FT Alphaville " Lame duck paralysis and fiscal-cliff-mageddon Last November, we pondered the various fiscal issues that might have to be confronted by the winner of the Presidential election and the lame duck Congress in the period between the elections and the end of the year - at least if they wanted to avoid further fiscal drag at a time when the economic recovery is likely to still be fragile. That combination of issues - expiration of the Bush tax cuts, the payroll tax cut, and extended jobless benefits; the automatically triggered sequestration cuts; and once again avoiding a breach of the debt ceiling - has since come to be known as the "massive fiscal cliff." Elsewhere it's been labelled "Taxmageddon." All of these issues remain to be dealt with, the problem is obvious, and everyone is aware of it. Much less clear is how functional the politics will be during this two-month period. And occasionally there's been some vague and optimistic chatter about how a bipartisan recognition of the cliff could pressure policymakers towards a bigger compromise on tax reform, one that will finally address the nation's longer-term budget issues. In other words, what they spent all of last year trying to do but without these big cuts looming above them like a guillotine blade. This blogger can't claim expertise in political process. But lucky for us, Stan Collender certainly can. And he's just penned a column explaining why a big bipartisan package is unlikely (emphasis ours): Leave the politics of the lame duck aside for a moment and start with logistics: There simply won't be that much time for Congress to deal with all of the big budget issues facing it after the elections. The approximately seven weeks between Election Day and the failure-of-the-hardly-super-committee-triggered sequester on Jan. 2 probably translates into no more than four weeks of workable time when you realize that Congress is not likely to return to Washington, D.C., immediately after Nov. 6, that much of at least one of the seven weeks will be devoted to organizing for next year and that there will be time away from the Capitol for Thanksgiving and Christmas. ... Even if there were an agreement on what that should include - and there absolutely isn't ­ - it would take longer than four to seven weeks just to draft the basic legislation, let alone debate and pass it in committee, debate and pass it in the full House and Senate, come up with a compromise agreement between the two chambers, redraft the compromise and pass the conference report. Add in the need for transition rules, which took a year to draft when the 1986 tax act was adopted, and it's ludicrous to think that tax reform has any chance of going anywhere during the lame duck. But the lack of time won't be the only, or perhaps even the most important, logistical problem. As anyone who has ever been through a lame-duck session knows, rounding up votes almost always is far more difficult after an election than it is before. If past lame ducks are a guide, many of the Representatives and Senators who will not be returning to Congress next year will be more focused on getting a job, packing up their offices and moving their families than on what's happening in their committees or being debated on the floor. ... Add to that the strong possibility that some retiring and defeated Members may not vote at all, and it's not hard to see why the close votes that have been typical of almost anything having to do with the budget the past few years may have to or should be avoided during the lame-duck session. And then there's the politics of the federal budget. Does anyone really think that the extreme partisanship and vitriol that has only grown since the 2010 elections will suddenly disappear or substantially subside on Nov. 7? ... I have two predictions based on all of this. First, instead of a big budget deal, the most likely result by far is that stopgap, temporary fixes will be put in place for at least several months (and possibly a year) for all of the major spending and revenue decisions that are coming due. Second, although they obviously shouldn't be, federal budget watchers will again express surprise and disappointment when this happens. Not us - we already thought that such a compromise was improbable. Indeed the likelihood of simply agreeing to more temporary measures is closer to the conventional expectation than Collender seems to think (see here and here). But the kind of anticipated intractability that Collender discusses here is still telling, and worrying. If you think back to the compromises that were necessary at the end of the past two years - extending the Bush tax cuts at the end of 2010, extending the payroll tax cut and jobless benefits at the end of 2011 - neither came easily. So even sticking to a more-realistic view of what could happen, we're a bit nervous that merely another postponement that doesn't result in a big, immediate fiscal drag next year will prove too difficult. Related links: What awaits you, Mr President (-elect?) - FT Alphaville Supercommittee: oh, drag - FT Alphaville This entry was posted by Cardiff Garcia on Wednesday, April 18th, 2012 at 20:15 and is filed under Capital markets. Tagged with fiscal cliff, lame duck, taxmageddon.