While Fiscal Cliff Dithers, Investment Falls Dramatically

While Congress and the President send hopeful signals of a “fiscal cliff” deal, a pall has come over the investment community that has effectively shut its proclivity for startup deals as there is no clarity as to the financial topography they’ll fall into after the first of the year.

Also rife among those with substantial estates are either the last minute development of trusts for beneficiaries, or total divestiture to outside buyers before the clock strikes twelve on January 1, 2013. These rapid year-end steps are being taken by those with substantial means who have no trust in what will be concocted or not. This is happening as a supremely confident President meets the irresistible force of an obdurate House of Representatives digging in for a determined opposition, even if it means a total return to the pre-Bush tax cuts.

Particularly vexing to large estate holders are the future of “death taxes.” The exclusion per marriage partner, which currently stands at $5 million, could drop to one million, if no overall fiscal cliff arrangement is reached by year end. Although the Administration and Senate Democrats are willing to compromise at $3.5 million, there is no guarantee that such an agreement will be reached in the short amount of time before January 1, 2013.

With the next “fiscal cliff” discussion not scheduled till after Thanksgiving, the post-election mood of the U.S. public is rapidly getting gloomier, as reflected by the latest measurement of consumer confidence. This has also lately been reflected in the growth in individual per capita debt that is up 3% currently, year over year.

Even savings rates that had grown to as high as 4 to 5% earlier in the year are rapidly disappearing, as consumers are falling back on available loans to make ends meet, within stagnant incomes that leave little room for discretionary spending.

Despite “Black Friday” sales after Thanksgiving, and record discounts being offered by leading retailers, expect year-end total spending to grind to a multi-annual low as celebrants gather in New York’s Times Square to welcome in a dubious New Year.

The uncertainty that has gripped the nation in anticipation of a White House-Congress stand-off could bring into play an overall economic freeze shortly that might gravely affect whatever hope had been generated earlier in 2012.

The potential of the beginnings of a new recession under these circumstances becomes possible with each passing day as the “fiscal cliff” issue is not being resolved.

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