Exit US presidential elections. Enter looming budget crisis. And once again, a disconnect between how Washington and Wall Street see the world could cause pain for investors if the two get their signals crossed.
At the beginning of next year, $600 billion in tax increases and spending cuts - known as the fiscal cliff - will automatically become law unless Congress acts. Such dramatic moves could hammer consumer and business spending, push the US economy back into recession and send markets reeling.
<>However, there is a sense that neither the financiers and investors in New York nor the lawmakers in Congress are taking each other seriously enough. Many in Washington believe Congress could do nothing, and the market reaction would be relatively sanguine. Plenty on Wall Street say the fiscal cliff, one way or another, will be dealt with. It raises the possibility that Congress will sail over the cliff, and markets will freak.
"The markets have been way too sanguine on the fiscal cliff," said Greg Valliere, chief political strategist for Potomac Research Group, which tracks Washington for institutional investors.
The fiscal cliff's automatic triggers were built into law as a way to force lawmakers to tackle huge US budget deficits.
Wall Street banks, investors, and financial industry lobbyists have coalesced around the view that after the elections Congress will reach a short-term deal to avert the worst of the cliff. In short, they believe Congress will kick the can down the road for several more months.
"They'll have to do some sort of short-term extension to buy some time to develop the larger component of addressing the fiscal cliff, which is a large-scale fiscal plan," said Ken Bentsen, head of the Washington office for financial industry group SIFMA, who sees that happening.
As SIFMA's chief lobbyist, Bentsen is essentially Wall Street's eyes and ears in the nation's capital. He was a congressman himself - a Texas Democrat who served in the House of Representatives from 1995 to 2003.
But Wall Street and Washington have misread each other in the past, and it has not been pretty for markets. One of the ugliest examples of that was in September 2008, not two weeks after Lehman Brothers collapsed, when the House rejected a $700 billion financial bailout plan. Markets plunged; that shock was enough to galvanize lawmakers to pass a revised plan a few days later.
There is some concern that poor assumptions are being made about each side. In Washington, there are Tea Party-backed Republicans who anticipate a market shock but believe the pain is worth it if it changes what they see as a culture of spending in Washington.
While none of them are saying this publicly in the pre-election environment, lobbyists in close contact with Capitol Hill say there are enough members with such an outlook to create headaches for leaders like House Speaker John Boehner just as they did during debt ceiling negotiations in 2011.
In addition, there is a growing group of Democrats and center-left policy wonks who say that going over the cliff may be a viable tactical option to force revenue increases on Republicans, who have resisted them.
The theory is simple: no one has to cast a potentially career-ending vote to raise tax rates, and lawmakers can easily blame the other party for the impasse.
The tax rates snap back to pre-2001 levels, to the levels prevailing before the tax cuts brought in by President George W. Bush, and $109 billion in automatic spending cuts start to bite - half military and half domestic programs.
Senator Patty Murray, the second-ranking Democrat on the Senate Budget Committee and a top player in last year's debt limit and deficit reduction negotiations, was among the first lawmakers to voice willingness to pursue a previously unthinkable tactic.
"If we can't get a good deal - a balanced deal that calls on the wealthy to pay their fair share - then I will absolutely continue this debate into 2013 rather than lock in a long-term deal this year that throws middle-class families under the bus," Murray said in a speech at the Brookings Institution in July.
