Few headwinds facing the markets are scarier than the fiscal cliff. But according to Rahm Emanuel, you needn’t worry.
The so-called fiscal cliff is a the confluence of tax hikes and spending cuts that are scheduled to happen, pretty much all at once, around the end of the year.
Although many investors are inclined to believe there will be some kind of grand compromise, they also know that lawmakers can be unpredictable. And lawmakers like to play politics.
The nagging concern on Wall Street is that partisan differences will trump all else preventing a compromise, and as a result the economy and the stock market will be thrust into a tailspin.
And it would be quite a tailspin.
According to Goldman Sachs, if the worst case scenario comes to pass GDP could shrink 4% in the first 6 months of 2013, alone.
But in an interview on CNBC's Fast Money, Chicago Mayor and former White House chief of staff Rahm Emanuel suggests worrying about a worst case scenario is a big waste of time.
He’s confident it won’t come to pass and says investors should look to history as a guide.
He thinks lawmakers learned their lesson in 1995 when an impasse shut down the federal government. And he reminds, nine months later the country entered an extended period of unprecedented prosperity.
Here’s how Emanuel sees events playing out, now.
“I believe Barack Obama will win the election. And after the election people will come to the conclusion that he’s won, he’s the president.”
He then thinks both sides of the aisle will bridge political differences and hammer out a plan that’s best for the nation as a whole. “They’ll work it out because they have to,” says Emanuel, just like they did in 1995.
Posted by CNBC's Lee Brodie
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CNBC.com with wires.