More Looming Problems: Congress About to Jump Off The "Fiscal Cliff?"

In my opinion they have already jumped off of it but if they don't do anything by Jan 1st 2013 then it might get pretty bad.

Economists agree that tax hikes and spending cuts will drag down economic growth in 2013 yet the estimates vary. Moody's Analytics chief economist Mark Zandi predicts the fiscal drag next year could be to closer to 1.5 of a percentage point of GDP. The Congressional Budget Office calculated GDP could drop by nearly 3.6 percentage points in the 2013 fiscal year while Morgan Stanley economist David Greenlaw says fiscal tightening could translate into a 5 percent drag on GDP during the 2013 calendar year.

So with our anemic 2% GDP growth a -5% smack in the face will put us right into a recession for 2013. The bad part is that Congress is such a joke that they probably won't get anything done until right after the election. If the GOP wins they might be able to throw something together to at least push the deadline forward until the 1st quarter of 2013.

However, the markets get to be in uncertainty mode until they finally get something done. The idea that a bunch of Americans need to figure out if they will be paying 15% or 35% capital gains taxes come Jan 1st will be sure to rile the markets at the end of the year.