Fiscal-Cliff Deal Gives Business Reason to Play in 2013
NEW YORK ( TheStreet) -- New Year's Eve has already stolen the country's attention from the so-called fiscal-cliff story that has flooded readers of business and political news since the election.
But with just a few hours from a likely U.S. Senate vote on a deal and a couple of days from a House vote, Americans may take solace that specifics don't matter in the final agreement so long as it passes into law.
"I don't think what is in the agreement is as important as that an agreement is being made," said Sam Stovall, chief equity strategist at S&P Capital IQ. "Nobody wanted to play when there were no rules. Now I guess it doesn't matter what those rules are because people will know how to play."
Company management sat on cash throughout 2012 as an acerbic presidential election unfolded about the economic direction of the country. Capital investment by businesses stalled as a lack of direction on the future of individual and company taxes cloaked CEOs and others.
The fiscal cliff -- when automatic spending cuts and tax hikes go into effect, unless Congress averts the crisis -- had been on the minds of investors for much of the year, but the issue reached full throttle after President Barack Obama's re-election in November.
Reported details of the possible Senate plan include a tax increase -- which may have been the biggest issue of the 2012 election -- to 39.6% from the previous 35% on individuals earning more than $400,000 a year and families making more than $450,000 a year. The payroll tax cut -- which engendered a struggle between the White House and the Republican Congress in the early part of 2012 -- will be allowed to expire. The alternative minimum tax (AMT) -- a bout of contention addressed by Obama and Mitt Romney during the 2012 campaign -- will maintain a permanent patch to keep more citizens from being taxed at the new level.
Stovall said the decision to address the AMT could be a good move as a failure to have it rise each year and Congress' lax from upping the threshold would have put middle class earners in a tough position.
The president had repeatedly called for an extension of unemployment insurance for long-term unemployed as the national unemployment rate remained near 8%. The Senate deal would extend those benefits through 2013. Business tax credits and stimulus tax credits would be extended.
"I think that what this is going to turn out to be is ultimately another round of
What many market analysts agree on is that if a deal passes -- regardless of what legislators agree to on the final specifics -- it will be positive for the economy and for equity markets.