It’s 5:30 pm here in sunny California, which means it’s 8:30 in the bowels of Washington, D.C. The House of Representatives has just adjourned until after Christmas. That will leave one week to solve the fiscal cliff problem. This is your fiscal cliff update.
There were two spending bills that passed the House. The first basically repeals much of the sequestration of Defense Department spending scheduled to go into effect January 1. The vote was 315-107 with 110 Democrats voting yes. The second bill reduces spending on a number of programs including SNAP (food stamps), ObamaCare, and Dodd-Frank. The vote on this was 215-209 with no Democrats voting yes and 21 Republicans voting no.
But the real problem was taxes. Speaker John Boehner had proposed Plan B, extending all current tax cuts except on households earning more than $1 million per year. After what was apparently a fairly raucous session of the House Republican caucus, the Speaker concluded he did not have the votes. The House then adjourned as noted earlier.
Markets Vote With Their Feet: Stampede for the Exits
Markets have not reacted well. As of 5:30 pm California time, futures markets looked like this (from FinViz.com):
The only one of the five indexes that didn’t fall off a cliff (sorry) was the Russell 2000. I’m pretty sure markets are saying they don’t like this turn of events.
Two Key Bills Passed
HR 4310, the “National Defense Authorization Ace for Fiscal Year 2013” basically repeals the sequestration scheduled to go into effect January 1. There is a good summary on the House web site.
HR 6684, the “Spending Reduction Act of 2012” cuts spending on a number of programs. There is a good, if wordy, summary on the House web site.
Title I deals with Agriculture. The SNAP program will be reduced.
Title II: Energy and Commerce. The bill amends ObamaCare as follows.
- Not allow the appropriation of funds to HHS to give grants to states to support creating Exchanges;
- Not allow the appropriation of funds for the Prevention and Public Health Fund. (See the summary cited above for details.)
- Not allow the appropriation of funds to set up and run the Consumer Operated and Oriented Plan.
Medicad and the State Children’s Health Program (CHIP) would be allowed to reduce eligibility levels below Federal standards. Previously authorized increases in Medicaid payments to territories would be repealed. Provisions that would have paid bonuses to states for enrollment and retention programs for children under Medicaid and CHIP.
Title III is Financial Services. Dodd-Frank would be amended to repeal authority for the orderly liquidation fund and judicial procedures that accompany it. Prohibits the Secretary of the Treasury from making payments under the Home Affordable Modification Program and other initiatives. The required annual payment from the Fed to the Consumer Financial Protection Bureau would be eliminated (effectively eliminating that bureau).
There is a lot more, but I can’t stand reading it. Not because of what the summary says but because the language is impenetrable bureaucrat-ese.
I sure am happy we bailed out of a lot of our mutual fund holdings three years ago. Unless people in Washington, D.C. come to their senses, this will be a terrific train wreck.