Kicking the Can off the Fiscal Cliff
In the end, there was no way that bill was not getting passed. There was simply too much hype, and too much blame would have followed if it had gone up in flames. They had to do something, right?
Congratulations Congress; you have averted a short-term crisis by "kicking the can off the fiscal cliff." I know there was not time to do more, time to get it right, time to address the ever-growing deficits and national debt. But that's what happens when you wait too long to address such monumental issues. We deserve better than this.
This is nothing more than a Band Aid; and the euphoria we may see in the markets today may well be short-lived. That's because the war is far from over.
The sequestration cuts that were due to take effect have just been delayed for two months. There was little to no deficit reduction in this deal, and we just hit the debt ceiling again ... at least according to the Treasury Secretary.
They may have put out a brush fire by passing that fiscal cliff bill, but there's a forest fire brewing. Somewhat lost in all of the fiscal cliff mania is the fact that new taxes supporting the "affordable" Healthcare Act kicked in yesterday. Looks like a potential job killer in a still-weak economy, but we'll see about that.
The expiration of the payroll tax cuts for all is yet another wrinkle, and one that may be lost in the translation of this deal. Now, I never believed that the payroll tax cuts were a good idea in the first place; not because I don't want more money in the pockets of working Americans. Temporary tax cuts, especially those that directly support an already fiscally challenged entitlement program such as Social Security are just a bad idea; especially when they have to be taken away.
All of this uncertainty could make for an interesting year in the markets. The optimist in me says that we can address these issues, bring back some fiscal discipline and get the economy growing again. The pessimist sees staggering hurdles ahead that will be difficult to navigate, especially with a dysfunctional government that is unable or unwilling to get out of the way.