Budget Deal Nears Completion

Reports from various media outlets this morning suggest that a budget deal is imminent.  While the reported deal is not a grand bargain that tackles critical long-term issues such as tax code simplification or entitlement reform, it does offer fiscal certainty for the next 2 years.  We have continually heard from business leaders over the past few years that the uncertainty surrounding fiscal policies was crimping investment and spending.  This deal eliminates the prospect of another government shutdown and provides clarity on the new levels of government spending and taxation, allowing CEO’s across the country to develop more concrete business plans.  Increased spending and the completion of once shelved plans for growth across corporate America could provide a nice boost to GDP growth in 2014.  Additionally, the cuts and revenue increases in this deal are not overly large, limiting the negative near term impact to U.S. growth.  When the Federal Reserve met in September and decided not to taper their asset purchases, one reason cited was the uncertainty (and potential tightening) of fiscal conditions.  Now that a deal has been crafted, and assuming it gets enough votes to pass the house, the Fed may be more comfortable in starting the tapering process sooner than they otherwise would have been.