That Annoying Fiscal Cliff is Here–Do Something
Word is that come 1/1/13, all of the recent economic gains of the U.S. will begin to unravel. Increased taxes for payroll, estate, capital gains and income, let alone new taxes on Patient Protection and Affordable Care. Top that with broad military and domestic spending cuts, a lame duck kick-the-can-down-the-road congress, who can possibly see anything promising for a continued recovery?
This hurts even more: both sides of the aisle say they want to avoid such calamity, but neither is willing to sacrifice. Make sure your parachute is in order, because the experts say if the “nothing-much-changes-in-election-years” syndrome holds, a 4% to 5% reduction in economic output is on its way. As of 8/22/12, the Congressional Budget Office’s latest projections include a recession in 2013 if fiscal cliff occurs on schedule and a nearly 3% decline in GDP in first half of 2013.
Really, we need that on top of an already shaky economy?
If you’re a congressman, this is a no-win proposition. If scheduled tax increases and spending cuts are ignored and go into effect, the national debt is actually expected to shrink by about $500B due to higher revenues and lower spending. But cancel some of those spending cuts and tax increases, and conversely, the national debt clock lights up like the 4th of July. Either option is political suicide in an election year, so lawmakers are mum on how they’ll vote until the elections are over.
Most likely, though, what you’ll see is another band-aid solution, the kicking-the-can movie we all know too well.
Fiscal cliff forecasts already have companies pulling back on hiring, investing – the last thing a struggling economy needs. No wonder. Who knows how Congress will react to the crisis? Douglas W. Elmendorf, director of the non-partisan Congressional Budget Office, believes the issue will become even bigger during this 2nd half of the year, and he’s not alone. Mark Doutzour, chief economist with the Real Estate Center at Texas A&M University, says economic activity—including the gains we’ve seen recently in the real estate world—will grind to a halt come Labor Day.
If you are in real estate. . . and. . .you are a buyer, this is actually good news. The bottom fishing of the last few years is likely to continue into at least the next year. All five of the most recent HCC acquisitions were distressed situations, poised for a buy-low, sell-high outcome. More of these are at hand. Now is the time to invest; don’t wait for this distressed market to prove up, it already has. Once we’ve emerged from the smoking crater, it’ll be too late.
Do Something! Write this to your congressman now: #1-buck up, no more kicking the can. Balance the budget, or else! #2- we the people find it reprehensible that you our elected officials would impose a health plan on your constituents that you would not also impose on yourself. #3-term limits are coming, and don’t say you didn’t ask for it! ”