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Fiscal Cliff Boogie Man: Political Theater and Distraction

by Jay D. Ahlbeck, President, JDA & Associates

Do not be surprised if Democrats and Republicans hold hands and jump off the “fiscal cliff” together.  There will be gnashing of the teeth, wailing in the streets and markets will swoon. Those living off government largess will scream like stuck pigs and rich people (however you care to define that) will say they will not play with poor people anymore if their taxes are going to be this high. Rice bowls will appear to be broken, but not really.

Going over the cliff makes political sense. The resulting higher taxes and draconian spending cuts, will allow both parties to compromise and claim victory. Democrats will take claim to increasing “investments” after the newly imposed cuts and the Republicans will claim that they have reduced taxes from the newly imposed levels. 

We all give a heavy sigh of relief, everyone is happy and nobody losses. Right?

After “Fiscal Cliff” get ready for its sequel “Son of Fiscal Cliff”, the coming “debt ceiling” debate.  The sad truth is that what goes on in the local mall this December is likely more meaningful than the actions in Washington, so I suggest that investors try to close their eyes as the next few weeks are going to be ugly, but before Spring has arrived this too will pass.  Between now and then, expect ugly.