In last weekend’s
commentary for the investment newsletter, I put the odds of going over the
“fiscal cliff” at about one-in-five, meaning that I figured there
is about an 80 percent chance that, somehow, a deal will get done in Washington
to avoid most of the tax hikes and spending cuts slated to go into effect on
It’s only been a few days,
but I’m already rethinking that view in light of all the recent news
coverage and, at this juncture, I’d say we’re definitely moving
closer to 50-50.
There have been a few elected
officials who have said that going over the cliff wouldn’t be so bad
and, now, an unscientific poll
at the LA Times indicates a surprisingly large number of respondents share
Of course, most of the people
responding are Californians and, as far as I can tell, Democrats get the
better end of the deal if we go over the cliff, so, this result should be
taken with a grain of salt.
The accompanying commentary
recounts some of the history of the Bush-era tax cuts that are at the center
of the current debate. Recall that the first round of these cuts very early
in the decade was aimed at giving the American people back some of their tax
money and, then, when the internet boom turned to bust, the justification
quickly turned to the tax cuts being a much needed stimulus.
Of course, former Federal
Reserve Chairman Alan Greenspan played a key role in these tax cuts as he,
effectively, gave his blessing. Since his reputation was quite a bit better then than it is today, that’s all it took for a lot
of people to think this big a tax cut for years to come might be a good idea.