Time for Obama to Own the Situation
Nov 30, 2012
From The Editor
November 30, 2012
Hello Pro Farmer Members!
You might detect a bit of frustration in this week's newsletter. Here's my take on what's going on in Washington:
Don’t be fooled by ‘fiscal cliff’ situation
"If lawmakers wanted an agreement on a tax and spending package to prevent the country from tumbling over the fiscal cliff, we’d have one by now. Some Washington-watchers say lawmakers “just need more time” to work out the details. They’re wrong.
"Lawmakers have had plenty of time — it’s not like they couldn’t see this coming! (We talked about it at last year’s Profit Briefing Seminars.) The current crew in Washington will let the situation turn as dark as possible before finally “saving” the country from another financial meltdown — and they still won’t cut enough spending to take even a
nibble out of the nation’s deficit spending. (That won’t happen until entitlement spending is cut — and cut deeply.)
"Next up will be a debate over raising the debt ceiling, which Congress (unfortunately) views as more important than preventing the deficit spending. Our current view is Congress will fail to reach a year-end agreement, but we’ll re-evaluate at mid-month. Failure would bring heavy pressure to equity and commodity markets, but don’t panic when it happens. Markets will likely recover when a tax/spending agreement is eventually reached."
Hey... I realize "this is how deals get done" in Washington, but this is really bad. A GOP leader heads to a press briefing to tell the country it's the Democrats that are holding up the process. Fifteen minutes later, a Democrat has a press conference to say the same thing.
All this while President Obama is out of town. He's in Pennsylvania today at a campaign-style meeting trying to rally citizen support for the White House plan... the same plan the GOP has already rejected. This is going to get really bad over the next two weeks... we'll have to watch both sides position until about mid-month. At that point, they'll decide that it's time to really try to make some progress on the issue.
We'll re-evaluate at that time, but as things stand, I put very low odds (something like 10%) that we'll have an agreement by the end of the year. If the country goes over the fiscal cliff, lawmakers will then have the opportunity to "save" the country from another financial meltdown... and lawmakers love "saving the day."
They'll introduce a whole new tax package with cuts for the middle class, a higher rate for the wealthy and increased burdens on dividend and estates. Then it will be the "Obama Tax Package." That might be the best news of all... we won't have to call it the "Bush tax cuts" any longer and the current administration will finally be forced to own the current situation in the country. If it works and we come blasting out of the economic malaise we've been under... that's great. I really hope it works.
Unfortunately, I don't think it will. There won't be any cuts to entitlements in the upcoming agreement... at least no substantial cuts. Those cuts to spending are what's needed... we absolutely cannot tax enough to evade deficit spending. The only way to make that happen is to cut spending... period.
That's it for now...
I'll be out of the office most of next week for a much-needed break from the frustration I detailed above. It's Iowa's first regular gun season for deer and I'll be hunting with my son Tom, my daughter Emily and a group of buddies I grew up with in Oxford Junction, Iowa.
Follow me on Twitter at @ChipFlory and I'll try to keep you updated on how the season goes!
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