Stocks may slump after GOP fails to pass tax bill

The Dow could open as much as 200 points lower after House Speaker Boehner pulls his 'Plan B' tax bill, which couldn't win enough Republican votes to pass. President Obama will have to come up with a specific plan, he says.

By Charley Blaine Dec 20, 2012 11:34PM
Dollar bills floating over U.S. Capitol © CorbisUpdated: 10:48 p.m. ET

Maybe cooler heads will prevail by Friday morning, but financial markets late Thursday and early Friday in Asia were falling after House Speaker John Boehner couldn't muster enough votes to pass his own tax bill.

The carnage looked to be most concentrated in U.S. markets.

Futures trading Thursday evening suggested the Dow Jones industrials ($INDU) would tumble perhaps 190 points at the open. The Standard & Poor's 500 Index ($INX) would drop some 22 points, and the Nasdaq-100 Index ($NDX) might tumble some 38 points. In all, stocks would open down perhaps as much as 1.5%.

The U.S. dollar moved higher against foreign currencies, and gold (-GC) fell nearly $10 o $1,636 an ounce. Crude oil (-CL) in New York moved lower as well.

Meanwhile, stocks in Australia and Asia were lower as the news spread, although the declines were not nearly as great. Futures trading in Europe suggested a slightly lower open for stocks.
The market reaction came as Boehner pulled his so-called Plan B proposal to prevent lower tax rates from expiring on most Americans. It came after the House had narrowly approved a plan to suspend planned Pentagon cuts.

When Boehner realized he didn't have the votes, he sent lawmakers home for the Christmas holiday. President Obama and Senate Majority Leader Harry Reid would have to come up with an acceptable deal, he said.
Boehner's calculation is that Democrats will cave on spending before Republicans cave on taxes. But the failure of the bill raises the issue of whether Boehner can survive as speaker.

Most Washington pundits believe -- at least publicly -- that a fiscal cliff deal will still be struck. But the fact of the matter is that Democrats and Republicans don't like each other and find little to talk about.

"The differences between the two parties are enormous, they're theological," Greg Valliere, a veteran Washington observer, said Thursday morning in a note to clients.

The development came as more than a half-trillion dollars in tax increases and spending cuts are supposed to kick in on Jan. 1. Federal tax rates would revert to those in place in 2001 when George W. Bush took office. In addition, there would be significant cuts in across the board.

Boehner's bill would have put Republicans on record as supporting a tax increase on those who earn more than $1 million a year -- a position the party opposed only weeks ago.

Boehner had hoped to show that he has the full support of House Republicans by passing a bill that would limit income-tax increases to the wealthiest sliver of the population, far fewer than Obama wants.

Obama had campaigned for reelection on raising tax rates on those making $250,000 or more. But he had indicated he might support tax increases only on those making $400,000 a year or more.

House Republicans also wanted specific and deep spending cuts, particularly in entitlements such as Social Security and Medicare.

Until Thursday, investors had assumed Washington would avoid disaster. President Obama and Boehner have said they want to cut a deal on taxes and spending before Dec. 31. Instead, the intense partisan divide that nearly shut down the government a year ago has reemerged.

And it could lead to an uglier fight over the federal debt ceiling in February or March.

In August 2011, Congress and the White House narrowly avoided an actual government default on the national debt. But the down-to-the-wire nature of the effort prompted a first-ever debt downgrade by Standard & Poor's and spooked investors and consumers.

Between July 29, 2011, and Oct. 4, 2011, even as Federal Reserve Chairman  Ben Bernanke vowed to make sure the economy wouldn't collapse, the Dow fell as much as 14%.
Dec 21, 2012 1:42AM
Uh, the cliff is exactly what we need.  Deep spending cuts and higher taxes across the board to balance our budget.

Heck, we're still talking about borrowing Billions and Billions to support our spending even with the proposals from Democrats and Republicans.

As a financially solvent business owner, and financially solvent family , I can't understand how people don't realize that you MUST LIVE WITHIN YOUR MEANS.    Really, doesn't anyone actually get that?

Dec 21, 2012 12:42AM

@first time


doesn't matter whos in....they only care about their own agenda....they 'all' have forgotten we hired them and yes we can fire them.

Dec 21, 2012 1:29AM
Interesting seeing as how the cpi does not take into account food or energy prices. 
 I have a far better idea lets cut out all retirement for politicians and end their medical care that was never voted on bu anyone except them. They can be on social security and medicare just like the people they are suppose to be serving not robbing.
Dec 21, 2012 1:00AM
Sad that our elected politicians in Washington can not move forward and get things done!  This failure to get anything done by our elected politicians may be the downfall of our form of democracy! It will be a bad omen for our form of government.  What a shame!  If someone told me before that the Mayan prediction for the EoW would actually happen on December 21, 2012, I would have laughed!  But the comedians in Washington may actually cause, at least for us small investors, this EoW to happen!
Dec 21, 2012 1:10AM

Our government has come to loathe the words, freedom, independence, ambition, and love control, regulation, oversight, fair share, equal.  In a free thriving republic, those dont coexist very well. Doubters,

take a history  course.  

Dec 21, 2012 2:11AM
4 MORE YEARS...4 MORE YEARS...4 MORE YEARS.... I can still hear the chant sounded by the MAJORITY OF THE VOTING PUBLIC!!!!! That's right 4 more years of discourse and apathy. WE, apparently, got exactly what WE wanted otherwise, WE would've gotten to the polls and VOTED!! There's your history lesson...
Dec 21, 2012 5:21AM

Go to work ,argue ,accomplish nothing, leave your place of work for the holidays knowing you will have a job when you get back,have an option to vote yourself a raise,retire enjoying a full pension including health benefits that your constituents will never experience. Sounds like a sweet deal.

Dec 21, 2012 1:34AM

I'm ok with going over the cliff - we all need to pay for the government we want and not just the rich.  I watched Howard Dean on CNBC ( ex Vermont Governor and ex demcratic Presidential candidate) and he also shared that we should go over the cliff it would be the only real way of having increased revenues and real spending cuts. We will go into a mild recession and then get realigned to the new normal just like before. By the time 2014 mid year elections roll hour this will be a distant memory in the voters eyes.

Dec 21, 2012 1:49AM
There's no way of knowing what stocks will do one way or another because stocks have become totally disconnected from technical analysis. It's emotion or computer mass trading based on tiny returns. You can't outguess the market makers.
Dec 21, 2012 12:53AM

Let it rip, the phony atempts to stimulate and prop up the economy through treasury and fed maniplaton,runaway govt give aways, mortgage scams, has to stop. an abrupt stop will speed a true recovery, however painful, however long. it will at least give our youth a chance to participate in recovery and not be burdened by generational theft which has become a Washington business as usua activity. we are still stalling the bitter  pill of a broke nation  by injecting drugs in the form of government programs certain to have worse consequences later than the misery of beginning real recovery now.

This is still largely a nation of doers and makers, hard working, frugal, creative, and realizing that in the end, their self interest can trump the very large component of sloth that has invaded our country.

 Get in, buckle up, and shut up..

Dec 21, 2012 12:19AM
Next election, Vote every republican out of government!
Dec 21, 2012 7:39AM
Lambo8525- You are a total moron! This will not be a short recession this will be what breaks our back. The economy will suffer like none have ever seen. Everything in price is going up and now you want us to pay more in taxes? Where is the money going to come from? People will not spend and job creation will be lost. The president and his party have destroyed this country and you can bet that history will put the blame on them. The people may not because of their worship for him but history will. If you voted for this man you should be ashamed of yourself. Wait and see what happens you morons!
Dec 21, 2012 3:20AM
Each side only represents those voters who elected them.  The Dems are told by their constituents to vote a certain way and the Republicans are doing the same. To do otherwise is risking their chances at reelection.  If they were voted in to favor a certain policy, then they are compelled to capitulate even if they know it's would not be in the best interest of themselves or their supporters. Thus the lunacy of politics.
Dec 21, 2012 1:09AM

PROBABLY THE MOST IMPORTANT ARTICLE on here, it manages to get just a few comments;

While WalMart, Dennys and McDonalds get hundreds...

Charley...I truly understand the intelligence of the readers here now.


I love how Boner throws a Dog Biscuit out and says he has done his job....

Even with other compromises being made, he is a fool or a puppet; And many in his own party are starting to think the same thing...?

I really don't see him keeping his job much longer....IMO

I wonder if he will be crying over that..?

Dec 21, 2012 1:36AM
The media is blaming the house while Harry Reid said he wouldn't vote if it passed anyway! Meanwhile Plan "B" was basically the Pelosi plan but the Democrats say they wouldn't vote on it  either. All I see is a bunch of worthless hypocrites like Harry Reid! To top it all off the usual people fall for the BS!
Dec 21, 2012 1:03AM
Chained CPI means the government will control the direction of everything that you buy by adjusting the cost.  When they want to buy pork, you will not be able to afford beef, etc.


Dec 21, 2012 1:38AM
It will not be a distant memory, of any Intelligent Voter, for a long time..
Dec 21, 2012 3:09AM
If we go over the cliff, we'll be lucky if it will be only a mild recession.  A loss of this magnitude in an already fragile economy is a recipe for decline in sales which will result in a decline in employment.  Once the snowball goes rolling, fear begets fear and a severe recession could develop since the Fed has already maxed out it's arsenal using the money supply.  The wealthy can weather this storm, but the already weakened poor and middle class will be hard hit.  Be careful of what you wish for or we may yet see a depression.
The Republicans made a 12 trillion dollar debt and the Dems have added another 7 on their watch.  You cannot "grow" an economy by paying off debt.  You have to have stimulus to create consumption. Paying off an old debt is merely paying for prior consumption. You don't worry about paying off your mortgage if you don't have a job and need that money to survive.  You have to get a job / raise your income first and then you can pay down the mortgage.  We went from a 17 trillion economy to 14 during the recession.  When we recover and become a 17 trillion economy again, taxes generated from that increased activity will be almost a trillion in gross receipts, covering most of the deficit and with that gain in activity, most likely employment will go up and fewer will need to be on the government dole reducing it's expenses.
Dec 21, 2012 1:12AM
The 1% or whaterver they're known as created this monster...bribin' politicians for this or that...let them get us out o this....
Dec 21, 2012 12:11PM
its about time the republicans put this issue at the feet of obama and his idiots, the republicans have tried enough to work this out with the democrats and obama. But its not surprising that no agreement can be reached. obama hasn't been willing to work with anyone that is not on board with his still undisclosed plan to right the ship. So i say go home and lets see if he can even come up with a specific plan to fix the problems THAT HE HAS CREATED.(Not George Bush) Obama is not going to agree with any plan. It his intention to let this so called over the cliff happen so as to raise taxes on every working person back to the clinton years. 
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