Tags: Wren | fiscal | cliff | half-baked

Wells Fargo’s Wren: Markets OK With Half-Baked Fiscal Cliff Deal

Wednesday, 28 Nov 2012 12:24 PM

Markets would applaud a half-baked solution that steers the country away from the fiscal cliff, a series of tax hikes and deep spending cuts set to take effect at the same time at the end of this year, said Scott Wren, senior equity strategist at Wells Fargo Advisors.

Just avoid disaster for now, but tackle deep-rooted fiscal issues next year.

“[M]y personal feeling is we’re not going to roll over the fiscal cliff,” Wren told CNBC.

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

Lawmakers are at odds over taxes, with Democrats arguing for tax breaks to expire on the wealthy and Republicans pushing for extending tax breaks for all while closing loopholes.

Punt the tough decisions today by extending deadlines or pushing through similar stopgap measures, just don’t let cliff arrive without some sort of a deal, Wren said.

“I’m expecting some contentious comments. It’s not going to be smooth sailing, but I really do feel that the market would be OK with them kicking it down the road or seeing a little progress,” Wren said.

“Whatever the compromise, it’s going to be enough to satisfy the market.”

Make tough fiscal reforms later in 2013.

“I think in 2013, the market is going to start to demand that things get done on this,” Wren added.

Talks continue to drag on in Congress with little advancement.

“There’s been little progress with the Republicans, which is a disappointment to me,” said Senate Majority Leader Harry Reid, D-Nev., according to Bloomberg.

Reid’s words sent stocks falling.

Economists have pointed out that even if lawmakers do steer the country away from the cliff, uncertainty alone surrounding how much more in taxes individuals and businesses would be paying next year can drag on the economy by forcing many to put off plans to expand and hire.

Such uncertainty threatens to tip the entire world into a global economic contraction, according to some studies, including one conducted by the Paris-based Organization for Economic Cooperation and Development (OECD), a 34-member international economic organization.

“If the fiscal cliff is not avoided, a large negative shock could bring the U.S. and the global economy into recession,” the OECD said in its Economic Outlook report, according to Bloomberg.
“Reducing the large federal budget deficit is necessary to restore fiscal sustainability, but this should be done gradually and in the context of a well-identified, medium-term consolidation plan,” the report added.

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

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