What They Say Will Happen
- Your taxes will go up. A lot.
- Your pay-roll tax holiday will end (and no one seems to be fighting to keep this) so that's another like 40 bucks per pay check.
- There will be spending cuts all over the place. Especially military.
- Unemployment checks for a lot of long-term blue-collar workers will end. This could be damaging for these people (and a lot of them are out of luck because the jobs they lost are no longer really in America).
- The economy could well plunge into recession. If you believe there is a limp, barely sprouting recession, this will stomp on it. Like Bambi vs. Godzilla.
What Will Really Happen
- Congress will suddenly have a 'surprise' vote to keep the current tax rates for almost everyone. If there is inability to pass a bill that keeps people making at least 250k a year off the tax-chopping block, politicians will be facing pitchforks and torches. Conservatives will say they voted to "lower taxes" while still (probably) playing ball with the white house. People making more than 250k will take it on the chin and be pissy but no one cares about them too much anyway.
- Republicans will eat the majority of the blame for going over the fiscal cliff (according to polling--around 60-40). They will complain bitterly about how this is so unfair--but--
- No one will remember this in two years or care especially except for ...
- Tea Party hopefuls looking to primary sitting Republican congressmen. The Tea Party hopefuls will be disappointed that the sitting candidates didn't vote Plan B, thereby making them vulnerable to primary challenges.
- The de-speakering of Boehner will turn out to have been greatly overstated. But Watch: he'll be pissed and he'll remember this and somewhere in a dark subcommittee when no one is watching ... someone will pay.
Why Wall Street is Fucking Terrified
After the Fiscal Cliff battle, which will result in Republicans taking an ego-hit and Obama (Possibly? Probably?) gloating during his state-of-the-nation address, will come the perpetual Valhalla-esque Debt Ceiling battle. Idiots who, presumably, don't pay their IOUs for credit cards or poker games because they don't understand the concept of paying money you already committed to pay, will try to take a piece out of Obama's hide.
This will make rating agencies nervous. They may, again, downgrade America.
Most of the world will not care: we are the economic safe-harbor today and borrow money at historically low rates with great confidence despite what you are being told*.
Then, when the downgrade happens, all these CDO super-complex debt weapons that have infiltrated the money-sphere like movie super-computer viruses will auto-trigger with CATASTROPHIC effects for the financial markets.
While Mad Max is fueling up his interceptor to go after the raiders who killed his wife and kids, Tea Party patriots will be watching zombies stream out from the burning cities going "Doug? DOUG!? What HAPPENED!? Why did NO ONE TELL US THIS WAS FUCKING STUPID!? DOUG!? Can You Hear Me!? It's ALMOST LIKE YOU ARE DEAF!?"
* In fact, our ability to borrow into structured debt is so good right now one could make a case this would be a perfect time to embark on massive, massive, infrastructure re-building projects that would boost employment and flood the consumer market with billions of--what? Oh, right. Yeah, I'll just shut the fuck up about that.