Best of the Week
Most Popular
1.UK General Election 2015 - Forecasting Seats for SNP, LIb-Dems, UKIP and Others - Nadeem_Walayat
2.UK General Election 2015 Seats Forecast - Who Will Win? - - Nadeem_Walayat
3.Gold Price Downtrend Looks Set to Continue - Clive_Maund
4.Commodity Prices Set To Plunge Below 2008 Lows - Austin_Galt
5.New Greece Drachma Revealed Amid Bank Runs - Greeks Buy Gold Sovereigns - GoldCore
6.Gold and Silver Stocks or General Stock Market Indices? - Rambus_Chartology
7.“Forgive Us Our Debts” – Only Way To Prevent Economic Meltdown - GoldCore
8.UK House Prices Trend 2015 and the May General Election - Nadeem_Walayat
9.12 Reasons Why Barry Ritholtz and Many UK Experts Are Mistaken On Gold - GoldCore
10.Recession is On The Way; Beat The Stock Market Crowd, Panic Now! - Mike_Shedlock
Last 5 days
Students Getting a PhD in Subprime Debt - U.S. Debt Breaking Bad Part 3 - 2nd Mar 15
The Stock Market is in The Process of Major Top! - 2nd Mar 15
Stock Market Weakening Trend - 2nd Mar 15
Gold Price Glimmer of Hope - 1st Mar 15
Stock Markets Are Riding High on Thin Air - 1st Mar 15
Varoufakis vs. the Troika - Showdown in Athens - 1st Mar 15
Subprime Rising - U.S. Debt Breaking Bad Part 2 - 1st Mar 15
Gold CoT Improving, But ... - 1st Mar 15
UK General Election 2015 Seats Forecast - Who Will Win? - 28th Feb 15
UK General Election 2015 - Forecasting Seats for SNP, LIb-Dems, UKIP and Others - 28th Feb 15
Stocks Bull Market Continues - 28th Feb 15
U.S. Debt Breaking Bad - 28th Feb 15
NATO Frankenstein - When Centralization Scales Beyond Our Control - 28th Feb 15
Gold And Silver Insanity Prevails; Precious Metals Without Direction - 28th Feb 15
Fed Raising U.S. Interest Rates - Shovelin’ Schmitt Against the Tide - 28th Feb 15
Don't Let This Stock Market Myth Cost You Your Gains - 28th Feb 15
Recession is On The Way; Beat The Stock Market Crowd, Panic Now! - 28th Feb 15
Stock Market Indexes Creeping Towards the Edge - 28th Feb 15
GGD Going for Mexican Gold - 27th Feb 15
Foreign Real Estate Is the New Swiss Bank Account - 27th Feb 15
10 Reasons Washington Has War Fever - 27th Feb 15
Gold and the Euro Tragedy, Iraq 3.0, Ukraine Conflict Three Ring Circus - 27th Feb 15
Deepak Chopra - New Age Genius or Bullshit Expert? - Video - 27th Feb 15 - Videos
New Greece Drachma Revealed Amid Bank Runs - Greeks Buy Gold Sovereigns - 27th Feb 15
Will Month Long Stocks Rally Continue? - 27th Feb 15
The Only Public Hedge Fund You Should Own - 27th Feb 15
UK House Prices Trend 2015 and the May General Election - 27th Feb 15
Why America is Ungovernable - The Republicans’ Civil War - 27th Feb 15
Gold vs Gold Stocks: Bullish Anomaly Developing? - 27th Feb 15
I Heart Capitalism, Nasdaq Stocks, Then And Now - 27th Feb 15
The Fed’s History of Assassination - 27th Feb 15 i
Gold Bull Market Forecast - Money Will Rotate Into These Dead Investments - 27th Feb 15
"Audit the Fed"? We've Already Done That (Well, Kind of) - 26th Feb 15
Forget Peak Oil; Worry About Peak Demand - 26th Feb 15
Currency Wars, Again - 26th Feb 15
The Fed Waited Too Long: Here Comes Inflation - 26th Feb 15
Investing Inertia Won’t Keep Your Cash Safe - 26th Feb 15
The Net Neutrality Scam - 26th Feb 15
Will Conservatives Out of Control Immigration Crisis Boost UKIP Election 2015 Prospects? - 26th Feb 15
EU Warns Ireland and Euro Zone of Debt Dangers - 26th Feb 15
Commodity Prices Set To Plunge Below 2008 Lows - 26th Feb 15
Ukraine Hyperinflation as Currency Plunges 44% in One Week! - 26th Feb 15
The State of the Global Markets 2015 - 53 Page Report - 26th Feb 15
NASDAQ New 15 Year High - Stock Market Death By Overdose - 25th Feb 15
12 Reasons Why Barry Ritholtz and Many UK Experts Are Mistaken On Gold - 25th Feb 15
Sugar Commodity Price To Sweeten Up - 25th Feb 15
Investor Profits from China 2,000-Year Unstoppable Trends - 25th Feb 15
How to Borrow Cheaply from a Government-Owned Bank - 25th Feb 15
Debt Be Not Proud - 25th Feb 15
Liberal Democrat Election Blood Bath - Could Nick Clegg Lose Sheffield Hallam? - 25th Feb 15
Wheat Commodity Price Technical Trend Forecast - 24th Feb 15
Bitcoin Price Might Stay below $250 - 24th Feb 15
Another Important Stock Market Inflection Point Approaching - 24th Feb 15
Gold: The Good, Bad, and Truly Ugly - 24th Feb 15
Eurozone Gold Holdings Increase to 10,792 Tonnes As “Reserve of Safety” Amidst Crisis - 24th Feb 15
Bird Doo; Yellen Goes to Congress - 24th Feb 15
Is Gold Investing Risk Free? - 24th Feb 15
The Bull Case For Gold Price 2015, and the Bear - 24th Feb 15
Europe - The Intersection of Three Crises - 24th Feb 15
Gold Price Just Needs More Time - 24th Feb 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The State of the Global Markets 2015

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

© 2005-2015 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

Free Report - Financial Markets 2014