Negotiations for the payroll tax extension mark the third near-shut down for the U.S. government this year, but Congress' new-found optimism may save us one more time.
A failure to extend the cuts, which expires at the end of the year, would raise taxes from 4.2% to 6.2% for middle-class workers.
Oddly, members of Congress are pretty much in agreement about extending the tax cuts, but the parties remain at odds about the bill's extras and how it will be funded.
Tax extensions -- points of debate
To pass the tax cuts bill, Republicans want spending cuts, increased Medicare premiums, and an oil pipeline, and they do not want to pay for the payroll tax by using a surcharge on incomes over $1 million.
On Wednesday, Senate Democrats agreed to drop their demand for a surtax on income exceeding $1 million if Republicans abandon efforts to expedite approval of TransCanada Corp.'s Keystone XL oil pipeline.
Furthermore, "Democrats have resisted some of the Republican proposals to cover the cost, including pay freezes for civilian federal workers and a requirement that high-income Medicare recipients pay a greater share of their premiums," notes Bloomberg.
"We want to get a bill and we want to pass a payroll tax," said Senator Charles Schumer of New York, who helped organize the Democratic message in support of a surtax on millionaires. "We believe a millionaires tax is the best way to do it. We're open to other suggestions."
"We are confident and optimistic we'll be able to resolve bills on a bipartisan basis," adds McConnell, a Kentucky Republican. He thinks both sides can resolve remaining issues in a few days.
Spending bill
To keep things interesting, there are only two days left until a temporary funding measure expires and the government is forced to shut down major services run by the departments of defense, education, health, and labor (via Reuters).
"Republicans introduced a $915 billion spending bill in the U.S. House of Representatives on Thursday in an attempt to force Democrats to finalize legislation that would keep the U.S. government operating beyond the weekend," reports Reuters. The house will vote on the spending bill on Friday.
Investing ideas
Both of these bills, spending and tax cuts, will have a significant impact to Americans' wallets. Lower taxes keep more money in the hands of consumers, and the spending bill can ultimately affect the number of government jobs (and salaries) there are.
Fewer jobs and more taxes means less consumer spending.
Let's suppose Congress passes both of these bills to the benefit of consumers. There would be more money to spend and consumer goods companies will sell more goods.
So what consumer goods are expected to benefit? For ideas, we created a list of consumer goods stocks and screened them for bullish short trends. This means short sellers are feeling less pessimistic about these names.
Do you think these names have more upside than downside? (Click here to access free, interactive tools to analyze these ideas.)
1. Diamond Foods
2. SodaStream International
3. Pitney Bowes
4. Lear
5. STR Holdings
6. Smart Balance
7. Sturm, Ruger & Co.
8. International Paper
9. Newell Rubbermaid
10. Ball
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Rebecca Lipman does not own any of the shares mentioned above. Short data sourced from Yahoo! Finance.
