This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

Political Brinksmanship Still Threatens US Economy

By PAUL WISEMAN and CHRISTOPHER S. RUGABER

WASHINGTON (AP) â¿¿ A last-minute deal will keep the U.S. from driving off the so-called "fiscal cliff," but higher taxes and continued political fighting in Washington threaten to shake the fragile economy well into 2013.

A bill passed by Congress late Tuesday averts widespread tax increases and delays deep spending cuts that had threatened to return the country to recession.

Investors around the world breathed a collective sigh of relief after the biggest near-term stumbling block for the world economy had been cleared.

At midday Wednesday on Wall Street, the Dow Jones industrial average was up a hefty 223 points, or 1.7 percent. Broader stock averages also jumped.

In Europe, the FTSE 100 index of leading British shares closed up 2.2 percent to 6,027.37, its first time above 6,000 since July 2011. The CAC-40 in France rose 2.6 percent, and Germany's DAX ended 2.2 percent higher.

Earlier, in Asia, Hong Kong's Hang Seng index shot up 2.9 percent to close at 23,311.89, its highest finish since June 1, 2011. Australia's S&P/ASX 200 surged 1.2 percent to close at 4,705.90, its best finish in 19 months.

Some economists were disappointed that Congress and the White House couldn't reach agreement on a broader deal to significantly reduce the deficit over the next 10 years. That could have boosted business and consumer confidence and accelerated growth.

"Nothing really has been fixed," said Joseph LaVorgna, an economist at Deutsche Bank. "There are much bigger philosophical issues that we aren't even addressing yet."

Lawmakers postponed tough decisions on government spending, giving themselves a reprieve from cuts that were scheduled to start taking effect automatically Jan. 1. That just sets the stage for more hard bargaining later. Spending cuts could hurt growth even more.

Another standoff is likely to arrive as early as February, when Congress will need to raise the $16.4 trillion federal borrowing limit so the government can keep paying its bills. House Republicans, who objected strongly to the latest fiscal deal Tuesday before the chamber finally voted to approve it, probably won't agree to raise the debt limit without offsetting spending cuts that Democrats are sure to resist.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,408.54 -16.31 -0.10%
S&P 500 1,864.85 +2.54 0.14%
NASDAQ 4,095.5160 +9.2910 0.23%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs