Look for a budget deal sometime in December, said Greg Valliere, chief political strategist at the Potomoc Research Group during the opening session at the Schwab Impact conference in Chicago Tuesday.
House speaker John Boehner “is smart enough to realize that the last thing he needs is to be the party of obstructionists, or the party that lets taxes go up January 1,” he said.
And president Obama “does not want to start his second term in an economic crisis” by going over the fiscal cliff, he said.
“The final reason I think we get a deal in December is that corporate America, almost to a person, has descended on [Washington] saying it's unthinkable if we don't get a deal,” Mr. Valliere said. This lobbying “has had an impact, especially among Republicans.”
But any idea that we're about to see a big [political] breakthrough …that will break the logjam in Washington is naÔve,” he said.
“Sadly, the markets are going to have to get angry” before lawmakers act, Mr. Valliere said. “That is the missing catalyst. … The next seven weeks are potentially quite volatile.”
Mr. Valliere told advisers at the conference that their clients may never again see capital gains taxes as low as current rates. And he doesn't see much chance for the municipal bond tax exemption to be eliminated.
The muni tax break “is like motherhood and apple pie,” he said, and would hit state and local governments when they're down.
“My gut feeling is [the exemption] is probably going to be spared,” he added, “but I'm not [as] certain” as in past periods when the exemption has been attacked.