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MoneyShow's Jim Jubak discusses whether a short-term fiscal cliff solution before the end of the year will calm the markets or make them more nervous.

So here we are in early December. We’re approaching the date when Goldman Sachs and the Mayan calendar predict the end of the world.

Goldman Sachs saying that Congress really has until December 21 to solve the fiscal cliff problem. People who read (and I think misread) the Mayan calendar say that’s also the date for the end of the world. Anyway, everybody has been worried about the fiscal cliff, but what seems to be happening in the last few days is a counter position.

The Democrats have basically said let’s do this huge package and get it solved now, or go over the cliff and then we’ll get it solved in January. Republicans are putting forward another proposal which says OK, let’s take some of the things we agree upon—this follows up on a suggestions from President Obama—let’s take the tax cuts, we’ll pass legislation that keeps the tax cuts for people making $250,000 or $500,000 or less, and we’ll agree on that, we’ll pass legislation to make sure those don’t expire, but we’ll leave everything else for January, and in fact we’ll put them into a big package with the debt ceiling.

I’ve got a question for you here, which is that if the market is kind of leery about a big package in a fiscal cliff, is it a plus or a minus to get a tiny bit done and then leave everything off to a debt ceiling bargain, if you will? Remember that the last time we went through the debt ceiling chaos, the US wound up losing its AAA credit rating, and we wound up coming very close to default, technically anyway.

I think actually the market is not going to be all that thrilled with the idea that we had this worry about the fiscal cliff in December, we postponed that, and now we’re going to have another big worry about the debt ceiling in January and February, depending on how long the Treasury can finagle accounts.

It seems to me that what we’re really doing here is stretching out a crisis, stretching out the worry, giving the financial markets longer to worry about things, and maybe even actually a bigger thing to worry about. So if we get through the end of the year and the world hasn’t come to an end, I think the debt ceiling will start to loom as a bigger and more contentious issue.

If you’re looking for some reason why the market might not do all that well in January, that’s the scenario I’d watch out for.

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