12-11-2012, 03:58 PM
The cliff will be solved but I think the question is how does each possible "solution" look from the standpoint of business? (or investors)
1) Big tax hikes, no reduction in spending.
I imagine business would like this. Lots of them benefit from government spending. The new taxes, as long as they aren't on businesses themselves, will keep the debt down and make business happy about the general state of the budget for the foreseeable future.
I suppose a big capital gains tax might hurt stocks overall, though, if the tax puts some other investment scheme into a better light?
2) Big cuts in spending.
DOOOOOOM. Even if you agree with this on libertarian principles (to the political forums!), I think business will see it as a huge negative. Uncle Sam is their sugar daddy. A big "readjustment" will take place.
3) Very little of meaning; debt ceiling increased; same-ol-same-ol.
Not sure about this. It would mean tons of new debt but the spending is still there. The US could take another credit hit rating (good for the stock market? drives more money to stocks, out of bonds?). But this could leave business in fear of what happens next, since it didn't solve the cliff so much as push it out. They'll hold their breath for another year.
1) Big tax hikes, no reduction in spending.
I imagine business would like this. Lots of them benefit from government spending. The new taxes, as long as they aren't on businesses themselves, will keep the debt down and make business happy about the general state of the budget for the foreseeable future.
I suppose a big capital gains tax might hurt stocks overall, though, if the tax puts some other investment scheme into a better light?
2) Big cuts in spending.
DOOOOOOM. Even if you agree with this on libertarian principles (to the political forums!), I think business will see it as a huge negative. Uncle Sam is their sugar daddy. A big "readjustment" will take place.
3) Very little of meaning; debt ceiling increased; same-ol-same-ol.
Not sure about this. It would mean tons of new debt but the spending is still there. The US could take another credit hit rating (good for the stock market? drives more money to stocks, out of bonds?). But this could leave business in fear of what happens next, since it didn't solve the cliff so much as push it out. They'll hold their breath for another year.