And from the Mayan Apocalypse to the Fiscal Cliff: Why They are Similar

Okay, it is December 21st. The sun is shining where I am. I ate too much last night but the rumbling in my stomach does not sound like the end of the world.

Which is exactly how we are all going to feel on January 1: a little the worse for wear but the world as we know it is not going to end.

The markets are probably going to crater today because they, like the President, desperately want a deal. But the big secret is that if the US economy goes over the Fiscal Cliff, life will go on. And let's be really clear: the people most impacted can afford it. The economy is righting itself and this is not going to change that.

As the following article explains, a host of self-serving charlatans are beating the apocalypse drums, but they are about as credible as the survivalists in loincloths who greeted this allegedly Mayan dawn.

This is not 2008 and the situation is not analogous to TARP. We do not fear the collapse of the financial system, the economy is on sounder footing and, perhaps most importantly, this plan was devised precisely because it was deemed harsh, but acceptable. Not that anyone thought reasonable, rational, intelligent people would ever let it become a serious policy prescription, as surely we would negotiate in good faith and find a solution, however imperfect.

But that is not how the last four years have gone and not, despite the President's election victory, how this is going. The outgoing Congress, several of whose most extreme members were defeated, is leaving the way it came in: with self-righteous and uncompromising truculence. The President, pathetically desperate to cement his legacy by proferring 'sensible' cuts to entitlement programs that have helped assure American prosperity, continues to offer more concessions despite his opponents' unwillingness to acknowledge his legitimacy as a negotiating partner.

In the end, the US will get not what it deserves, but what it bargained for. And will probably be none the worse for it. JL

Barry Ritholtz comment in The Big Picture blog:

The ongoing fiscal cliff foolishness continues to be a parade of bad data, ignorant commentary and media hype. The latest silliness: THIS IS JUST LIKE TARP.

Only its nothing like TARP. Indeed, in nearly every significant way that we can compare the two, they have almost no similarities:• Economy: During the TARP vote, the US economy had been in a recession for nearly a year. It would turn out to be the worst Recession since the Great Depression, and would not end until 9 months after the vote took place.

Currently, GDP was just revised up to 3.1%, and while the economy is not anywhere near full capacity, it is expanding modestly.

• Markets: As of the night before the GOP revolt, the S&P500 was up almost 15% (17% TR) for the year. ALL major US markets had done well (Futures suggest that may change a bit today).

2008, on the other hand, was a market debacle. When the TARP vote came up, 6 of the prior 9 months were negative. September alone was off nearly 10%. And the S&P500 ended the full year down 38.5%, the worst showing in decades.

• Employment: TARP was voted on in a terrible jobs market. The prior year had seen huge monthly drops in NFP — down 489,000 in October 2008, 432,000 in September, -274,ooo in August. (BLS) Only one month in 2008 had job gains, and even that was for only 41k. For the calendar year of 2008, we averaged job losses of 300, 000 per month.

In 2012, we have been adding between 100,000 – 200,000 new jobs each month. The prior 12 months have averaged over 157,000 new jobs.

• Timing: TARP was voted on a month before a presidential elections, with no incumbent running.

The Sequestration vote is occurring a month after the incumbent won by a big margin 51% to 47%, with a 332 to 206 electoral college victory, a majority of voters in House and Senate races, picking up seats in both the House and Senate.

• Leadership: I may not have agreed with what the leadership was saying and doing, but Hank Paulson worked closely with Fed Chair Bernanke. They were out front, very public in pronouncements, and showed significant leadership. (George W. Bush had mostly delegated his economics team).

Currently, Bernanke has said its up to Congress to resolve this — its outside of the Fed’s purview. A power play looks to be going on behind the scenes, with Boehner’s chairmanship at risk. The GOP position — is no new taxes or rate increases, regardless of the costs.

• Repercussions for failure: The threat of failure of TARP was pretty dire: Firms like McDonalds and GE would not be able to maker payroll. ATMs would stop working, even a fear of having to impose Martial Law.

If Sequestration occurs, tax rates go up 3%, return to 1999 levels, and about $500B out of 16 trillion economy gets cut over all of 2013.

Let’s see, 3% tax bump versus Martial Law: Yeah the Sequestration is exactly like TARP.

The best part about the fiscal cliff is how revealing it is of the scaremongers, fools and charlatans, Make your list of fools now, and save it for a future date. You may find it productive.