Cliff Jumping

It seems like we’re seeing a bubble in cliffs.

Everybody knows about the fiscal cliff. That’s what’s going to happen January 1st if Congress and the President can’t put aside their differences long enough to avoid $500 billion in tax hikes and spending cuts over the next year. The combination of spending cuts and tax hikes could cause a mild recession early next year.

But the metaphor has proven to be so popular that we’re now looking at a milk-price cliff, a container cliff, and—I kid you not—a copyright cliff in 2013. These are all part of the long-term consequences of Congressional actions some years ago. The milk-cliff is due the reinstatement of a 1949 farm law that is scheduled to go into effect that could effectively double the price of milk in the New Year.

The “container cliff” has to do with a potential strike by the Longshoremen’s Union in ports on the East Coast. Federal mediators need to work out a compromise on per-container royalty fees. The copyright cliff is the outworking of a 1976 law that allows artists to reclaim the rights to their works after 35 years. For the struggling music industry, this could be a lethal blow, as revenues from classics from 1978 like “Shattered” by the Rolling Stones or “Because the Night” by Patti Smith revert to their creators.

These issues have come up because Congress doesn’t always plan for the long-term consequences of its legislation. Perhaps they can’t with only two-year terms. But it raises this verbal question: if pro is the opposite of con, what’s the opposite of progress?

Douglas R. Tengdin, CFA
Chief Investment Officer
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