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 3:55PM
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This is only a fiscal cliff for you and I. For the politicians it's government by fiat, as usual. Taxes may go up for you and I, but for our politicians they will just keep raising their salaries and the size of their kickbacks. You will pay more for health insurance and health care, but our politicians will just make you pay more for their health care. Worried about Social Security? Our politicians are not. they get their own special pensions that you and I pay for. Think that the debt ceiling might slow the spending down? Think again. The president will just issue himself an executive order. the government wants to go over the fiscal cliff. The government loves the fiscal cliff. The fiscal cliff means that the government can scr*w you while saying that it's not their fault.
Dec 24, 2012 3:54PM
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The only good politician is a dead one-they can all ****ing eat **** and die!
Dec 24, 2012 3:53PM
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Perhaps some of you just don't understand how this works. The "Peoples Branch" writes the laws, it is the sole job of the president to "Sign them", we have two parties in this country. Some others have one, what would you have them do ? The Senate and the House do NOT work for the President, he can not order them to do anything. That would be The Speakers and the Leader of the Senate to retain their members. This country is NOT a dictatorship, although a recent former POTUS thought it was.

 

Yes term limits are a VERY good idea, however how do you get the people to vote in favor of applying them to themselves ????

Dec 24, 2012 3:46PM
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They are like little boys with suits on.They just argue back and forth and are only concerned about who's Party will look better when this is over.I think we should just take these little boys and through them over the cliff.
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no way any politician comes out of this looking good.....republican or democrat
Dec 24, 2012 3:39PM
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How many of us have said not to reelect ANYONE and yet how many of you BONEHEADS did it any way ? You, of course, started at the to of the ballot (for Obama), working your way down saying to yourself, "well it won't be that bad". And yet here we are screaming, "IT'S BAD!!!"

So are you going to just sit there on your BLESSED ASSURANCES sipping egg Nog(with a little rum) or are going to actually get involved ? The first three words of the declaration of independence are WE THE PEOPLE -  and that means YOU!!

 

If your advocating one term limits, then you need to be willing to step in to take their place. I almost feel sorry for some of you that voted for this crap we have in D. C. because your the ones to bear the brunt of the inaction by Obama & congress.

 

Don't worry about us; We not only have a 'parachute', we have fashioned a 'hand glider' of sorts. We sincerely hope that when we 'land', we can do some hiring & help get our area back on a prosperous business path without Obama & congress getting in our way !

Dec 24, 2012 3:32PM
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It is very simple. Do spend more than you take in. Raising taxes will not help anyone.

Obama needs to pull his head out of his @#$#@$ as well as others and cut spending keep taxes low and move on.

This has happened multiple times now and he has done nothing until the last moment, as I see it that is poor leadership.

Unfortunately someone voted for it again and again it continues. 
Dec 24, 2012 3:31PM
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Let fiscal cliff happen. We should have a lot of cuts and revenue which could potentially pay our debts.

Dec 24, 2012 3:31PM
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The Grand Old Party is split into three camps, The mainstream Republicans, the tea party wing and the neo-cons...  We the People must force the Republicans in the House to replace Johnny "one note" Boehner as Speaker and force the Senate to replace Mean Mitch McConnell as minority leader, with other Republicans, who are more cooperative and willing to compromise...   The Boehner/McConnell led Republicans in the House and Senate are obstructing, blocking, delaying and scuttling legislations that would help America and all of the American people... Boehner and McConnell are worried about winning re-election in two years...  They don't give a damn about America or We the People...  The elected politicians in the House and Senate are sent to Washington to solve problems, not to create and cause problems...   The Republicans are the problem, if We the People get rid of the Republicans, we can get rid of the problem...

Dec 24, 2012 3:31PM
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Just look in the mirror to see who crated this problem.  We voted for this (to the surprise of some) to happen, Obama wanted to raise taxes, and increase spending, now everyone is shocked that this is going to happen.  Some thought that this would only happen to the rich and not to everyone else.  The problem is the rich pay the majorty already and they have enough lawyers, accountants, money managers to cut thier losses, the middle class will have to pay more, as well as the poor,   We bought it on ourselves again.    Just like in the old west the snakeoil sales man sold us another pint of it, and be bought it hook, line and sinker.  Now you know why the "Tea Party" was started. 
Dec 24, 2012 3:29PM
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The GOP had their chance to put up or shut up in this last election. Now, they're trying to stall any kind of progress in solving the coming crisis looming. Instead, they put out there a stiff, wishey washy candidate caught in so many hypocritical stances of his philosophy that a lot Americans saw right through and didn't vote him in. Now, it's coming out, through his son, he didn't even want to be President. This Boehner is a jerk with a bad attitude and an agenda just like so many politicians who have judges in their pockets. They can all go to hell. Merry Christmas!
Dec 24, 2012 3:27PM
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And we elected these idiots to do what?

Dec 24, 2012 3:20PM
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THEY TOOK MY COMMENT OFF, EVIDENTLY THERE IS A MUSLIM RUNNING THIS !!!!!
Dec 24, 2012 3:14PM
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I am at an interesting point in a book I discovered and am reading called "THE DECLINE AND FALL OF THE ROMAN EMPIRE".  It seems that shortly before the collapse happened they debased their coinage and started making it from worthless types of metal; who could ever imagine anything like that taking place?
Dec 24, 2012 3:12PM
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Dear Santa

 

I'm going on vacation for 20 days.  Please solve the little problem with the financial cliff so I can return from vacation and take credit for the solution.  No reason for the people to know I'm a failure.  Thanks Obama

Dec 24, 2012 3:12PM
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Every senator and congressman has a mandate from the voters who put them there.  With the two houses of Congress under different party control, the responsibility to "broker" a mutually acceptable deal falls directly on the president's shoulders . . . and where is he?  Vacationing in Hawaii.  What a worthless excuse for a president.

 

Bring on the fiscal cliff.  And if you're looking to blame someone - and you're one of the idiots who voted to re-elect this so-called leader - look no further than a mirror.

Dec 24, 2012 3:11PM
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I see nobody wants to say or tell this congress how stupid an ignorant they are.

Nobody wants to say or tell this congress how stupid an ignorant they are. They don't care for one reason. They have money, they have all the benefits that a regular citizen does not have. I strongly think they do not deserve it. Years from now when they retire. Every single congress man will retire with a full pension package and they won't have to work until they die like a F###### rat. While the poor will stay and live like a rat.

 

Thanks,

Will.

Dec 24, 2012 3:10PM
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Any one who voted for Obama . SHAME ON YOU!!!!! Now we all have to suffer. Thanks
Dec 24, 2012 3:07PM
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Those who voted for the Tea Turds currently in Congress are getting what you deserve - a fall off the cliff. You expect the President to compromise while the House refuses to do so, in any situation having to do with raising revenue.

Grow up and put the blame where it belongs - yourselves.

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