Clock ticks on ‘fiscal cliff’ talksPublished 10:54am Monday, December 31, 2012
Local financial advisers share concerns about federal negotiations
Local financial advisers showed their concern Friday as federal leaders continued talks to prevent the government from going over the “fiscal cliff.”
As of press time, a deal had not yet been struck, and less than 24 hours remains to prevent a blend of middle-class tax increases and spending cuts from taking effect at the turn of the new year.
The Senate’s top Democrat and Republican leaders met Saturday to work on a compromise, and House and Senate members were called in for a rare Sunday session. The meetings come after President Barack Obama and congressional leaders met Friday.
“We’ve had more concern from clients over this than probably any other issue I’ve seen in the last 10 or 15 years,” said District 27A Rep. Rich Murray, who also owns ISC Financial Advisors.
While Americans — and in turn the world — wait for a decision to be made, he said some of his clients are lightening up on the amount of stocks they’re carrying.
“The markets don’t like uncertainty,” he said.
If an agreement is not reached, Americans at almost every level would be affected.
On the short-term, Murray said one of the biggest panics for families with small kids is the chance that the price of milk could double without the passage of a farm bill.
Under the current law, the federal government is obligated to maintain prices so that fluid milk sells for about $20 per hundredweight. If the law lapses, the Department of Agriculture would be required to maintain a price closer to $36 or $38 per hundredweight. It is unclear when the price might be felt by consumers.
Payroll tax increases of 2 percent would be felt right away, giving a person making $1,000 every two weeks an about $20 increase in taxes each paycheck, Murray said.
Also at stake are continued benefits for the long-term unemployed, the estate tax, taxes on investment income and dividends and a pending 27.5 percent cut in payment levels for doctors who treat Medicare patients. Likewise in question is the Alternative Minimum Tax, which would effectively raise taxes on millions of upper-middle-class families unless Congress acts. Radley Miller, a financial adviser with Thrivent Financial, said he is advising his clients to place their money into tax-deferred gross investment products or municipal bonds, which would have no federal tax.
“Ultimately I believe everyone is going to have an increase in their tax bracket,’ Miller said.
Murray said he is hopeful an agreement will be reached but hopes leaders address the root of problem instead of just pass something to push off the problem down the road.
“Until we address that, people will be in fear and the market will be in panic,” he said.
Miller said he thinks as a whole people think Congress will reach an agreement and make it retroactive to the first of the year.
“The clock is ticking,” Sen. Max Baucus, chairman of the Senate Finance Committee, said in remarks on the Senate floor Friday as Obama and congressional leaders were meeting several blocks away at the White House. “My message to them is simple. We can do this. We can get this done, and we must.”