Best of the Week
Most Popular
1.Canada Real Estate Bubble - Harry_Dent
2.UK House Prices ‘On Brink’ Of Massive 40% Collapse - GoldCore
3.Best Cash ISA for Soaring Inflation, Kent Reliance Illustrates the Great ISA Rip Off - Nadeem_Walayat
4.Understanding true money, Pound Sterling must make another historic low, Euro and Gold outlook! - Marc_Horn
5.5 Maps That Explain The Modern Middle East - GEORGE FRIEDMAN
6.Gold Back With A Vengeance As Bitcoin Bubble Bursts - OilPrice_Com
7.Gold Summer Doldrums - Zeal_LLC
8.Crude Oil Trade & Nasdaq QQQ Update - Plunger
9.Gold And Silver – Why No Rally? Lies, Lies, And More Lies - Michael_Noonan
10.UK Election 2017 Disaster, Fake BrExit Chaos, Forecasting Lessons for Next Time - Nadeem_Walayat
Last 7 days
UK House Prices Momentum Crash Warns of 2017 Bear Market - Video - 22nd Jul 17
Crude Oil, Gold, ETFs & more: Pro-grade Market Forecasts - 22nd Jul 17
Warning: The Fed Is Preparing to Crash the Financial System Again - 21st Jul 17
Gold / Silver Shorts Extreme - 21st Jul 17
GBP/USD Bearish Factors - 21st Jul 17
Gold Hedges Against Currency Devaluation and Cost Of Fuel, Food, Beer and Housing - 21st Jul 17
Is It Worth Investing in Palladium? - 21st Jul 17
UK House Prices Momentum Crash Threatens Mini Bear Market 2017 - 21st Jul 17
The Fed May Show Trump No Love - 20th Jul 17
The 3 Best Asset Classes To Brace Your Portfolio For The Next Financial Crisis - 20th Jul 17
Gold Stocks and Bonds - Preparing for THE Bottom - 20th Jul 17
Millennials Can Punt On Bitcoin, Own Safe Haven Gold For Long Term - 20th Jul 17
Trump Has Found A Loophole To Rewrite Trade Agreements Without Anyone’s Permission - 20th Jul 17
Basic Materials and Commodities Analysis and Trend Forecasts - 20th Jul 17
Bitcoin PullBack Is Over (For Now): Cryptocurrencies Gain Nearly A 50% In Last 48 Hours - 19th Jul 17
AAPL's 6% June slide - When Prices Are Falling, TWO Numbers Matter Most - 19th Jul 17
Discover Why A Major American Revolution Is Brewing - 19th Jul 17
iGaming – Stock Prices - 19th Jul 17
The Socionomic Theory of Finance By Robert Prechter - Book Review - 18th Jul 17
Ethereum Versus Bitcoin – Which Cryptocurrency Will Win The War? - 18th Jul 17
Accepting a Society of Government Tyranny - 18th Jul 17
Gold Cheaper Than Buying Greek Villas in 2012 - 18th Jul 17
Why & How to Hedge the Growing Risks of Holding Stocks - 18th Jul 17
Relocation: Everything You Need to do for a Smooth Transition Abroad - 17th Jul 17
A Former Lehman Brothers Trader: It’s Time To Buy Brick And Mortar Retailers - 17th Jul 17
Bank Of England Warns “Bigger Systemic Risk” Now Than 2008 - 17th Jul 17
Bitcoin Price “Deja Vu” Corrective Sequence - 17th Jul 17
Charting New Low in Speculation in Gold and Silver Markets - 17th Jul 17
Bitcoin Crash - Is This The End of Cryptocurrencies? - 17th Jul 17
The Fed's Inflation Nightmare Scenario - 17th Jul 17
Billionaire Investors Backing A Marijuana Boom In 2017 - 17th Jul 17
Perfect Storm - This Fourth Turning has Over a Decade of Continuous Storms to Come - 17th Jul 17
Gold and Silver Biggest Opportunity Since Late 2015, Last Chance at These Prices - 17th Jul 17
Stock Market More to Go - 17th Jul 17
Emerging Markets & Basic Materials Stocks Breaking Out Together - 16th Jul 17
Stock Market SPX Uptrending Again After Microscopic Correction - 15th Jul 17
Global Currency Reserve At Risk - 14th Jul 17
Picking Great Gold Stocks - 14th Jul 17
BBC Tree Expert's Verdict on Sheffield Amey / Labour City Council Tree Felling's - 14th Jul 17
SPX Cycles, Fed Funds and Gold - 14th Jul 17
Should Platinum Be More Expensive Than Gold? - 14th Jul 17
What's Next for US Dollar, Stocks, Bonds and Gold? - 13th Jul 17
India Gold Imports Surge To 5 Year High – 220 Tons In May Alone - 13th Jul 17
Gold and Silver: Your Stomach Is Probably Wrenching Right Now - 13th Jul 17
Gold Industry Is In A Deep State Of Dysfunction, Delusion And Denial - 13th Jul 17

Market Oracle FREE Newsletter

Crude Oil, Gold, ETFs & more: Pro-grade Market Forecasts

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

© 2005-2017 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

Catching a Falling Financial Knife