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

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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 1:16PM
The markets are going to sell off the reast of the year no matter what the news is. Wall Street has its mind made up to throw away the gain for the year and no one is going to change that. Plain and simple fact!!!
Nov 12, 2012 1:14PM
tumbleweed, in the 1970's the same gap was there we've let 50 million poor to our country via mexico, poor ta rico since then "trickle down" coined in the 80's. if your 66 you should know this. I question your intentions.
Nov 12, 2012 1:13PM

Did anyone hear what oblamos recovery plan is, other than more taxes for the rich and everybody else...?

Could be he will ask China for more loans, thus driving the United States deeper in debt...

watchya think...

Nov 12, 2012 1:10PM

Well let's see how about a real easy way. No one that works for the government shall receive more than the minimal wager does. That means no health care for them. Why should they get real good heath care and I get crap. Why should they get paid like they do they don't do a darn thing if you ask me.


And why do they get a pension I don't  that's where all the money is going to them not to run the USA but to run the trips with hookers and we paid for it.


I do not understand WHITE, BLACK, CREAM I don't care what color he is with all that happen in the 4 years you all put that human back in office.


Oh I know because you are on handouts too...

Nov 12, 2012 1:06PM
Republican White Dudes Vs Everybody Else. Well there's always Idaho and Alaska to hunker down in

Mitt got LESS votes than McCain did. Your numbers are dwindling, while your enemy's are on a constant rise.You are TOAST even  in a Civil War. I suggest you change your tune
Nov 12, 2012 1:01PM
piped pipers , and Gamblers, all die the same way the good ,bad ,and ugly do ,alone and stinking there way to absorbition if there lucky , . Net worth say's jimmy is worth 100 million ,  he is over paid  , bald is beautiful  go jimmy go
Nov 12, 2012 1:01PM
Maybe some (enough) voters didn't like the idea of getting rid of medicare as it now is for those under 55. I thought this was a big mistake, but they went with it and its backer Ryan whole hog. Even Donald Trump warned against it. Try getting and paying for health insurance when you're 65 plus...or 80. 
Nov 12, 2012 12:57PM

 Either you believe that concentrated wealth and greed are good or you don't
Nov 12, 2012 12:56PM

400 members of the Upper Class have the same combined net worth as 150,000,000 of us combined. Here's a thought. Thy raping THEM for a change instead of the Middle Class
.And if you bring up that " job creator" CRAP go screw yourself, Tickle Down Economics has been thoroughly discredited and you damned well know it. All boats did NOT rise with the tide as promised, just the Upper Class yachts
Nov 12, 2012 12:53PM
I've always been the type to jump in a cold swimming pool than to wade in having to adjust to the water every inch or two is slow and more painful by the way i'm already in the pool come on in.
Nov 12, 2012 12:52PM
4 million millionaires makes a bundle of 4 trillion to draw on. Unless you think the water is already under the bridge.I don't and want some of it BACK
  The way I see it the Upper Class got to where they are on the hard work and consumer spending of the Lower and Middle Classes, so they are ENTITLED-- and I use that verb specifically -- to at LEAST a kickback in their old age
Nov 12, 2012 12:44PM
  Bush was selling Cayman Island homes to Fat Cats at that oh so secret meeting of his,  as a hedge to and contingent upon Mitt losing
Nov 12, 2012 12:44PM

Let`s cut to the chase.An agreement be will be reached and the Dow will crash through

14,000.Be sure you`re fully invested.Then our right wing media will find something else to

complain about Obama.

Nov 12, 2012 12:39PM

Let`s cut to the chase.It will be settled soon and the market will go up hundreds of points.

Be sure you`re fully invested because we1ll crash through 14,000.The right wing media

will find something else to complain about Obama.

Nov 12, 2012 12:35PM

 It's all Bush's fault for passing his UNNECESSARY tax cuts to begin with. Utterly irresponsible given the then looming Baby Boomer Entitlements.ALL it  did was exacerbate the deficit
Nov 12, 2012 12:31PM
It is time for the Republican Trolls in the house and senate to stop drinking tea and go to a real bar and have a couple (1 or 2) of shots and work out a deal like real men have for generations!
Nov 12, 2012 12:29PM
WOLF!! WOLF! WOLF! Been there done that---- fear and negativity help to sell ads
  I simply do not believe the gloom and doomers, it never happens. Y2K et al
 This ALL goes away when some Important Dude merely scribbles his name on a piece of paper. It is NOT baked into the cake any more than the debt ceiling charade was
Nov 12, 2012 12:21PM

You could take all the rich folks money and run this government for a few months at the most. We have a huge spending problem.
Nov 12, 2012 12:19PM

Raise taxes on everyone. For the rich and also for those paying NO taxes.  Combine that with a balanced budget amendment.  Not ten years from now,  next year 2013.

Until they agree to a balanced budget, why agree to raise any taxes because the SOB's will waste it on crap!

Nov 12, 2012 12:17PM
Obama already got a tax hike. It's called The "Affordable" Care Act.
Taxes the middle class - Just ask the court - Now he may get some "Loop Holes" cut if he wants a deal.

I think he would like to go back to the Clinton Tax rates anyway, death tax and all. Doesn't want a deal and will never put forward a budget.

Just what I think.
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