The next debate involves raising the debt ceiling. The government has already passed its borrowing limit, but the Treasury Department is juggling some items here and smudging some paperwork there and getting the government through.
The debate on taxes that nearly pushed the economy off a cliff at the end of 2012 and the debt ceiling debate of 2011 demonstrated exactly how far leaders in Washington are willing to go to make their point on budget decisions. Even President Obama said this week that, "America cannot afford another debate with this Congress about whether or not they should pay the bills they've already racked up."
The president also said that "markets could go haywire," crossing an invisible line in Washington that declares it is the center of policy decisions, but does not, in some magical way, influence the stock markets.
Stock markets, whenever a politician wants to duck the issue, rise and fall on the merits of the corporations they represent. It has nothing to do with policy.
That disclaimer aside, markets could indeed go haywire between now and the end of February, when automatic spending cuts kick in or between now and the end of March when, The Wall Street Journal reports, appropriations run out for much of the government.
Two ways to look at this are, yes, the short-term distraction of a fight over the debt ceiling and how to approach the size of the budget are unsettling to investors. More importantly, neither party seems able to grasp the point that a long-term solution is not only the only viable political way out, but the only economic one, as well.
The translation of that in some of the crudest imagery imaginable is that Washington should, indeed, kick the can down the road on spending decisions and do so proudly. What the economy does not need is a fiscal cliff and it seems to be amply proved that neither Democrats nor Republicans nor most economists want that kind of abrupt crash.
Washington should embrace its hesitancy. This is a case in which gridlock is a good thing -- but it has to be recognized as such, so that headlines read, "We're being careful," instead of "We're being stonewalled."
If it didn't create such nasty headlines every three to six months, it would be brilliant to hear Washington choose to do some terracing, to replace a free fall off a fiscal cliff with a series of tolerable adjustments. OK, maybe that's hoping for too much.
In international markets the Nikkei 225 index in Japan added 0.72 percent, while the Shanghai composite index in China gained 0.6 percent. The Hang Seng index in Hong Kong slipped 0.14 percent, while the Sensex in India rose 0.4 percent.
The S&P/ASX 200 in Australia shed 0.07 percent.
In midday trading in Europe, the FTSE 100 index in Britain was flat, dropping 0.1 percent, while the DAX 30 in Germany fell 1 percent. The CAC 40 in France gave up 0.37 percent, while the Stoxx Europe 600 lost 0.25 percent.
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Don't panic, stocks will rebound