How much will the market tank on tax bill failure?

Since the odds never favored a deal, Boehner's Plan B failure isn't that surprising.

By Jim Cramer Dec 21, 2012 10:05AM

Street logoCorbisWe're stuck with bad templates: TARP votes one and two and the Grand Bargain No Bargain moments of 2011.

These two Washington-orchestrated calamities caused the stock market to plummet each time, which then helped get a deal done.

Anyone who remembers the chaos after the failure of TARP to be passed knows that a 7% drop can occur when Congress chooses not to save the Republic's banks.

The failure to raise the debt ceiling or come up with anything responsible led to a 19% fall until we got something that worked then, but isn't working now. We were paralyzed by the possible ratings agency downgrades and when we got one we thought, somehow, it was the end of the Earth.

It wasn't.

Bonds did the opposite of what we thought and staged a remarkable rally. In that sense the selloff was about nothing.

I think that these two analogies, which are being trotted out quickly Friday morning after the failure of Plan B, simply don't work.

First, the hated TARP came at a time when there was a run on the banks. You could argue that your ATM might not even have worked if that didn't pass. That one was huge.

Second, the debt ceiling deal turned out not to matter, at least when it came to the ratings agencies. It was, alas, almost much ado about nothing. This time around it would not shock me if the president just raised it himself and accepted a court challenge. Bills need to be paid, that's the law. One law -- that the Congress has to approve a debt ceiling raise -- conflicts with another. The payments that the federal government must pay on time.

Now I am reading that this failure of Boehner's Plan B is the equivalent of both. You can almost take an average of the two and arrive at what we are supposed to be done, call it 12%. And yes, those are precisely the numbers I am being told we will fall.

Now there are several things at work here. First, I don't know anyone who really thought the GOP would ever vote for a tax increase, period. Grover Norquist has made most Republicans sign a pledge. They will, according to Norquist, be challenged in the primary by Tea Party members. The pledge will not be broken.

I have thought, ever since I came back from Washington not that long ago, that it was clear this meant there could be no deal. We had hopes there would be another Grand Bargain driven this time by the president's big win, but these Republicans won regardless of the president. He means nothing to them. Nothing at all.

So, now we go over the cliff. I believe once Americans have seen their truncated paychecks -- both the people who are paid weekly and the ones paid monthly -- talks would begin in earnest to make some sort of deal to cut taxes with the Republicans actually leading that fight, urged on by Norquist. So Boehner's gambit was always a charade.

So, why should we sell off big on a charade? The Super Bowl plan is in effect. My take, the odds always favored no deal. We aren't going to get a deal. We fall of the cliff.

What gets repealed? The whole 7.5% gain since the November lows?

Nah, I think the gain from when there seemed to be a deal last week, call it about 2%-3%.

We always overdo it intraday, so it could be more. But the idea that "suddenly" there's no chance of a deal is pretty ludicrous.

The GOP will not vote to raise taxes, just to cut them. And I actually expect that to happen because Norquist will urge them to do so.

If it doesn't? Well, we won't know that for another month. And that's how it will go.


Cramer's face 


Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust.



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Dec 22, 2012 1:59PM

Well with Hanukkah ending and onto Christmas, then maybe Kwansa ?

I hope all have/had nice Holidays....And Hopes for a better New Year...Cheers...

Dec 21, 2012 6:16PM


I like Next Time Up's statement:          "The system is eating itself."



Dec 21, 2012 4:02PM

Cramer is turning into one of those the sky if falling let me help you crowd.


Beware when people tied to Washington tell us they have to do this for our own good...we always take it in the shorts and all of them walk away millionaires.


Obama is just another voted into office poor but now a millionaire politicians.....we keep giving them more money while they keep taking more for themselves....enough is more more borrowing...this is all the money you have now go deal with it.

Dec 21, 2012 3:29PM

Steve...Usually takes about a 200 point loss or 200pt. gain...To throw up the Red or Green banner.


Next time...Gonna add or take away a little bit about Gold, the Markets(major indices) Oil and the U$D.

Just about the time you get one or the other figured out, they go backwards on you...

Over the years in RECENT times many times Gold or other PGMs have disconnected from the Markets and worst yet sometimes even the US Greenback...Oil usually has a somewhat better correlation, but even then the unthinkable can happen....They are wierd ducks to follow...Don't always fly in a Vee.

Gold has been somewhat stagnant, bouncing off 1600+ lows for about 18 months now...

Then climbing slowly to close to 1800, maybe the most we see in day/week is 50 pts...Traders have settled into this game and is about all they expect anymore??...The days of making 25-40% gains in a short period, like 3-6 months has been eluding us for sometime now..Too many players.

So with the stagnating volitilty now, I just try and hook up some miner's stock for a 15-18% gain or the ugly word to be thrown around, along with maybe some crazy shidt to happen somewhere in the World....Even the Weddings and Celebrations in the Pacific Rim and India don't seem to have as much bearing anymore.?...Plus there is a helluva lot of scrap in the Marketplace to be melted into a cheaper product, especially in a World recession. ..Our day will come again.

Dec 21, 2012 2:46PM

WE the People are required to fix it.



Poor foresight by all Americans regarding Washington legislation have created decades of inept policies. A simple, strategic, powerful fix to jump start the process:

 28th constitutional amendment: Yearly Balanced Budget Required

Balanced definition:

Debt to GDP ratio

>35% =   balanced               

<35% =   allow 10% extra yearly spending


This will not be easy to get congress to enact. The good news is we don’t need Washington to move this: The Constitution provides that an amendment may be proposed either by the Congress with a two-thirds majority vote in both the House of Representatives and the Senate or by a constitutional convention called for by two-thirds of the State legislatures.


It will take only one state to get the ball rolling!!!!!!! A STATE CONSTITUTIONAL CONVENTION!!!!!!!

Dec 21, 2012 2:45PM

The debt will not be paid down.

Waste and fraud will continue.

The Federal government will continue to spend money just like a drunken sailor on leave.

Now they want us to pay for their good time.

Dec 21, 2012 2:31PM

nice minor crash today - why no RED banner?

Dec 21, 2012 1:53PM

The GOP is collapsing!


Republican Retards, Teabagger Turds and Libertarian Lunatics arguing amongst themselves!


The Stock Market is crashing!


The Mayans we're right, Republican Armageddon has arrived and their pathetic lives are being destroyed,..... by themselves. LMAO


Boehner with an 11% approval rating!




Chris Van Hollen & Elizabeth Warren in 2016 & 2020!



Dec 21, 2012 1:48PM
As we all get caught up in the sausage making, reality will take a backseat.  These folks will solve nothing, nothing, because there is nothing solvable.  They will once again fiddle a little around the edges but the corporate pie will still remain intact.  The rich may pay a little more but they will never suffer. The electerds in DC will never suffer.  The poor, weak, and vulnerable will suffer even more.  You see folks the system is eating itself.  The rich may fear Obama so they may have to pay for some protection,  but they know as well he has a price.  The Rich know this is just politics and after waiting this out will still be just as powerfull.  Would you bite the hand that feeds you?
Dec 21, 2012 1:34PM
WAIT A MINUTE - This weeks "HOPES" rallies aren't enough to hold up the market today ?? I thought the world not ending would have been enough BS for a little rally today.Oh,well.
Merry CHRISTmas,everybody ! ! ! !

Go over the cliff. No REAL change will happen until this gets much worse. Why keep sputtering? The sooner we hit the absolute bottom, the sooner we will fix things and come back up.
Dec 21, 2012 1:32PM

PLAN B.....Was never a FAILURE....It was never a PLAN.


Buffoonery at it's best...

Dec 21, 2012 1:24PM

Mirage....You'd better be careful...You're really starting to LABEL YOURSELF...


Wanted to use one more you, but really didn't how I could fit it in....?

Dec 21, 2012 1:20PM
Dec 21, 2012 1:20PM
Retog....absolutely, there will be a new Speaker of the House in Congress come January....and you know what, it may very well be a Democrat....since the winner must receive at least 218 votes, a majority.... Will the Repukicans be able to coalesce around one candidate, or will 19 republicans peel away and vote for a Democrat and possibly change parties (to save their political futures).... that's how the Repukicans are lacking in the leadership department 
Dec 21, 2012 1:13PM
I also have 500 freeze dried, peanut butter and jelly sandwiches for sale....Real Cheap..
Dec 21, 2012 1:11PM
By going over the fiscal cliff the Republicans will let the tax cuts expire, thus raising taxes for all.  The thing they allegedly are against but will do it.  Once we get to the tax rates that were in affect before the Bush tax cuts then they will compromise and cut those tax increases by half, which turns out to be a tax hike for some people.  This way they can say they cut taxes.  if this isn't politicizing the situation at our expense then what is?  Perhaps we should make some propositions as a voter.  You want to cut entitlements?  Cut the health and retirement benefits of each and every Government politician, then i am sure they will listen.  Let's see how they feel when it is their pocket that is being picked instead of ours.
Dec 21, 2012 1:08PM
Please, Mister Boehner, next time you see my ultra right-wing, mousey, tea (cult) party rubber stamper congressman, named robbie bishop, kick him in his **** for me. Would you please?  And, bring charges against grover for blackmail and coercion.
Dec 21, 2012 1:03PM
The over riding philosophy for folks such as MG is's all based on GREED AND ARROGANCE which our government has fostered since NIXON, FORD, AND REAGAN.   And of course, if you disagree with folks such as MG, you automatically are labeled as part of their so-called leech class.  They fail to realize that 47% includes students, elderly veterans, and disabled.  No matter what the rates, those folks didn't pay prior to the rate changes either.  And just for a matter of record, MG, I know I probably don't pay the taxes you pay, since you are part of the upper 2%, but I will tell you this that this year myself and  Mrs. Doda will be paying over $10K in Federal Tax, over $3.5K in State Taxes, over $2.8K in Social Security Taxes and $1.8K in Local Property Tax.  We feel genuinely fortunate to be able to have the earnings base to pay "our fair share".  We look upon these fees as the cost of an orderly society and civilization, while not perfect, is the best in the world.
Dec 21, 2012 1:01PM

You have no further to look for piss poor Leadership, then the Republican Controlled House;


And I really "doubt" that leader will be in position within 60 days....

Too bad so many place fault in the wrong places, pure ignorance.


I don't read replies today, SO if you have the ballz to say anything, make sure everyone reads it.

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