Fiscal cliff not likely to be resolved until lame duck

Does Anyone Really Care?

According to Credit Suisse, the U.S. Congress is scheduled to leave Washington this week to focus on the fall elections. They have postponed the consideration of the major components of the “fiscal cliff” – the expiration of the Bush tax cuts, automatic budget sequestration, and  extension of the debt ceiling – until the expected  lame duck session in November.

Credit Suisse does not believe a long term solution to these issues is likely in the lame duck session. Instead, they expect the Congress to approve a short-term extension for the various components of the fiscal cliff and address them more comprehensively next year.

The manner in which these issues will be addressed is highly correlated to the election results and therefore it is difficult to determine what the construct of a final package will ultimately look like.

Meantime, William Gale, Brookings’ chair of Federal Economic Policy and a former George H.W. Bush economist said this week that, "Going over the cliff may be the only way to get Republicans to negotiate any meaningful tax increases, given the no new taxes pledge."

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