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 6:10PM
To balance the federal budget we must raise taxes by 50% or cut spending by 35% or a combination of both. This fiscal cliff is just the beginning. We don't need a deal we need to get it done.
Nov 12, 2012 5:53PM
Changed your tune from a week ago, eh?
Nov 12, 2012 4:10PM

0016T:  Do you expect me to talk?


Geithfinger:  No Mr. Boehner, I expect you to die.

Nov 12, 2012 3:48PM
for those that do not reside in a border state



Nov 12, 2012 3:43PM
I believe that if you truly need  monetary help ,Than you should be required to pee in the cup every month. If you fail your done.
Nov 12, 2012 3:34PM
Get Ready for SOCIALIZED MEDICINE.....The Banksters and the Insurance companies are buying up Healthcare groups and Hospitals in order to secure cost. The main thrust is to be on the top and tell every DOCTOR  what they should make......Now The New World Order is targeting the Doctors and picking them off Group by Group until they all become employees...and selecting Hospitals and Healthcare groups to monopolize and standardize wage and proceedure cost factors and bring down Medicine as we know it. By doing so this guarantees that the BIG CORPORATE INSURANCE COMPANIES THAT ISSUE RISK CONTROL ALL ASPECTS OF THE COST AND MAXIMIZE THEIR PROFIT...THIS MEANS YOU WILL NOT GET THE BEST CARE YOU WILL GET THE CARE THAT BEST SUITES THE INSURANCE COVERAGE AND PAYMENTS YOU MAKE AS THEY MAKE MORE PROFITS.....your care is marginalized.......as more profits are always good for the Banksters....! GET READY FOR SOCIALIZED MEDICINE OBAMACARE IS THE FIRST STEP...!!! 
Nov 12, 2012 3:26PM
maybe we need to vote for CPA's instead of lawyers.
Nov 12, 2012 3:22PM

This health care is a simple fix. Everyone pays into a pool every paycheck. Based on your salary, you pay 2,3,4,5 dollars every week or two weeks that goes directly into a American HealthCare Tax. Leave the businesses out of it and let the American workers pay into it. Even people who collect an unemployment check would pay 2 bucks a week.


With 100 million workers, you would generate almost a billion dollars a month.


Done. Have a nice day and "don't forget to tip your waitress on the way out."

Nov 12, 2012 3:20PM
i think i wil go into the STEEL window roll -down  and  gate business

Nov 12, 2012 3:19PM

OMG- passing a budget so that you know what you need to plan for !?!

This congress & president have never seen anything like that yet- Maybe one of you can send them a Quick Books program to get them started. Oh-wait; don't forget to hire a advisor to teach them how to use it.

Nov 12, 2012 3:14PM
this country decline not because of the system is the the society structure change and the new generation is not like the previous one global changing is lot to do with our situation today we was not smart to know the changing economy after the communism fail because we have conservative political and economical idea that we adopt that the other big country's got clever different view of the changing time and they succeed with better performance in the global economy they got big chunk of the cake in there mouth Obama know the mistakes that conservative politicians do and he want to take smart direction to let this country gain power again in the international stage many wealthy will get weaker but he will get this country to the right direction 
Nov 12, 2012 3:09PM
I vote for the cliff No more tax cuts and
cut spending, raise the interest rate, increase import tariffs on items that are below US market standards.

Nov 12, 2012 3:00PM
Let it happen, I am retired and it won't heart me at all.
Nov 12, 2012 2:55PM

Who was it that freed up the mortgage lending standards so everyone could have the opportunity to bankrupt America with crap credit and crap lending? Who was it that passed policy that allowed banks to make a commodity out of our homes by way of Home equity loans?


Our good friend Slick Willy, Bill Clinton. Liberal policy for the masses.


See when the governemnt tries to intervene so that everyone gets a peice, IT ALWAYS BACK FIRES! Not everyone can be entitled to a piece, that happens naturally by hard work.


I'm all for regulation at the central bank level. I'm all for regulation of the investment companies who can move enough bad decision capital to roll over the credit market.


NO to Obama. You have no record to prove your economic decision making. I do not trust you or Harry Reid. Do not take another dime from my fellow americans unless you can pass a budget!

Nov 12, 2012 2:49PM

Everyone should send a message to their congressman about keeping their party ideology on side, use their own intellect and work for american people, otherwise it is their last term in congress.

Nov 12, 2012 2:43PM



Why should small businesses and high income individuals pay more, when the congressional democrats can't prove to the people that they can be responsible with our money. Hell no, absolutely not. That's a horrible deal! The people shouldn't stand for it.


Obama did not tell us he was going to take billions out of medicare to fund the ACA. What else is Obama not telling us that he has in store with our tax payer dollars?!?


i don't trust Obama one dang bit. He has already been too dishonest with too much sneaky business going on in the Whitehouse. No more policy by executive fiat. Pass a damn budget politician!

Nov 12, 2012 2:36PM
mike 226

the mentally unstable  JESSE JACKSON JR.?
Nov 12, 2012 2:27PM
jesse jackson jr. would trounce Abraham Lincoln in today's America.......
Nov 12, 2012 2:22PM

 Why is Warren Buffet's prostate cancer treatment being paid for by Medicare? Because he paid in is your answer? So much for compromise
Nov 12, 2012 2:21PM
it's the failure of the individual that's the cause of all this mess.......either he/she was a moron who didn't know to buy the house they couldn't afford, or they are a moron and unemployable, or they are a lazy, scamming weasel looking for someone to pay their lazy way....
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.

123 rated 1
262 rated 2
480 rated 3
651 rated 4
649 rated 5
629 rated 6
616 rated 7
496 rated 8
346 rated 9
111 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.