Investment Bank Warns: Status Quo Election Harms Economy
NEW YORK (TheStreet) -- A Barack Obama victory and a failure by the Republicans to gain a Senate majority could harm the economy, an investment bank said Tuesday.
FBR Capital Markets said a "status quo" result would make it difficult for the president to cut a deal that avoids fallout from the so-called fiscal cliff.
"A status quo election will be seen as a political disaster for Republicans, and Democrats will be riding high ... but
The fiscal cliff -- which refers to expiring Bush-era tax cuts, the payroll tax cut, the Alternative Minimum Tax and other critical spending cuts that must be addressed for the 2013 fiscal year budget -- poses a difficult barrier for lame-duck legislators, who must broker a deal before the beginning of next year.
A budget agreement has become increasingly unlikely, as politicians are focused on campaigning in the final weeks of the election season and would be forced to reach a deal in less than two months.
Talk on Capitol Hill before the August recess included a proposal to temporarily push back a budget decision by some six months to enable new legislators and incumbents time to flesh out a reasonable agreement.
FBR Capital said a Republican loss could trigger leadership to reconsider its policy of obstructionism and resolve the issue quickly in order to pivot party focus to swing voters in the next election.
"With the makeup of Congress and the presidency not changing materially between the election and January, it is in everyone's best interest to resolve differences and come to a quick resolution," the firm said.
At last check, an average of polls collected by RealClearPolitics suggests an Obama victory against Mitt Romney in November, while sentiment in Senate polls shows favor leaning slightly Democratic, with five seats listed as toss-ups in battleground states.
--Written by Joe Deaux in New York.
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