Tick. Tick. Tick.
It’s like that scene in “Goldfinger,” where the seconds are ticking down and James Bond is trying to defuse the bomb. He succeeds, of course, just in time.
Of course, John Boehner is not James Bond and real life is far more complicated than the movies.
Tick. Tick. Tick.
The real problem is not a cliff, but a chasm. The degree of separation between Democrats and Republicans in Congress has never been wider.
On one side, President Obama and his Democratic supporters are hell-bent on raising taxes on the wealthy, which may not do much to tame the deficit, but may achieve the goal of moving toward class equality. Democrats believe that more spending is needed to stimulate the economy, even though spending is at an all-time high and the economy is still in dismal shape.
On the other side, Republicans are dead set against raising taxes, and want spending cuts, tax reform and entitlement reform. Medicare, Social Security and government employee pensions have created unfunded liabilities of more than $86 trillion, but the chances of working out a rational reform before the end of the year are about the same as the chances of winning Powerball. Maybe less.
Tick. Tick. Tick.
Congressman Boehner’s “Plan B,” which would have raised taxes on millionaires, did not even make it to a vote. He could go through the entire alphabet and the results would likely be the same.
Republicans in Congress would rather go over the fiscal cliff than approve taxes on the wealthy, who are viewed as job creators.
Democrats would rather go over the fiscal cliff than approve major spending cuts, as spending is viewed as an economic stimulant.
Tick. Tick. Tick.
Maybe Gary Cooper in “High Noon” provides a more appropriate comparison. The clock on the wall ticks down and you know that confrontation is unavoidable and blood will be spilled.
Take a look at the futures market and you’ll see that it’s already spilling. Last night, S&P 500 futures dropped from 1437.25 to 1391.25 as soon as Congressman Boehner’s plan was scrapped. The value of the dollar also tumbled, as witnessed on the EUR/USD, which pairs the dollar with the euro.
Tick. Tick. Tick.
Another movie that comes to mind is “Groundhog Day,” where Bill Murray’s day is endlessly repeated until he gets life right.
The déjà vu is appropriate to today’s negotiations. Consider the U.S. Macro Surprise Index, which quantifies the extent to which U.S. economic indicators exceed or fall short of consensus estimates. This year’s path is almost identical to last year’s, when Congress put off making tough decisions by extended tax breaks for another year.
Then again, “Groundhog Day” had a happy ending. Maybe “The Day the Earth Stood Still” is a better comparison.