There is now about 48 hours until the rubber hits the road. What happens in the next 2 days: in a somewhat surprising development earlier, the Republicans today managed to turn the tables on the president, and as reported this morning, proposed an alternative “Plan B”, one which the president has already said he will not to accept as it extends the current Bush tax cuts on all those making $1 million or less (and thus not nearly punitive enough in the eyes of Obama’s electorate). The reason for this strawman is that unless Obama settles on some compromise definition of ‘wealthy’ between his already adjusted definition which moved from $250,000 to $400,000 earlier, and the $1 million cutoff proposed by the republicans, republicans will take the Plan B proposal to the House on Thursday and pass it, only so it is immediately voted down by the Senate, but have the popular backstop of saying “they gave it their best” just as Ken Langone suggested to Rand Paul earlier today on CNBC. And as Reuters reported, it appears that the drop dead date for House majority leader Cantor is Thursday, at which point he will vote, and pass, Plan B. At that point the Fiscal Cliff debate for 2012 is as good as over, as the resulting animosity that develops in the subsequent days will guarantee no further compromises are achievable for the balance of the year.
In other words, tomorrow is when all the horse trading will culminate: if there is no resolution by the end of day, the Thursday Plan B vote is all but assured, as is the resultant Risk Off phase, especially for all those who saw in today’s moves yet another glimmer of a compromise when in reality it was all merely the latest and greatest big PR stunt. In the meantime, trigger happy algos will send stocks moving wildly in eiuther direction based on headlines over the next 24 hours, although the consensus is that following the massive overbought surge in stocks in the past month, that a fiscal deal is now largely priced in, and a sell the news event is likely to result following a firm agreement… assuming one comes of course.
