In the wake of former Governor Mitt Romney's loss to President Barack Obama in the November 6 presidential election, the attention of American politicos has turned to the upcoming "fiscal cliff," the combination of tax hikes and spending cuts that could deal a mortal blow to the U.S. economy. Both sides of the political spectrum have begun staking their terms for an eventual deal, but Republicans are facing an increasingly larger problem on their own team: defections regarding Grover Norquist's infamous no-tax pledge.
For those who are unfamiliar with Norquist's Americans for Tax Reform and "The Pledge," the short version of the story is that, beginning in the late 1980s following the election of President George H. W. Bush, Norquist has encouraged conservative leaders to swear to never raise taxes. While "revenue adjustments" are allowed, they must be offset with accompanying cuts so as to make any legislation tax-neutral as a result.
Once considered a sacred cow among the GOP, several conservative lawmakers, in recent days, have begun to renounce "The Pledge" as archaic and inappropriate for the current economic crisis.
"I'm not obligated on the pledge," Tennessee Senator Bob Corker told CBS News in an interview. "I was just elected. The only thing I'm honoring is the oath I take when I serve when I'm sworn in this January."
Even those who have been staunch supporters of Norquist's efforts for decades are switching sides, citing the obvious mandate President Obama received in the November 6 elections.
"Times have changed significantly, and I care more about my country than I do about a 20-year-old pledge," Georgia Senator Saxby Chambliss said to reporters. "If we do it [Norquist's] way, then we'll continue in debt. I'm frankly not concerned about the Norquist pledge."
These allegiance changes are sure to add another element of complexity to the fiscal cliff talks. As such, investors should consider altering their strategies in the event that stock markets nose-dive during the Congressional negotiations.
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