Saturday, December 29, 2012

Countdown to the Fiscal Cliff

As January 1 approaches so does the fiscal cliff. A couple of days ago, I was sure that the government would not come to an agreement. Now, things look slightly better. Negotiations are now going on in the Senate to come up with a compromise.  If it passes the Senate, Speaker Boehner has said he will bring it to a vote in the House.  Perhaps some congressmen will not want to go on record as voting against a package to a vert the fiscal cliff. Of course, there are Tea Party Republicans who want to be on record as voting against an increase in taxes. So, I don't think the odds are high that a deal will be found.

As I have written before, I am not convinced that going over the cliff will be that negative since a bill can be passed in the new congress to avert much of the impact. It could also be retroactive to Jan. 1. The fact that many will gladly vote for a tax reduction after Jan. 1 means that most of the Bush tax cuts would be reinstated. Ultimately, I don't see anything happening that will address the long-term problems.  The short-term mentality still prevails in Washington and, unfortunately, on Main Street.

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