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Will We Go Over the Fiscal Cliff?

Written by Gary North on November 8, 2012

Obama, Reid. and Boehner are trying to work out a deal to avoid automatic spending cuts, heavily in the Defense budget, trhat go into effect automatically on January 1.

Obama wans to tax the rich. Boehner has said “no deal.”

Boehner is on the hot seat. Will he stick to his guns? Will he let the cuts begin? He can probably block the tax increases. The House Republicans will go along with him.

If he buckles, he begins the 4-year period with a capitulation. He becomes “Mr. Sell Out.” He did that with TARP. He has said he will not do it again. But his initial comments sound conciliatory.

Gridlock should begin now.

One Canadian financial commentator has laid out the economic issues. Tax increases (automatic) could cause a recession. This could spread beyond U.S. borders.

Another four years under U.S. President Barak Obama is seen as generally positive for the Canadian economy. But fears about the looming “fiscal cliff” quickly overtook the initial euphoria.

North American stock markets traded sharply lower on continuing uncertainty over how a deeply divided Washington will deal with nearly $600 billion (U.S.) in tax increases and spending cuts that come into effect in 2013.

If unresolved, the so-called “fiscal cliff” – a phrase coined by U.S. Federal Reserve chairman Ben Bernanke – threatens to plunge the U.S. back into recession, dragging Canada and other global economies down with it. . . .

In New York, the Dow Jones Industrial Average and S&P 500 composite index both closed down 2.4 per cent. Oil prices fell 5 per cent on declining demand. . . .

In Ottawa, federal Finance Minister Jim Flaherty urged U.S. politicians to move swiftly to reach an agreement on the fiscal cliff before the package of tax and spending programs comes into effect Jan. 1.

“Of course we’re worried because it would mean, were the entire fiscal cliff risk to come to reality … (it) would put the U.S. economy into a recession quite quickly and the Canadian economy would follow shortly thereafter, and would have a significant effect on the global economy,” Flaherty told reporters. . . .

However, it remains to be seen how much Obama can accomplish given a divided Congress (Democrats maintained control of the Senate while the Republicans kept the House), a scenario that led to political gridlock in Washington under the previous administration.

The U.S. is Canada’s largest trading partner and, as such, everything from its interest rate policies to consumer confidence levels can affect Canada’s economic performance.

“The risks that the U.S. economy will fall off the looming fiscal cliff and fall back into recession is one of the top risks facing Canada’s economy as we head into 2013,” Derek Burleton, deputy chief economist, TD Economics, wrote in a note to clients. . . .

“The U.S. recovery is still quite tenuous,” Paul Taylor, chief investment officer for BMO Asset Management Inc. in Toronto, said on a conference call with reporters. . . .

Some economists are betting a more conciliatory Obama and a Republican Congress less focused on defeating him at the polls will be more able to reach an agreement on how to avoid that catastrophe.

But nothing is certain. . . .

An impasse could mean a package of Bush-era tax cuts expires Dec. 31 for everyone except households earnings above $250,000, curbing most consumers’ spending ability.

As well, several hundred billion dollars in additional tax increases and spending cuts are scheduled to take effect in January unless the White House and Congress reach an alternative deficit-reduction agreement.

Combined, the measures would cut U.S. economic growth, currently at 2 per cent, by an estimated 3 to 4 percentage points next year, economists estimate. . . .

The year after an election has typically been the worst in the four-year political cycle for equities, BMO Capital Markets economist Robert Kavcic noted. And with President Obama now facing a significant fiscal challenge, the pattern could hold this year, he speculated.

Continue Reading on www.thestar.com

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14 thoughts on “Will We Go Over the Fiscal Cliff?

  1. Texas Chris says:

    Gridlock. Hold the line, Boehner. Don't give him one inch.

  2. BOEHNER WILL FOLD AGAIN.!!!!

  3. BOEHNER is a gutless, spineless, balless, puke that will kiss your arse to get a vote and then sell you out. He cannot take the heat of being the MAN that stood his ground. Instead Boehner is an accident of birth called a male that has yet to learn how to be a man. Boehner if you read this a United States Marine is calling you out. Be a man or resign.

  4. jmsmaxwell says:

    Boehner has a long history of capiulation, he is sor of like Nevil Chamberlin over in England when he returned from Germany
    and held up a piece of paper that Hitler has signed. As he disembarked the plane he said "Peace in our Time" WW II
    started shortly after that. Like the vast majority of politicans who have been in Washngton DC to long they have lost the
    fire in their belly if they ever had it and have become bargainers rather than statesmen who listen to their voters and are
    willing to put it on the line. Boehner has acted more like a RINO than he has a Republicans who represents the people
    who elected him. But I blame the voters also for not waking up to that fact.

  5. DockyWocky says:

    2 days now, and I still have not seen any evidence that the "best is yet to come."

    Instead, the news is now all of a sudden that we might be facing some financial cliff. Was King Obama trying to keep news of this financial cliff from us prior to his ascendency to the throne? We knew he had no plan to prevent anything like a financial cliff from happening before his re-election. Do you think he has a plan to avoid a financial cliff now?

    This is always what happens when folks are too stupid to see what political hacks are really selling.

    God knows we have a surfeit of stupid people. Tuesday proved that.

  6. "Will We Go Over the Fiscal Cliff?" == NO! They will find a way to kick the can down the road … just like they did a year ago. newsandopinions dot net

  7. I can see that the Snakes are coming out of the Grass.

  8. The only way Boehner can keep the tax rates of the rich from going up is to sell his soul to the devil.
    http://tomesnyder.blogspot.com/2012/11/fiscal-cli

  9. Boehner needs to go.They need someone who won't bend under pressure.At first after the republicans took the house I thought it would work out.But it seems no one wants to take responsibility and stand up for America! Its shameful what the feds are getting away with,printing 40 billion dollars a month funny money.Someone should go to prison for that!But it won't happen.Here comes stagflation and the only ones that pay are the hard working American people!While the people with the free cell phones and food stamps sit back and laugh.But they also will be in for a big surprise also when the feds run out of other peoples money!America needs revival and turn back to God!

  10. BOEHNER, look obama and Reed in the eye and say” welcome to America, I’m the voice of half this Country, remember them? I will not give you what you want! You can spin this all you want, your Administration is 100% responsible. I will not give in.. “

  11. MI Patriot says:

    Boehner needs to grow set of balls and act like a man. However, based on past actions of his, he'll fold like a cheap suit and start crying while running up the white handkerchief of surrender. We need somebody who can stand up to Harry Reid and Obama and call them out for the treasonous people they are.

  12. MI Patriot says:

    And what makes you think he HASN'T sold his soul to the devil?

  13. We will go over the fiscal cliff,Obama is out of town now. He don't give a dam, he will get away by blaming some one.I hope we do, maybe it will be pay back to Obama s supposrters. Country is already on the way to hell. Obama will make sure it gets there.