Obama stated today that by raising taxes on the so-called wealthy – those making over $250,000 per year – he can address “half” the fiscal cliff. He plans to raise taxes on the “wealthy” and leave the rest for later, namely entitlements and other spending cuts set to go into effect January 1, 2013. Really? Is he that much of a neophyte? If he truly believes that this is possible, he is even more naive that I thought. There is no way in hell that Republicans will vote for tax increases on those making over $250,000 without significant spending cuts, including entitlements – social security, medicare, etc.
Apparently, Obama believes he has a mandate from the people after his “big win” in the election. While he did win 332 electoral college votes to Romney’s 206, he only won the popular vote by about 2.5%. This is hardly a mandate. In fact, what it means is that virtually half of the U.S. population voted against him. There is no mandate. The country is divided and the only way anything will be accomplished will be if Congress and the President can compromise – something neither seems ready or willing to do.
Obama has already stated that he will not sign anything that extends any tax cuts for the “wealthy.” He is now basically saying he is not interested in even considering cuts to entitlements or spending. With the Republicans controlling the House of Representatives, there is no possibility of Obama’s plan reaching his desk. We are headed, therefore, for complete gridlock – a complete shutdown of the federal government and a steep dive off the fiscal cliff at the beginning of 2013.
What company is going to hire or invest in this chaotic, uncertain environment? What consumer is going to spend money this Christmas? What investor will want to assume the risk of investing in stocks that have suspect earnings generating prospects?
I hope I am wrong. I hope Congress and the President can come to some kind of viable compromise that allows us to avoid recession next year. At this point, however, I just don’t see that happening.