Well, there was a form of Fiscal Cliff Resolution which appeared to make no one happy except maybe real people who got a little more certainty about how they need to handle their finances. There seems to be general disappointment that the long term deficit problem was not dealt with. Let’s state the obvious: the long term deficit problem is just that–a long term problem. Instant gratification is not required–except maybe for the securities markets. The short term problem, even for the securities markets and certainly for the commonweal, is maintaining the pace of a recovery that remains fragile. Why would any leader want to truly deal with a long term problem with a lame-duck Congress, particularly when the incoming Congress is modestly more in his camp? I would posit that he may not even want to deal with the long-term problems with this Congress if he has any belief that the 2014 elections could swing things even more his way as Congress continues to look political as opposed to statesman-like.
Right now, we need to deal with the short-term issues of maintaining this recovery. Some of the compromises made to get past the Cliff didn’t do that–the Payroll tax restoration being a big one. No doubt there will be more compromises to get past the debt ceiling issues. However, I do believe it is becoming more difficult for the majority in the House to continue to hold a gun to this economic recovery. The majority in the Senate and the minority in the House need to do their part as well. In addition, the ratings agencies should also stop looking for instant gratification. The long term deficit problem must get dealt with, including entitlement reform. It will get dealt with because it has to and it can be done. If that takes two years, during which we continue to see a reasonable economic recovery, I don’t think that’s a problem. Maybe is pays to take another look at what could be happening if we keep eliminating uncertainty and maintain this recovery.