The Fiscal Cliff Deal: Politics Over Economics?

As the “feverish bullish” market rally now seems to peter out, is the short-term Fiscal Cliff Deal nothing more than dysfunctional politics trumping over economic common sense?

By: Ringo Bones

Well, at least America’s economically embattled middle-class wasn’t thrown under the bus this time around and as for “Dictator of the House” Boehner supposedly getting his well-deserved defenestration off the Fiscal Cliff would have to wait another time, many economically savvy individuals now wonder if the short-term Fiscal Cliff Deal nothing more than “kicking the can down the road”. The next insurmountable hurdle facing an increasingly partisan Capitol Hill will be the Debt Ceiling and the U.S. Republican Party’s push for very unreasonable Federal spending cuts (aimed at primarily Democrat-legislated programs?) by March 2013. Will this two issues spook the markets yet again?

The short-term deal that staved off the looming Fiscal Deal that House Republicans played brinkmanship until the last second did manage to generate a post-New Year market euphoria back in Wednesday, January 2, 2013 seems now starting to inevitably peter-out as wary investors around the world start to wonder whether a partisan “deadlock” of the Debt Ceiling and Federal Spending Cuts Deal that needs to be deliberated by March 2013 will spook the markets yet again. Given that President Obama won’t do a repeat of the heated reaching across the partisan divide type of negotiations that averted the Fiscal Cliff on raising the Debt Ceiling and the GOPs proposed very unreasonable Federal spending cuts sans raising taxes on the richest 1% of America, this would certainly spook the global markets yet again.

The good news is that America’s low and middle income classes won’t be facing an increased tax burden if the looming Fiscal Cliff hasn’t been averted. The bad news is that the US government’s Debt Ceiling will reach the 16.4-trillion U.S. dollar mark in a few weeks time. A “new deal” on balancing the Federal government’s budget deficit that doesn’t involve a more progressive taxation scheme – ending the Bush era tax cuts on the top 1% of America that never seemed to trickle down for over a decade now - and spending cuts on not-so-essential government programs will only widen the partisan divide, as opposed to bring in a sense of both fiscal and economic sense, to the runaway spending at Washington, D.C.