Fiscal Cliff Update: Obama Smartly Shortens Vacation To Resume Talks
Here’s where they left off: President Obama last Friday said he wants a pared-down plan that would prevent middle class tax hikes and keep unemployment flowing for 2 million Americans by Jan. 1. “This is something within our capacity to solve. It doesn’t take that much work,” the president said in a nationally televised address.”We just have to do the right thing. So call me a hopeless optimist, but I actually still think we can get it done.”
The president’s remarks came less than 24 hours after House Republicans staged a revolt against the GOP leader, John Boehner; under his plan, taxes would increase for Americans earning more than $1 million—roughly 0.3% of the population—but that proved too much for the adamantly antitax wing of the Republican House. Earlier in the week, in efforts to try to strike a bargain, Obama relented on his stance to raise taxes on Americans making more than $250,00 and said he would agree to moving that figure to $400,000.
President Obama made a smart decision to return to D.C., as did Congress. The public relations nightmare that would arise from Obama continuing his vacation—where he golfed, spent 90 minutes at the gym and visited a Marine base—would surely, in turns, distract from any dialogue and take on a life of its own.
Considerable work awaits the pols’ return to D.C. The two parties remain considerably apart. It’s unclear whether moderate Republicans can muster support for a compromise bill, especially after Boehner failed to gain enough votes for his bill. Make no mistake: Senate Republicans, led by Mitch McConnell, have given no indication that they would stall the process. It’s House Republican that seem most likely to prevent any bill containing tax increases to pass, and Democrats have vowed to include tax hikes in any bill. (Though, you can see that the exact level where the increases begin remains fluid.)
What’s at stake? Possibly a recession in the first half of the new year, brought on by the series of tax hikes and spending cuts that will take effect next Tuesday. And how can we monitor investor sentiment? Keep your eyes on the sleep-well-at-night stocks, like Procter & Gamble, Ford and Coca-Cola. Large caps like these are bought when investors seek safety. Threat of a recession will likely trigger that. Also, monitor bellwethers like Apple and FedEx. Both serve as excellent measures of sentiment—highly trafficked shares of companies with a wide, international business.
Stock nudged higher after the opening bell. The Dow Jones industrial average added 0.2% to 13,159.37. The S&P 500 rose 0.1% to 1,427.62. And the Nasdaq composite increased 0.1% to 3,016.97.
Some stocks seeing early morning activity: Exxon Mobil rose 0.8%. Chevron gained 0.5%. Conoco increased 0.1%.
Two tech stocks propped up the Nasdaq. Research in Motion jumped 6.1%. Facebook gained 0.6%.
Nearly all attention this week will center on the fiscal cliff. Precious few economic reports will come. The Case-Shiller Home Price index this morning will be released at 9. New home sales and consumer confidence figures come tomorrow; an earlier measure of consumers showed Americans have limited their spending in this crucial holiday season, weighed down by uncertainty about their paychecks next year.