Fiscal Cliff Looms

The market traded sideways this week as everyone listened to the ongoing reports from Washington concerning our budget negotiations. A "fiscal cliff" is looming if the two sides cannot reach an agreement. This term "fiscal cliff" was coined in reference to automatic cuts that will take place if a new budget plan cannot be agreed upon. Economists expect these cuts will send the US economy into another recession.

The Dow continues to show intermediate support with no news coming out of Washington. At this point we can expect a good rally if any favorable news is reported. The market seems to have discounted the fact that the two sides cannot agree on anything. Each side is actively pushing its own agenda.

Speaking on behalf of the President, White House Treasury Secretary Timothy Geithner announced that the White House is prepared to "go over the cliff" if tax rates on the wealthiest individuals were not increased. Speaker Boehner simply stated there was no progress on talks. Boehner and the Republicans are pushing for spending cuts and no tax increases. Public opinion polls show that Americans are likely to blame the Republicans if no compromised is reached.

President Barack Obama and Congressional Speaker John Boehner represent each side of the ongoing negotiations.

Both sides need to be put in timeout

Just as the family that spends more than it makes, feels the pain when the electric company turns the power off, so the government may have to feel the pain of the automatic cuts before they are willing to make any serious progress.