Fiscal Cliff

[dan_s]

"An agreement to avert the fiscal cliff before year-end remains our central assumption, though it continues to look like a fairly close call given the political obstacles to a deal," said Goldman Sachs economists in a morning note. "If a deal is reached, we would expect a tax increase of a magnitude similar to the upper income tax cuts, though the composition might differ. Entitlement reforms also seem likely to be part of a package, particularly related to health programs.

'Downpayments' in both areas seem likely, with additional deficit reduction to be enacted in 2013 as part of a two-stage process."

The working deadline for an agreement, according to the Goldman Sachs economists, appears to be Dec. 21.
"While talks are ongoing, we would not expect serious negotiations to begin for another couple of weeks. In the interim, headlines out of Washington are likely to be mixed, but we would expect more negative than positive news until at least mid-December," the economists noted.