The Fiscal Cliff. It's the ominous sounding half-trillion dollar economic punch in the face that has everybody scared and running for cover. But the funny things is, for all its teeth and terror, the fiscal cliff is also not going to happen.
That's right. Market watcher Jason Pride, director of investment strategy at Glenmede, says the implications of doing nothing are well-known and simply too big to ignore.
"If you put forth any fiscal pullback of that magnitude (3 - 3.5% of GDP), there's going to be a jobs impact, there's going to be a consumer spending impact, there's going to be a business impact," Pride says in the attached video. "The economy can't handle that type of shift, therefore, there has to be a reaction."
And by reaction, he means fix. Pride says he is betting on a last minute 3-12 month punt done after the elections during the lame duck session.
Technically, that would be more of can-kick than an actual fix, but the effect would be the same. It would de-fang the beast long enough to allow the newly elected Congress and President to tailor a more long-term solution to the wallop inflicted by mandatory tax increases and budget cuts.
Still, there are predictions that as many as 2 million jobs would be lost in the aerospace industry alone if we're allowed to go over the cliff so to speak. We now know that sometime between Thanksgiving and Christmas our do-nothing Congress will do the least that they can at the last possible minute.
It'll be a lame effort by the lame ducks if ever there was one.