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Talk, talk, talk endlessly about the fiscal cliff -- it's diarrhea.  But the clear situation is there will be NO DEAL and tax rates will go up on everybody on January 1st.  This is obvious because the House Republicans who were frequently elected with substantial margins (due to redistricting) cannot vote in large enough numbers to a get deal that involves increasing tax rates on the rich. The only way a deal can be reached is if President Obama took increasing tax rates for the rich off the table; however, the re-elected President is sticking to his pledge to let the Bush tax cuts expire on the rich.

The President's line in the sand is there can be no negotiations until the Republicans agree to increase the tax rates on the rich and offer specific spending cuts of their own.  This implies the President realizes there will be no deal without the cliff rolling back the Bush tax rates; he has no allusions that Republicans will do the right thing pre cliff.

It is better politically for everybody to go over the cliff and let the Bush tax rates expire. This is the only way Democrats are going to get the increase tax rates on the rich.  This is why going over the cliff is being endorsed by the likes of Newt Gingrich, Rush Limbaugh, and other conservatives.  But in any case, most everybody is for going over the cliff even though few will say it out loud.  After the cliff the Republicans will pretend they are the ones to restore lower taxes on the middle class, and Democrats will celebrate increased tax rates on the rich.

Markets may start to weigh in on the cliff before the end of the year, and this could shake the politicians up a bit.  But it will take multiple -500 Dow days to get their attention and/or talk about further reductions in the US credit rating.  But even this will likely not budge the debate.

The consensus is now for cliff diving.  So, enjoy the holidays -- this will resume in January, perhaps not until the Inauguration and the new Congress.

Poll

Will US go over fiscal cliff?

88%22 votes
8%2 votes
4%1 votes
0%0 votes

| 25 votes | Vote | Results

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Comment Preferences

  •  Where is the option for (0+ / 0-)

    both sides will cave? It's hard to see how you ever make any kind of deal unless both sides give some ground.

    Also it's not strictly speaking accurate to say that Republicans won't agree to increase taxes on the rich. Taxes on the rich are going up all by themselves on January 1. It would take Democrats agreeing to extend those tax cuts for the rates to stay the same. The only item on the table as far as tax rates is whether to prevent taxes from going up on the 98%. For that to happen, the House will have to refuse to vote on a bill the Senate has already passed to extend the Bush tax cuts on the 98%. That puts the Republicans in a bit more of a bind than the suggestion that Republicans need to agree to increase taxes on the rich. Actually, they don't have to agree to that at all.

  •  There are a lot worse fates than going back to (0+ / 0-)

    the Clinton Budget.
    And staying there for about 8 years, sans wars.

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