Line Items: Frankenstorm Edition
Storm Brewing – The Northeastern U.S. is being impacted by the freak concurrence of several major storms that has caused major population centers like Washington and New York to effectively shut down. The economic impact from the so-called “Frankenstorm” is expected to be substantial. Not far off is another tempest that is brewing that also represents numerous events coming together. However, unlike the current storm, the fiscal cliff at the end of the year is the result of the forces of nature in Washington – gridlock, partisanship, dysfunction – not Mother Nature. This storm has been forecast a long ways out and can be prevented, yet many policymakers have refused to take the necessary steps. Without action, the economic impact of the fiscal cliff could far outpace that of the Frankenstorm. Will we avert this coming gale or will we take our chances with a storm surge of red ink?
Cliff Barrels Towards Us – Like a slow-moving hurricane that is building strength off the coast, the fiscal cliff is coming. The abrupt tax increases and across-the-board spending cuts could also be joined with the statutory debt ceiling being reached again and the need for another increase. Investors indicate that the fiscal cliff is their primary concern and suggest they may be open to higher taxes to avoid it. Some observers are claiming that the effects of the fiscal cliff are already being felt through slower growth and fewer jobs and some economists fear the cliff will be even worse than forecast.
Sandbags Slowly Being Filled – While there is not exactly a blizzard of activity so far to avoid the fiscal cliff, there are some signs of action. Reuters reports on congressional aides working on a $55 billion down payment to replace the fiscal cliff to buy more time to find further savings. President Obama says a reelection victory will be a mandate to pursue a grand bargain with Congress and that he is confident he could reach it within the first half of 2013. And some Republicans reportedly are considering tax options to raise revenue in order to facilitate a deal that avoids the cliff. The presidential candidates must be listening as the fiscal situation received some attention in the last debate.
Warnings Issued Left and Right – Alarms are being raised from multiple sources regarding the fiscal cliff. Business leaders are coming together to call for action now. Lawmakers are also getting pressure from their former colleagues. Former senators Sam Nunn (D-GA) and Pete Domenici (R-NM) called for a comprehensive debt reduction plan to replace the fiscal cliff in an op-ed. The fiscal cliff is also on voters’ radar as a recent poll by CenterForward indicates that many voters are aware of the cliff and are concerned about it while a Bankrupting America poll shows that Americans believe that the national debt personally affects them.
Key Upcoming Dates (all times are ET)
- Unemployment statistics for the month of October released
- Election Day
- House and Senate due to convene for lame duck session
- Consumer Price Index for October released
- Second estimate of Third Quarter GDP figures released
- Unemployment statistics for the month of November released
- Consumer Price Index for November released
- Third estimate of Third Quarter GDP figures released
January 1, 2013
- The “fiscal cliff” occurs, including the expiration of the 2001/2003/2010 tax cuts and across the board spending cuts the following day