The fiscal cliff will be resolved Jan. 8.
Both sides will settle on a 37 percent tax rate on incomes above $250,000 and a 28 percent cap on deductions. Why Jan. 8? It's sometime after Jan. 1 and the week of New Year's when no one is serious about anything. My guess is the deal gets done a day or two after the market gets back to work, somewhere between Jan. 2 and Jan. 4 and then maybe falls out of bed on Jan. 7. That should get politicians' attention.
There will be at least one quarter of growth above 3 percent in 2013—maybe even two.
The relatively strong growth will happen as a result of investment pent up before the fiscal cliff. We'll get a brief period of the economy firing on at least 2 critical cylinders: consumer and business investment, along with housing. Europe should continue to be a drag next year, but global growth will become less of a drag. But there will be something of a boost in the early part of the year from Hurricane Sandy rebuilding. All of this assumes we fix the fiscal cliff.
Unemployment will end the year at 6.9 percent.Page 1 of 2 | Next Page