Best of the Week
Most Popular
1.Oil Wars 2016 - US vs Russia vs Saudi Arabia vs Iran - Nadeem_Walayat
2.Crude Oil Price Crash Triggering Global Instability, Trend Forecast 2016 - Nadeem_Walayat
3.Stock Market Crash - Last Week was The 2nd and Final Warning... - Clive_Maund
4.Stock Market Crash Apocalypse or Bull Market Severe Correction? - Nadeem_Walayat
5.TShipping Said to Have Ceased… Is the Worldwide Economy Grinding to a Halt? - Jeff_Berwick
6.Crude Oil Price Crash Catastrophe, Independant Scotland Literally Begging to Rejoin the UK - Nadeem_Walayat
7.Summers: Global Economy Can't Withstand Four 2016 Fed Hikes - Bloomberg
8.Gold And Silver: New World Order: Public Be Damned, Preferably Dead - Michael_Noonan
9.Rigged U.S. Ttreasury Bond Market Double Barreled Hidden Q.E. To Infinity - Jim_Willie_CB
10.Major Stocks Bear Market Awakening - Zeal_LLC
Last 5 days
Is This the Debt Bubbles Last Rattle? - 12th Feb 16
Gold Stocks Upside Targets - 12th Feb 16
Stock Market Observations - 12th Feb 16
Will Capital Controls Return? - 12th Feb 16
Gold, Gold Stocks, and the End Game - 12th Feb 16
Canadian Dollar Now Even Less of a Haven from US Dollar Collapse Than Before - 12th Feb 16
The Stock Market Dow Elevator; 18, 17, 16.... - 12th Feb 16
Will Harry Dent Eat Crow on His $700 Gold Price Prediction? - 12th Feb 16
Where to Hide Your Money From Reckless Governments - 12th Feb 16
The War on Cash is About to Go into Hyperdrive - 11th Feb 16
More Bankruptcy For Your Retirement Portfolio - 11th Feb 16
2016 - Gold & Silver Rising: A Gold And Silver Bottom May Be In - 11th Feb 16
Gain Trading Confidence by Improving Your Elliott Wave Analysis Skills - Video - 11th Feb 16
With A Gloomy Start To 2016, A Bust Seems Just Around The Corner - 11th Feb 16
UK Interest Rates, Economy Forecasts 2016 and 2017 - Video - 10th Feb 16
World Markets Are in Sync - 10th Feb 16
If You Miss Buying Gold – You Will Regret, it Later - 10th Feb 16
The Fed Doesn't have a Clue! - 10th Feb 16
How Far Can Gold Price Go? - 10th Feb 16
It's Stock Market Panic Time! - 9th Feb 16
Gold Stocks Picks for Patient Pickers - 9th Feb 16
Oil Price Collapse U.S. Recession Odds 2016 - 9th Feb 16
Preparing for Crisis - It's About Risk Mitigation and Capital Preservation - 9th Feb 16
Top Silver Mining CEO: Don't Laugh, We Could See Silver $100+ - 8th Feb 16
Gold, Investment Leadership Changes Permanent? - 8th Feb 16
Stock Market Panic Decline Begins... - 8th Feb 16
How to Save Money By Growing Your Own Homegrown Tomatoes Indoors From Seeds - 8th Feb 16
US Economy Slides One Step Further Towards A Recession - 8th Feb 16
Gold Bear Market Bottom : Mr. Bear has left the PM Sector for Greener Pastures - 8th Feb 16
Stock Market At Important Support - 8th Feb 16
David Cameron Humiliated in Poland Over Refusal to Stop Taking UK Benefits, BrExit or Super State? - 8th Feb 16
Why Crude Oil Prices Could Continue FALLING From Here - 7th Feb 16
Stock Market S&P, NAS Best, Most Reliable Answers Come From The Market And You - 7th Feb 16
Stocks Bear Market Continues - 7th Feb 16
Silver COT Paving Way for Sustained Upside Breakout Sharp Rally - 7th Feb 16
US Dollar Double Top, Gold Prospects Brightening Rapidly - 7th Feb 16
Gold And Silver - Is A Bottom In? Nothing Confirmed - 7th Feb 16
Gold Stocks Something has Changed - 6th Feb 16
UK Interest Rates, Economy GDP Forecasts 2016 and 2017 - 6th Feb 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Global Financial Crisis 2016

Why the Fiscal Cliff Will Happen… For About a Week

Politics / Financial Markets 2013 Dec 10, 2012 - 10:00 AM GMT

By: Investment_U

Politics

Alexander Green , writes: A few weeks ago, The Oxford Club held its special Post-Election Conference at the luxurious Willard Intercontinental Hotel in Washington, D.C.

We were there to talk about the election results and how they are likely to impact your stock portfolio in the months ahead. Here is a brief re-cap of my analysis.


Before the election, the Democrats controlled the Senate, the Republicans controlled the House and Obama was in the White House. The same is true today. This is dispiriting to many, not least of all because this is the same gang that has dithered on important policy issues, spent like drunken sailors, and generally hampered the recovery over the last two years.

There are good reasons for optimism, however, beginning with the so-called “fiscal cliff,” approximately $600 billion in automatic tax increases and spending cuts set to take place beginning January 1.

How can this be good? First, because it isn’t going to happen. And, second, because it will set the stage for genuine reform. Here’s what I mean…

The first rule for an educated citizenry is to forget everything your politicians say and watch only what they do. And what they are not going to do right now – despite the claims of the fear mongers and propagandists on both sides of the aisle – is throw the economy back into recession by letting the fiscal cliff become a reality.

I know both politicians in both parties are saying they are far apart but this is simply how the game is played. In particular, if Republicans are going to cave on their promise not to raise taxes they have to wait until after January 1. Why? Because then the top tax rate rises to 39.6% automatically.

Once it becomes law, they can restore all the Bush tax cuts except for the top 2%, lower their new top rate to, say 38%, and try to save face by claiming they cut the top tax rate instead of raising it. (Even though it will be higher than the current top rate of 35%.)

Cynical? Yes. Wrong-headed? Yes, but it is likely to happen anyway. Polls show that 60% of voters will blame Republicans if everyone’s taxes go up.

As for the spending, let’s get real. Republicans and Democrats have never had a problem coming together to let federal spending flow and this time isn’t likely to be any different.

This compromise – which we are likely to see fairly quickly – will only be a short-term patch by a lame duck Congress. But when the new Congress comes to town, expect to see something like Simpson-Bowles II. Only this time Obama isn’t likely to ignore the bipartisan commission’s budgetary and entitlement reform proposals.

You’re skeptical? Don’t be. Obama owns this budget deficit now. He knows that if he doesn’t do something about the long-term fiscal crisis we face, his legacy will be mud.

Bill Clinton, for instance, was no Ronald Reagan. But he did cut the capital gains tax, reform welfare, sign NAFTA into law and preside over a budget surplus. Clearly, it is possible for a Democratic administration to sign pro-business, free-market reforms.

There’s an old saying in politics: “Only Nixon could go to China.” The implication is that only someone like Richard Nixon, a man of unquestioned anti-Communist convictions, could reach out 40 years ago and engage constructively with the Chinese without fear of being labeled an appeaser.

Expect something similar in Obama’s second term. Perhaps only a man clearly committed to a strong social welfare network can rein in runaway entitlement spending without being labeled heartless, uncompassionate, or a toady of the rich.

Exactly how we’ll get there is unclear, but reforms will almost certainly include some combination of delayed eligibility for future recipients, means testing, spending cuts and increased revenue. Neither the right nor the left will be entirely satisfied with the result – and there will be plenty of name-calling and hyperbole before we get there – but that’s why we call it compromise.

In short, the real looming crisis is not the fiscal cliff on January 1. It’s the current entitlement system that – in its present form – is absolutely guaranteed to come undone by time and arithmetic.

Progress on this front – which we are likely to see next year – will be good for the dollar, good for the stock market, and good for the future of the United States.

Govern your portfolio accordingly.

Good Investing,

Alex

Source : http://www.investmentu.com/2012/December/the-fiscal-cliff-will-happen.html

by Alexander Green , Oxford Club Investment Director Chairman, Investment

http://www.investmentu.com

Copyright © 1999 - 2012 by The Oxford Club, L.L.C All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

assetmgr44
10 Dec 12, 21:55
Fiscal Cliff

Alex:

You have a fuzzy memory of political facts. It was a REPUBLICAN-led Congress that proposed welfare form in the 1990s. Clinton simply signed it into law. That hardly qualifies for giving him full credit for it. That's like awarding the Nobel Peace Prize to President Obama (for doing nothing). As far as the budget surplus of the 1990s goes, need I remind you that CONGRESS prepares, authorizes, and appropriates budgets, NOT the President. Once again, give credit here where credit is due (which does NOT happen to be due to Pres. Clinton).

As for our current budget disaster much (if not all of it) can be traced back to January 2007, when the Democrats assumed total control of Congress. Since that time gas prices have exploded, housing prices collapsed, and other commodity prices have soared. Just do the math. If you do, you will find that Dems are totally incapable of restraining any spending, because they provide "candy" to just about every major interest group i,e, unions, teachers, lawyers, feminists, minorities.

So to conclude, your hopes of Obama coming to the rescue of this economy are ill-founded. The man is a social engineer and committed demagogue. He is not interested in solving this country's problems. He wants to tear it all down and start all over where everything is "fair and square".

C.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History