Fiscal cliff ‘looms larger’ in wake of Supreme Court ruling

LPL's Kleintop says budget deficit compromise may be impossible after Obamacare decision

The Supreme Court’s ruling on Obamacare might have just made matters worse for the year-end fiscal cliff.
Jeff Kleintop, chief market strategist at LPL Financial LLC, believes that by leaving the health care legislation intact, the court unintentionally may have removed a major motivator for Congress to work together on a budget.
“We know that the Republicans are still going to try and take action to eliminate the legislation, but it will be harder to do without the backing of the Supreme Court,” he said. “And that means that it will be even more difficult to get a budget deal now that the whole law was upheld.”
The fiscal cliff refers to a confluence of year-end deadlines that will combine higher tax rates, reduced unemployment benefits, spending cuts, the end of a payroll tax cut and the start of new taxes introduced to help pay for the new health care law.
Unless Congress acts on at least some of the looming issues, the impact on the U.S. economy is expected to be severe, but so far Congress is proving to be as inept as ever at working together.
From Mr. Kleintop’s perspective, if either all or part of the health care law had been struck down by the court, both parties would have some incentive to work together to bring back the parts they wanted, and those negotiations likely would carry over to involve budget talks.
“The new negotiations over health care could have created some room for finding middle ground on the budget,” he added. “Now it will be much harder to get some kind of compromise on the budget, and that makes the fiscal cliff loom even larger.”

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