3 pressure points that could force a fiscal cliff deal

The odds of reaching an agreement aren't great, but here's what it might take.

By Jim Cramer Nov 12, 2012 9:48AM

TheStreet.com LOGO

Image Source Black JupiterimagesWhat will force the hands of Congress and the president to make a budget deal before taxes shoot up and spending slams down? What inputs do they need?


I see three pressure points.


The first is a precipitous decline in the stock market. We have two precedents for the market to matter: the TARP vote and the deal in Europe. After TARP initially failed, the market took a real hammering, and that was because sellers knew they had to get out before the banking system collapsed.

You have heard a series of banking CEOs say their institutions wouldn't have collapsed if TARP had failed to pass. That's nonsense. Short sellers controlled the market, and they could bring stocks down, which then caused ratings agencies to panic, which then stopped funding to banks and then brought collapses. The bank CEOs couldn't stop that trend. They should stop pretending they did. Congress swung into action only after the hideous sell-off.


There's no secret to the when the central bank got a deal to move along: when the stock markets collapsed and the bank stocks looked like they would be rolled.


So my simple take is a 1,000-2,000-point bone-crusher comes first and a deal later. Chances: 50/50.


The second? The beginning of a shoot up in employment claims as everyone from the biggest executives to the smallest of small-business men know it is time to fire. Why not? We rewarded executives who "saw it coming first" with higher stock prices, and "saw it coming" meant who fired the most the fastest. You will see that from the claims. I don't have to put odds on that. The game is already happening.

Third, in order to stop the fiscal cliff jump, CEOs who contributed to the Romney campaign and to opponents of the Democrats recognize they backed losers and actually ask the congresspeople they invested in to make a deal rather than have a recession that will kill profits, lower stock prices and maybe affect CEO compensation. This may not happen, because No. 2 says they can slash hiring and still do well personally and with their stocks, but there have to be some executives who say they are not going to continue to front losing, divisive leaders.


Of course, the Tea Party people are willing to crucify hiring upon a cross of 15% tax rates for hedge fund managers, perhaps the greatest bit of Grover Norquist-inspired insanity yet. But as a former hedge fund manager who paid ordinary income, I could see selfish hedge funds really funding financial Armageddon because they can get short and make up the lower tax rate that way.


Oh, come on, that's not cynical, that's good business. The prospects of business leaders actually helping to get a deal done has increased to 50% also simply because they are money men and backing losers turned out to be a really bad strategy.


So there are the players. That's the game plan. I don't like the odds, because issue two has already started and you can gift-wrap a 2013 recession come no deal by Christmas.


That means staying lean, investing with companies that don't have to rely on U.S. consumers, who will be hammered, and just waiting for the punishment from having Congress sink into partisan politics instead of rising above to get a deal done.


Jim 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.




More from TheStreet.com

Nov 12, 2012 12:14PM
 Obama and the Senate has the GOP boxed into a corner with their extend the middle class tax cut bill. Gonna be a LOT of pissed off people if they fail to pass it and they will look like jerks
Nov 12, 2012 12:08PM

How come there isn't a disclaimer at the end of this article stating that Mr. Cramer is not shorting the market?????  One more thing.  It's a shoot up in "UNemployment claims", not "Employment claims".

Nov 12, 2012 12:08PM

 Each Cabinet should get a certain percentage of the budget by law and be voted on separately. You want to change the percentage, vote on it
Nov 12, 2012 12:07PM

Congress now play the semantics bulls--t game. What is the difference of raising the "tax rate" or closing the loopholes and deductions from the very rich? NOTHING but semantics.

Either you ask the richest to pay $ 25,000-40,0000 more on 1 million income or you raise the dividend rate from 15% to 25% on their million dollars of diviidend income($10,000) and take away the $25,000 property tax deduction and $15,000 mortgage interest  deduction on their  $750,000 house, or on their second home or yacht or super RV that are considered second homes.

Math is math. All this is semantics to "not raise the tax rate" and upset Grover, Rove,and FOX and  50 tea party republicans who hold the rest of the party and country hostage.

Novel idea:  Offer only Americans a 5 year "American T bill"  Pays all citizens buying  2%, TAX free, Trillions come into treasury over next 5 years, pay back Chinesse and all foreighn countries.

Nov 12, 2012 12:07PM
Nov 12, 2012 12:07PM
Time for a correction that should have happened long ago to this smoke and mirrors economy of it's own making. The world market only exists on Wall Street and in anything related to it and it only exists if we the people participate by buying it's products and services. Problem is I don't believe the people have the sands for what needs to take place so this will continue to plunder along until it finally does what it should have done. Fail!
Nov 12, 2012 12:03PM

Poor Cramer can't hustle the stocks when they aren't being manipulated by the recipients of our money to prop up the phony market.  After all, what would he do without a positive market?


Nov 12, 2012 12:01PM
 Go over the cliff.  Then craft separate tax cut bills, one for the Upper Class and one for Everybody Else Let Congress pass or fail them and be accountable to the voters in 2014
 SAME deal for Medicare and Defense, Separate budget bills , then vote on each
Nov 12, 2012 11:55AM

Koo... Romney wanted to build a stronger military also ..... but as noted by you.  Look back at Reagan....and the Bushs. A larger stronger military never solved our problems !

When are the politicians going to grow up......stop calling other world leaders names as if they are playing in a sand box...... as if children ? Relating to Rumsfelds.....Shock and Awe... Abu grave issues.

We need a stronger military...when the leaders such as Petraeus cant keep their pants on ?  Obama dont have any idea what happened in Benghazi yet....... we need a stronger military when no one knows whats happening ???

At least Obama never suggested a more powerful military !   

 Lets try a more effective military ?

Nov 12, 2012 11:50AM
He's right on this:  Nothing will happen until things get worse, MUCH MUCH worse.  Don't look for any action then until 2013.

the fiscal cliff will be the best thing ever for America


add in a 50 percent tax hike on all income of the super rich and a 25 percent tax hike on those making above $250,000 a year 


getting rid of all loop holes --- people forget that the Reagan deal with lower tax rates came with getting rid of all the corporate and high income loop holes which increased revenue.


Somehow the tax rates stayed low for the super rich yet  the loop holes made their way back into the tax code. Hmmmm funny how the loop holes for the middle class never came back.


If the loop holes for the super rich were done away with and their taxes increased by 50 percent then we could almost pay off the debt.


After all the debt is merely a function of the super rich not paying enough taxes and paying and hiring people at a livable wage.


So the super rich caused the debt and they can clean it up.

Nov 12, 2012 11:46AM
I am surprised I have not heard anyone say that we should raise taxes on each family making less than $250k and not tax those making more.
Nov 12, 2012 11:45AM
IF we had back all the money we wasted on George Bush Sr.'s multiple Holy Wars in the Middle East to protect oil properties for his buddies, we would have cured cancer by now. War is such a waste. All of the good things we could have left for our kids are gone and the country is bankrupt. Sad. There is only profit in peace. I hope we enjoy many more years of common sense and peace with President Obama in office. Fix the budget, throw out the useless Tea Party and renew the energy grid to prepare for the coming future of electric cars. End control of our government by Big Oil forever. GOP is history. They stand for nothing now but standing in the way of progress.
Nov 12, 2012 11:41AM
Like many "fads" this one will end poorly. There never was a time EVER in history when you could just play with money (currency), it would multiply indefinitely and have no impact on the world. There is no way now to prevent catastrophic loss. There is however, reason to deflect it from 100 million American families and stick it to Elitists. Essentially, if all you did was gain wealth through financial means, you have no economic social or productive value. It's not like greedy grubbers have genetic advantage, in fact, the opposite is more likely the case. The ratio of productive able people to paper and button pushers is alarming. Grow a garden, if you can't, WE have to seriously wonder about it. A nation that doesn't grow everything that fuels it's productivity needs to import it. If it pays for import goods it has to be exporting in offset. If making weapons is your export, what goes around takes all it wants when it comes around.

Close the banks. Reconcile, regulate, create ample supervision and re-open minus anyone in them now (nobody picks good apples from a rotten bushel). End the Federal Reserve or audit it. Likely, holders of it's Notes also borrowed or sabotaged to warrant the issue of those Notes. We need that reconciled, dashed, and our cash flowing through Main Street. There is no such role as a Financier. No retirement planners, no fund anybodies, no traders, no Wall Street. They are anti-American in every possible aspect. We have seniors who cannot procreate and raise kids, cannot work day-jobs, cannot sustain labor... making more now than they did when OF working age. That ends... I don't care big their mouths and threats are. Eat your oatmeal and shut up. Our nation was never designed or fought-for for these current circumstances. You want a social and new world order? MOVE. Free America to be the fresh entrepreneurial innovative dynamic place where rules are made by interactivity not the whim of fools.

It's either cooperation or war. If it's war, be careful what you wish for. You have no idea what end you start because you are mean and greedy and selfish. 

Nov 12, 2012 11:40AM
To the (TBTF) Criminal Banking Cartel ! This should be your most profitable season of all time ! Enjoy your money and profits ! Continue to SCREW THE AMERICAN PEOPLE and we might surprise you with a Holiday gift !
Nov 12, 2012 11:36AM

There will be no fiscal cliff !     No more than there had been a government shut down.

There will only be a watered down version to delay any responsible action.

Nov 12, 2012 11:30AM

I sure love how an old short-seller like Cramer is suggesting that one of the ways to force a fiscal cliff decision is for Wall Street hedge funds to just pump-and-dump then stay out until a decision is reached. Great advice that will hurt the little guy, Cramer. What the GOP needs to do is realize that half of the country thinks the Tea Party GOP is a bunch of religious fanatics totally disinterested in politically taking care of the responsibilities of their positions. The Tea Party needs to be thrown out and it should be a warning in the future that the Tea Party is an American Taliban. The GOP needs to desperately come back to the center and focus on being the party of small business again because this 30-year detour to the far right has been a humiliating disaster. It should be noted that Eisenhower warned us of the financial abyss we could fall into if the military-industrial complex is unchecked as it was under Reagan and both Bushes. Now we're broke. Even Romney's own father, after a tour of Vietnam, realized very early on that the war was not winnable and that politicians were lying to the American people about their successes and the extent of their failures in the war. Romney, Sr. came out against the war and lost the GOP nomination for President. His son decided to continue along this right wing path and lost. We are broke. There is no more money for policing the world and we have failed at policing our own borders and are losing the drug war. We need to be energy independent and we need a budget deal soon to make this market go up. Citigroup raised guidance on Disney this morning so there is hope. 2013 may be better than we think.

Nov 12, 2012 11:29AM
Here's a new flash Cramer! The American public is sick of this partisan crap from ALL of the politicians (that's right.... REPUBS & DEMS). While we need something new and credible, that was the whole thing behind the elections, not more of the same old crap. And Americans for the most part are going to take these Roves, Tea Partiers, and all of the obstructionists out of the picture by whatever means necessary. And NO, we are not going to keep unhumanizing our gay citizens, plunder abortion clinics, or peep through husband & wives bedrooms to see if they are using birth control. We will simply dismiss these a.. holes if they do not get the job done. We don't care how much billionaires like it or not. We are over it. Since they can't govern themselves, the hard working American people will do it, because most Americans are NOT the piece of trash that Wall Street, billionaires, and politicians think, assume and have labeled them. These dipsticks can go to He__!@
Nov 12, 2012 11:18AM
Well the welfare mentality on wall street thinking that the tax payer will bailout them again is stupid. Short sells should not be allowed ! Wall street should not have margin buys at all ! They should be cash and carry only.. The Glass Steagal act should be put back in place ! The too big to fail mantra on banks should be broken up ! The FEDs should raise int rates to 1.5% at the fed window on wall street! Stop all the qe1, qe2 , qe3 BS NOW.. If wall street falls let the free market system rule the strong lives the weak die.. Thats the way wall street should be today .THATS CAPITALISM ..The Bush tax cuts expiring will only bring the rates to where they were ! They were to create jobs from the rich right? WELL a decade latter and guess what no jobs by the so called job creators ! If tax cuts work ? We would have unemployment at 2% TODAY.. THE FISCAL CLIFF NEEDS TO COME AND CONGRESS SHOULD not raise THE DEBT LIMIT! THAT WILL PUT THE BREAKS ON THE FEDS RUNNING THE PRINTING PRESSES FOR WALL STREETS FREE MONEY! And Congress out of control spending .And stop the devaluation of the US$ . Its time for wall street AND CONGRESS to live within its means like the rest of America. 16 trillion was good enough for 2012 ! It truly good enough for 2013.. Thats why they call it a debt LIMIT people ! Do not listen to the pundits on the news and wall street pukes ! They just hate the thought of using their money!!!! And living in a truly free market ! What we have today on wall street is socialized wall street looking for a government bailout at every turn! Thats and this the way they have ran is NOT CAPITALISM folks its pure socialism on wall street! READ YOUR CONSTITUTION PEOPLE ! CONGRESS IS THE ONLY POWER TO TAX AND SPEND . ITS IN THE US CONSTITUTION READ IT YOU PEOPLE... TAKE A CIVICS CLASS AND LEARN AMERICA... STOP BELIEVING THE B.S.FROM FOX NEWS AND ALL THE OTHER IDIOTS OUT THERE..
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

120 rated 1
268 rated 2
439 rated 3
709 rated 4
641 rated 5
609 rated 6
640 rated 7
516 rated 8
272 rated 9
152 rated 10

Top Picks

TAT&T Inc9



Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.