Stocks staged a late day rally because the Senate is prepared to kick the can down the road, avoiding any chance of fiscal sanity this year or next.
Whether or not the House will go along is another matter, but unfortunately Speaker Boehner calls House back to Washington on Sunday
The House of Representatives will reconvene on Sunday evening, just less than 30 hours before the United States reaches the fiscal cliff.
House Speaker John Boehner, R-Ohio, notified lawmakers that the House would come to order at 6:30 p.m. ET on Sunday in hopes of averting the end-of-year combination of tax hikes and spending cuts that constitute the fiscal cliff.
The lawmaker on Thursday's call told NBC News that any Senate plan Boehner puts on the House floor (of which there is no guarantee) would only receive as few as 40 Republican votes, making Democratic help necessary.
"If the Senate will not approve these bills and send them to the president to be signed into law in their current form, they must be amended and returned to the House," Boehner told Republicans Thursday, according to a source on the call. "Once this has occurred, the House will then consider whether to accept the bills as amended, or to send them back to the Senate with additional amendments. The House will take this action on whatever the Senate can pass -- but the Senate must act."
The moment I saw that second green candle and volume spike on the S&P 500 futures I knew a deal was in the works even though I could not find any news for a half hour.
Magic Number is 60
MarketWatch reports Senate Republicans open to new cliff deal
Senate Republican Leader Mitch McConnell said late Thursday that Senate Republicans are open to any White House proposal to avert the fiscal cliff.
Reid urged the House to pass a Senate bill extending Bush-era tax cuts for those earning $250,000 a year or less. The Nevada Democrat said the House is being operated under “a dictatorship of the speaker.”
A spokesman for House Speaker John Boehner said in response: “Senator Reid should talk less and legislate more.”
Even in the Democratic-controlled Senate, Obama’s preferred bill faces an obstacle: Sixty senators are required to break a filibuster, and Democrats control 53 seats.
The magic number may be 60, but I do not expect any filibusters in the Senate.
The easy escape route is to pass the buck. In this case the Senate is likely to pass anything, hoping to avoid the blame, while placing a burden on the House to do something fiscally responsible.
Let's hope the House rejects whatever watered-down proposal that comes out of the Senate.
Lock Congress Up Until They Deal?
MarketWatch Columnist Rex Nutting says On fiscal cliff: Don’t negotiate, let’s legislate.
The United States doesn’t have a fiscal problem. Or an economic problem. It has a political problem. The workings of the government are so gummed up that we’re in danger of falling into a recession that’s completely avoidable.
I think it’s high time we locked the members of Congress in a room and told them that we’ll let them out when they reach a deal.
The idea the US does not have a fiscal problem or an economic problem is of course total nonsense.
That said, I am of course totally sympathetic towards the idea the US also has a political problem. Indeed, I am even willing to say the political problem is largely responsible for the economic and fiscal problems.
Where Nutting crosses the line into economic folly is the idea Congress needs to avoid a recession. Quite frankly, that is a nut case proposal, and no solution at all.
The US is in this mess because every step of the way, the Fed and Congress acted to avoid recessions. Greenspan in particular fueled a housing bubble holding interest rates too low too long to "help" the economy out of a dot-com bubble bust largely of the Fed's making.
Now, Nutting wants to lock Congress in a room until they come up with a deal to avoid a recession.
Instead, I propose fiscal sanity. I propose we lock Congress in a room until they come up with a proposal that will balance the budget within five years.
Either Nutting is wrong or I am. And here's a hint, if I'm wrong about anything, it's that five years is too long.
Nutting proposed nothing more than another can-kicking exercise that will never end. I suggest it's time for an honest economic discussion on what the country can or cannot afford.
Mike "Mish" Shedlock