No Christmas miracle for fiscal cliff

With political leaders on holiday break, talks to avert automatic tax increases and government spending cuts are at a standstill.

By Jonathan Berr Dec 24, 2012 11:53AM

People putting political symbols in box Comstock Images, Getty Images'Twas the day before Christmas and all through the House of Representatives, not a creature was stirring -- since House Speaker John Boehner told members to go home for the holidays last week without a deal on the fiscal cliff. Members of the Senate are also with their families, and President Barack Obama is in Hawaii for a vacation. The once unfathomable prospect of about $600 billion in tax hikes and government spending cuts coming into effect at the end of the year is becoming frighteningly real.

Not surprisingly, stocks were lower in Monday's holiday-shortened trading day. Declines will likely continue until a deal emerges. So much for the Santa Claus rally.

 

"There's a lot of uncertainty,"said Jacques Porta, who helps manage $627 million at Ofi Patrimoine in Paris, in an interview with Bloomberg News. "We’re at a political dead end. Everything has cooled off. The market has become cautious."

 

Make no mistake, everyone loses if the economy falls off the cliff. People with limited means are especially vulnerable. According to The Wall Street Journal, the overall tax burdens for households earning $10,000 to $20,000 would rise from an average of $68 to $605. The more well-to-do would feel the pinch as well.

Consumers are already cutting back on spending. A recent Bankrate survey found that a third of Americans are spending less because of worries about the fiscal cliff. So far, the worries have not been reflected in the economic data, according to Reuters, but it's still early days. Retailers are expecting holiday sales to be less robust than last year.

As the cliff grows closer, the caution could morph into panic.  Even if politicians come to their senses at 12:01 am January 1, the damage to the credibility of the the U.S. government will be lasting. Remember, it was Congress' plan to create the fiscal cliff so it would have little choice but to take action to avoid it.

Eventually, this problem will be solved. But then Congress will then have to take up the equally contentious issue of raising the debt ceiling. Unless the Treasury's ability to borrow is expanded, the government would be forced to close and its credit rating may face further downgrades. The debt ceiling was expanded as a matter of routine until recently. 

 

For investors, it looks like political turmoil will mean tough sledding into January.


Tags: Economy
180Comments
Dec 24, 2012 3:03PM
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You can thank John Boehner and his republican cronies for this holiday gift!

 

We shall return the gift in November of 2014!

Dec 24, 2012 3:02PM
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setting term limits does NOT stop them from collection 100% benefits ....us hard workin americans work for 20 years or more in a company to see any type of benefits ...then u keep working or get a new job couse u still screwed

Dec 24, 2012 3:00PM
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I REALLY DON`t THINK THAY(the # house) REALLY GIVE A DAMM.

Thay shouldn`t get PAYED IF THAY DON`T do there JOB.

I`D FIREthem ALL!!!!!!!!!!!!!!!!!!!!!

Dec 24, 2012 2:59PM
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nothing will change because of all the favors owed. Agree with what is needed is a clean house.

Unfortunately the only way out maybe " Make an offer they can't refuse".

Dec 24, 2012 2:58PM
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term limits dont stop them from collecting 100% benefits !!!!
Dec 24, 2012 2:57PM
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If you all cant do the job then get the ****. out. That is what happens in the real world.
Dec 24, 2012 2:56PM
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It is unfortunate that the same people from the top down keep getting re-elected and you all wonder what happened?  Nothing will change unless we change it by voting out the incumbents.  Don't complain that nothing changes unless you are all willing to take that first step and voting for new people.  I know I did in the last election; but one cannot do it alone.

Dec 24, 2012 2:52PM
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Because Barry Obastard is bent on taking every hard working American's earned money, I say we embrace going over the fiscal cliff in order to have shared suffering.  Anyone collecting SS benefits, unemployment benefits, food stamps, etc., will have some skin in the game. Screw Obama.  Let him preside over another 4 years of a failed economy.
Dec 24, 2012 2:50PM
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Blame OBAMA All you want but wall street and the FEDs are leading this country into the abyss....Now add the useless Congress of the USA and you all can see that this has been coming for a long time ! Ben and the boys are the most dangerous things facing the USA... And they have NO CONTROLS they are independent from the US Government. They cannot even be audited by the CBO... LMFAO... Absolute power corrupts absolutely....And Ben and the boys are just that .. 40 billion a month in QE3 !!! All the money printed for QE1-2 ?? America has no clue ...
Dec 24, 2012 2:48PM
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Before you dismiss the possibility of a 90% drop in the stock market as unrealistic, consider Wiedemer’s credentials.

In 2006, Wiedemer and a team of economists accurately predicted the collapse of the U.S. housing market, equity markets, and consumer spending that almost sank the United States. They published their research in the book America’s Bubble Economy.

The book quickly grabbed headlines for its accuracy in predicting what many thought would never happen, and quickly established Wiedemer as a trusted voice.

A columnist at Dow Jones said the book was “one of those rare finds that not only predicted the subprime credit meltdown well in advance, it offered Main Street investors a winning strategy that helped avoid the forty percent losses that followed . . .”

The chief investment strategist at Standard & Poor’s said that Wiedemer’s track record “demands our attention.”

And finally, the former CFO of Goldman Sachs said Wiedemer’s “prescience in (his) first book lends credence to the new warnings. This book deserves our attention.”

In the interview for his latest blockbuster Aftershock, Wiedemer says the 90% drop in the stock market is “a worst-case scenario,” and the host quickly challenged this claim.

Wiedemer calmly laid out a clear explanation of why a large drop of some sort is a virtual certainty.

It starts with the reckless strategy of the Federal Reserve to print a massive amount of money out of thin air in an attempt to stimulate the economy.

“These funds haven’t made it into the markets and the economy yet. But it is a mathematical certainty that once the dam breaks, and this money passes through the reserves and hits the markets, inflation will surge,” said Wiedemer.

“Once you hit 10% inflation, 10-year Treasury bonds lose about half their value. And by 20%, any value is all but gone. Interest rates will increase dramatically at this point, and that will cause real estate values to collapse. And the stock market will collapse as a consequence of these other problems.”

See the Proof: .

And this is where Wiedemer explains why Buffett, Paulson, and Soros could be dumping U.S. stocks:

“Companies will be spending more money on borrowing costs than business expansion costs. That means lower profit margins, lower dividends, and less hiring. Plus, more layoffs.”

No investors, let alone billionaires, will want to own stocks with falling profit margins and shrinking dividends. So if that’s why Buffett, Paulson, and Soros are dumping stocks, they have decided to cash out early and leave Main Street investors holding the bag.

But Main Street investors don’t have to see their investment and retirement accounts decimated for the second time in five years.

Wiedemer’s video interview also contains a comprehensive blueprint for economic survival that’s really commanding global attention.


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Dec 24, 2012 2:47PM
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YOU HAVE TO REMEMBER THAT OBAMA'S AGENDA IS TO BREAK THE USA AND MAKE US A THIRD WORLD COUNTRY SUJECT TO THE MUSLIMS, JUST LOOK AT HIS FOREIGN POLICY, SNUBS OUR ALLIES AND SUPPORTS THE ARABS [ MUSLIMS ]. IT IS NOT THAT HE DOES NOT UNDERSTAND THAT THE USA IS 'BROKE', IT IS HIS AGENDA GUIDED BY GEORGE SOROS AND THE MICHAEL BLOMBERGS OF THE WORLD !! AS LONG AS YOU HAVE THE FREE LOADERS VOTING FOR THE DEMOCRATES, YOU ARE SUNK.
Dec 24, 2012 2:47PM
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This is so unbelievalbe that the can't agree...time to get rid of them all

Dec 24, 2012 2:47PM
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Just my theory concerning the presidents refusal to compromise on his tax the (rich) or we should say the successful.  This is just his way of "breaking the code", after that just wait to see the rest of his plans to implement his misguided vision of social justice. He is the master of blaming everyone else for our current economic and other domestic problems.  We had our chance to elect someone that would have been an excellent president with the morals and ethics we could have been proud of but 51 percent of us drank too much kool-aid  and reelected the wrong man for our president.  I do not feel he is an evil man just a misguided one with a distorted vision of what America should be.  He is a good family man but is also arrogant, exhibits that he was a spoiled child that has carried over that personality  into his adulthood,does not feel that personal responsibility and self reliance are traits that should be encouraged and thinks the lazy and incompetent should have just as much material things and opportunities that those who work hard and developed a high standard of accountability and ethical behavior have earned.  He feels that those less fortunate or those that just don't have a clue should also have what the successful in life have regardless of what they have done to earn it, the government will just mandate and give it to them at the expense of those who have worked for what they have.  Doubt me on this then explain why he wants to tax those of a certain  income when is a proven fact they already pay the majority of revenue in this country.  Or to put it another way why is it that besides the federal government mess every state with a so called "progressive government"  are  also in great fiscal difficulties.  Gee! could it be a heavily left leaning attitude and style of governance that has also negatively impacted those states with liberal governments? I for one will at least take solace that I did not vote for him but that is little comfort knowing that four more years of this inept and misguided presidency will just increase the harm he has already done to this nation.  He is not a leader that pulls people together but a divider who has established an atmosphere of that does not inspire pride in this nation nor confidence in our future.    
Dec 24, 2012 2:41PM
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........Obama spending our money again - in Hawaii!!.............

 

his arrogance NEVER ends! While just about everyone is cutting back, he's out flaunting his beach-gront vacation in Hawaii....while we all pay for everything including the AirForce one cost to tax payers of over 1 million dollars and that's just for the plane ride for his family and 37 full-time attendants.

 

Obama could care less about the people that voted him in....he and Michelle are laughing in your face about how cullible you were to vote that slacker in.

Dec 24, 2012 2:37PM
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OK, let's stand back and regroup. We put these clowns into office. I don't see them cutting their benefits. They work for us. We need to do something (legally) to get them or most of them out of office. If we really are serious we need to act. Our congress is unamerican. They only think about themselves and large contributors. Lets start somethiung. Lets cause themheartaches. Lets get them out NOW!!!!.
Dec 24, 2012 2:35PM
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Wall street will not be affected much or for long period.Just look at DOW.

It has been playing between 13000 and 13350 since long .Investers investment is not

changing remarkably.Game is manuplated by big corporations,ceo's, financial institutions,

Banks and politicians

Dec 24, 2012 2:35PM
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Well here we go again, good (Dem.) v. evil (GOP) . The GOP wants the DEM. PRESIDENT out of office and is doing everything it can to do that by not playing ball with the PRESIDENT, HOPING that he will be thrown out of office, so the GOP could put in one of their own so they could totally take full control of the goverment, so they can fatten their pockets by rapeing the country. They don't care about the people below their statue of life, only to increase their wealth. They are fearfull of losing their wealth, and not concerned about what is good for the AMERICAN people, only for them selfs. What they don't realize is that the people(lower and middle class) are the ones that make up this country and pays their salries to run the country on their behalf. The GOP is hurting the country by not playing ball with the PRESIDENT and hurting them selfs, the PRESIDENT is fair and is on the right track to make this country come back into the black instead of staying in the red. If the GOP gets their way and down grades Social security all the people that are collecting it will at the poverty level and will go into debt and this country will be hurt even more then it is now.
Dec 24, 2012 2:34PM
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I say all the employers in the fine USA get together to pay everybody cash, gold, and diamonds till the haughty bickering ceases.
Dec 24, 2012 2:32PM
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guys like that **** Boehner. eric cantor, harry reid, and mitch mcconnel need to go.
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i think that we no longer need The Congress, The Senate is more than enough
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