Tuesday, October 2, 2012

Senate Discusses Avoiding Fiscal Cliff ... And So It Begins

Currently there is lots of talk about the approaching year end fiscal cliff.

However, there's nothing more than that. It's just talk so far.

We'll be looking at something bond manager guru Bill Gross calls the "fiscal gap" perhaps as early as tomorrow, but for now suffice it to say that while the fiscal cliff is scary, the fiscal gap of which Mr. Gross speaks is downright frightening.

Oh well, let's deal with first things first. In other words, the fiscal cliff solution will look like a cakewalk compared to the much larger fiscal gap problem described by Bill Gross.

But before addressing the fiscal gap, we'll first need to find a way to keep from going over the fiscal cliff. Got it?  Good.

More secret talks? Senators eye grand plan to avoid 'fiscal cliff' says this:

"Washington is abuzz Tuesday with talk of a deal to help the U.S. economy avoid falling off a so-called fiscal cliff.

The New York Times reports a group of senators is working on several proposals to prevent deep spending cuts and sharp tax hikes from taking effect on Jan. 1 as scheduled.  Economists say the U.S. could fall back into recession if the fiscal cliff is not averted. Some business leaders warn that the standoff in Washington is already harming the economy. See NYT article. . . .

The bipartisan group of senators is not close to a deal yet, however, and it’s unclear if the House would go along with whatever plan is cooked up, the article says.

Senators are discussing ways to help the economy and boost federal revenue by revamping the tax code and eliminating deductions. More controversially, changes could be made to Social Security and Medicare to constrain the growth in entitlement programs.

Any plan would have a large deficit-reduction program, though most of the savings would likely take place in the future.

The outcome of the 2012 elections could play a big role in the final outcome. Senators are looking to strike a deal shortly after the Nov.  6 vote — before 2013 starts — to prevent a potential crisis from landing on Washington’s doorstep when the new year starts.

Summing Up

And so the talks on how to avoid the year end fiscal cliff finally have begun.

For now we'll just tune in and be prepared to watch as discussions evolve.

While it clearly won't be easy for our politicians to get to a compromise solution even after the November election, we should expect that nothing concrete will happen before then.

But at least in the Senate they're now talking about the problem.

Thanks. Bob.

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