Diary of a Financier

Paradoxymoron: Fiscal cliff reaches headwall

In Politics on Fri 21 Dec 2012 at 14:12

The left side of the aisle wants to raise taxes more than they cut spending. The right side of the aisle wants to cut spending more than they raise taxes. If they do nothing, they’ll automatically raise taxes and cut spending—both more than in either party’s wildest dreams or desires. Splendid, a prisoner’s dilemma, wrapped in a paradox, folded into an oxymoron.

We have modern analogues to gauge expectations regarding such Congressional negotiations: the last debt ceiling debate (summer 2011) and the TARP legislation (2008). An ultimatum is presented, a deadline mandated, yet Congress will remain entrenched along partisan lines, while the economy and taxpayers suffer the trauma of whiplash. Uncle Sam hanging off the fiscal cliffWhen the economic machine transmits the present value of future contraction unto capital markets, the lace curtain mother*c%er politicians finally feel it where it counts, in their bank accounts, albeit a pinprick in their a$$es.

I’ll be here working on Monday, Christmas Eve. I’ll be here the day after Christmas and New Year’s Eve too. By the way, I work for myself, but if I had a boss ask me to work this weekend, I’d be here. Guess what? I’m your boss, Mr. Representative and Mr. Senator and Mr. President. You’re already fired as far as I’m concerned, and I think I’ll get the board’s approval. If I get my way, you’re coming down from your ivory tower to unwind this mess December 24, 26, 27, 28, 29, 30, 31—like a know-nothing Lehman underling who got tapped on the shoulder and awarded the misfortune of wasting two years winding-up the bankruptcy after his retirement savings already went to zero.

Does nobody realize that the Democrats’ plan nary differs from the Republicans’ (in terms of the ostensible net effect on GDP)? Were we to wake up with one plan or the other on January 1, we should understand that these juvenile politicians are haggling over two sides of the same coin. I’d rather the purchasing power lay in the hands of the private sector, but I really don’t care, because the difference is negligible relative to sequestration. (If I had to choose, I think the future value of a dollar in the private sector is generally more than a dollar in the hands of the government.)Quantifying fiscal cliff (before & after sequestration)

Please realize that this was a contrived crisis: The Obama White House implemented automatic spending cuts that’d be triggered in 2013 lest Congress agree to a deal. While I have trouble blaming Mr. Obama for instituting a deadline as a means of forcing bipartisan collaboration, the fact remains that this is an arbitrary, contrived crisis. That’s not intended to incriminate the President; it’s an apolitical realization that a deal can be deferred in CY12, then reached on January 2nd, with little long term consequence. There is no “drop dead date” here, but capital markets will assert discipline in the short term, and the economy faces decreasing marginal productivity as time passes, so save us the trouble, Mr. Politician, and prove that you’re at least worth your weight in salt.


As I write this, Senate Minority Leader Mitch McConnell (R-KY) is on a pulpit in Capitol Hill, and he’s extolling the worthiness of Americans, the saintliness of Speaker John Boehner (R-OH), and the intractability of Democrats. Mr. McConnell is Exhibit A.¹ His timely, exemplary display of cognitive dissonance—the proverbial Nero, fiddling while Rome burns—volunteers him for a very public expulsion from the elected office he holds. As far as I’m concerned, he’s Patient Zero for the plague of oligarchy that’s swept the nation, and he’s the first to go in a draconian purge. No more speeches, no more pulpits, no more cameras. Lock yourselves in a room and don’t come out until you have something. We’ll assume that anyone caught pontificating is declaring his own impotence, ineffectiveness, and empty-suited-ness, like Mr. McConnell.


¹For the record, Majority Leader Harry Reid (D-NV) spoke before Mr. McConnell, but I give him a pardon, because his speech at least focused on an outcome to negotiations—essentially, ‘we have a plan that the House and Senate will pass if only a few Republicans consent; so to those few Republicans, I’m asking you to tell us what concessions would make this palatable.’

  1. Bravo for you. Glad you recognize the bull#h*t that is the Washington Beltway.

  2. […] governing precious metals (2009), tech (2007), volatility (2011), the US Dollar (1996), and politicians (2008 & 2011). As noted parenthetically, not all originated from the same time period, yet […]

  3. […] retracing nearly all of their gains since the fiscal cliff in 1q13. [See also & previously: Fiscal cliff YE12 & debt ceiling 2011] #Grey swan #Credit default […]


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