Photo: Bloomberg TV
You would think that the horrific fiscal cliff scenarios relayed by economists would get Congress moving as the deadline to act is fast approaching.This was the assumption Goldman’s Jim O’Neill had made, only to be disappointed.
O’Neill recently spent a week in DC. Here’s what he had to say in his new Viewpoints note:
That evening, I watched an hour or so of the debate live before my age and jet lag caught up with me. The following morning, I watched far too much TV debate about who did better. Frankly, I was none the wiser about either the likely winner or the consequences. The only clear thing, as it was before the debates even happened and huge amounts of money were spent, is that it will be a narrow victory and it is unlikely the new President will carry a decisive strong mandate!
After the discussions I had with people in DC (although this was not a major feature of any discussions), I did leave more concerned than I had been this time a week ago about the ‘fiscal cliff’. I’d been assuming for weeks that in order to avoid the 4% of GDP tightening that no deal would imply, it would be easy to find a deal. I love the way Kent Wosepka, one of our Senior Portfolio Managers describes the topic and compares it to the Y2K fears. Whether it was the airport experience, the fact that the stock market had one of its worst days for months that day, or anything specific that I heard about, I don’t know, but I’m not so sure an early deal will be an obvious feat. We shall see.
Fiscal “brinksmanship” and lack of a mandate are definitely things to be worried about.