StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



Don't Believe The Reports Of Progress On The Fiscal Cliff

26 Nov 2012
Posted by Stan Collender

In spite of what you may be reading elsewhere, we are no closer today to avoiding the fiscal cliff than we were the day after Election Day.

All of the so-called progress to date has been one of three things: the media looking for a story, a misunderstanding of what it's going to take to get a deal or hype. For example, the big fiscal cliff-stories over the past two weeks have been...

1. Reports about congressional leaders saying nice things and using a positive tone after a first meeting with the president at the White House to discuss the cliff.

2. Reports about how White House and House Budget Committee Republican staff have been working on fiscal cliff options during the Thanksgiving recess.

3. A report about how three GOP senators -- Lindsay Graham (SC), John McCain (AZ) and Saxby Chambliss (GA) -- all said on Sunday talk shows that they would be willing to break the no-tax pledge.

4. Reports about corporate CEOs urging Congress and the president to prevent the cliff from occurring.

Let's take these in turn.

1. The meeting at the White House was purely ceremonial. No negotiations took place. The language and tone of the post-meeting statements by the congressional leaders was carefully choreographed to be positive.

2. Staff-prepared options are always the starting point for budget discussions ...and they almost always are rejected out of hand. The fact that they were being prepared now is not significant.

3.The three GOP senators are not important players in the Senate on the fiscal cliff, and they specifically rejected higher tax rates --the White House's preference -- in any case. In other words, all they did was endorse the long-standing GOP position on taxes. More important, however, is that the GOP senators are not as important to a fiscal cliff deal than House Republicans and none of them have said they're going to break the pledge.

4. As much as they might like to think of themselves as being important, corporate CEOs have so little influence on what happens on the fiscal cliff that their statements about what should be done are almost completely irrelevant. Besides, is it really so surprising and newsworthy that the CEOs of companies that sell to consumers are concerned about tax increases that will take money out of the hands of their customers? It's also important to note that none of the CEOs who have spoken up about the fiscal cliff have endorsed any alternative that would cost their companies money.

 

Go over already

The so called cliff has two components as I understand it. The built in termination of the Bush-II era tax cuts and the sequestration spending cuts from last Fall.
I fail to see why there should be any action on the first. It was planned by the Republican Congress and signed by a Republican president for the taxes to end.
So let them end. They are the "fruit of the poison tree". They were set up in bad faith so they should just go away and then we can start a conversation.
The second part is more difficult.
We should have some kind of planning in our budgets not automatic triggers.
But if the Republicans want to go back to brinksmanship then that's where we'll go. If the President gives on this now, then as soon as discussions start on the next budget this will start all over.
Might as well get it over. Let the thing kick in and see how badly the Congress wants to save the country.




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