Fiscal Cliff Deal: World Markets Celebrate Certainty
Global markets screamed higher on Wednesday, propelled by a familiar ending to the unprecedented Fiscal Cliff debacle. After all the noise, the Cliff was exposed as the sham it was: a fake deadline set up by politicians otherwise unmotivated to do their jobs.
The Dow, Nasdaq and S&P 500 are up 2% in early trading.
In spirit, it was perhaps akin to children setting their own bedtimes. After blowing the New Years Eve deadline, the kids voted to move the date for making firm 'this-time-we-mean-it' decisions.
That's not to say nothing changed. President Obama followed through on his vow to jam the wealthy. For the purposes of the U.S. taxation system couples making more than $450,000 a year are now rich. Those lucky few will see their tax rate rise to 39.6%.
In exchange for the largest tax hike in decades, the Republicans won back $1 of spending cuts for every $41 of increased revenue.
The automatic cuts that served as the rocks at the bottom of the cliff were pushed out to a debt ceiling debate in two months. At that point, it is promised, $110 billion in cuts will be made in a discretionary manner.
Estimates vary, but the deficit reduction benefits of the bill are somewhere in the neighborhood of $600 billion over the next 10 years. Like all things "long-term" in Washington no one expects the final figure to be anything resembling what is being promised.
The President won, the Republicans lost and the rich got hammered, albeit with plenty of loopholes. It's business as usual. The worldwide rallies are a celebration of certainty that Washington DC will never change.
