As of today, December 26, the maneuverings over various legislative tripwires scheduled to be crossed on January 1 have reached that quintessentially Washingtonian point where reality becomes fully Kabuki-ized.
Congress is coming back tomorrow despite the absence of any significant progress in fiscal talks since Speaker Boehner’s failure to round up enough votes from his own Caucus for his own “Plan B” proposal. The President is also returning to DC touting a smaller bargain that on first blush appears even less likely to overcome conservative opposition.
In the background, of course, are business “analysts” who are deciding whether to stake their reputations on repeating earlier predictions that the world as we know it would end absent a big fiscal deal before January 1. There’s also talk that bargain-hunting could cushion stock market drops attributable to entirely artificial panic over the “fiscal cliff.”
If you share the view of many progressives that this whole crisis was largely contrived to produce a fiscal agreement closer to what we might have expected had Mitt Romney won on November 6, the next few days could represent a fascinating experiment in the willingness of the “investor class” to degrade its own financial assets in order to achieve its preferred public policies. There is no objective reason for the kind of market hysteria that has repeatedly been threatened. So if it breaks out, it should be viewed at least partially as a political exercise rather than as a market reaction to political failure.