Paraphrasing…”The stock market has fallen over 400 points in
the last two days over fears of government gridlock and the impending fiscal
cliff.”
The impending fiscal cliff was impending last week, Monday,
Tuesday…what happened between Tuesday and Wednesday?
All polls and expectations were that Democrats would retain
control of the Senate and Republicans would retain control of the House, which
is exactly what happened. So status quo. The iffy element was the Presidential
race, which was nearly a toss-up heading into election day.
If there is to be gridlock, it would be with Pres. Obama and
the sitting Congress, especially with respect to the impending fiscal cliff:
- The Obama (née Bush) tax cuts expire Dec 31 unless something is
done by Pres Obama and the sitting Congress. The election has changed nothing about
that situation.
- The Obama payroll tax cut expires at the same
time, again unless something is done by Pres Obama and the sitting Congress.
And again, the election has changed nothing about that situation.
- Many of the Obamacare taxes take effect on 1 Jan
2013, once again unless something is done by Pres Obama and the sitting
Congress. And once again, the election has changed nothing about that situation.
- Finally, because Pres Obama and the sitting
Congress failed to enact the
requisite $1.2 in spending cuts required by the debt limit legislation, Pres.
Obama and the sitting Congress will face the automatic spending cuts to defense,
Medicare, and many other spending programs. Those cuts take effect 15 Jan 2013,
before the new Congress is sworn in, so yet again, the election has changed
nothing about the situation.
It seems to me that the only thing that has changed is that
before the election, there was a good chance that Pres. Obama would lose. Wednesday morning, he has won his re-election and cemented in four
more years of his administration. Surely this is what the market is reacting
to, not some fear of government gridlock?
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