Mar 6
As the clock ticked past 11:59 and Friday, March 1 turned into Saturday, March 2, the much-discussed sequestration went into effect. Did markets shudder at this lack of a last-minute deal? Not really – in fact, all three major U.S. markets (DJIA, S&P 500, and NASDAQ) closed up on Friday. So, how much of an impact will this roughly US$1 trillion in cuts have on the economy? Not as much as you might think. Read more
The fiscal cliff deal was not a pretty thing, but it moved the conversation forward. It resolved uncertainty on most of the outstanding tax issues, and we think that it likely helped prevent a tax-hike-induced recession in the United States. That’s part of the deal. Now, we look forward to fixing the other part – spending cuts, or as they call it in Washington, sequestration. The deal hammered out by Congress in the first day of 2013 delayed the automatic spending cuts by two months. So the question is, if they pushed it back once, won’t they just push it again and delay until sometime in 2014?
I don’t think so. I think something is going to happen on the spending cut side. With the new sequestration deadline seemingly on top of the deadline for expansion of the federal debt ceiling, Republicans have some amount of leverage. The problem with delaying the sequestration even to February is the uncertainty that it pushes throughout the federal system. Read more
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