To paraphrase Churchill, never has so much been written about so little.

The fiscal cliff, responsible for acres of newsprint and taxing the minds of investors the world over, will almost certainly be resolved, although not without some angst.

The Bush tax cuts, the bank bailouts and the wars in Afghanistan and Iraq have pushed US debt as a percentage of gross domestic product to almost twice its historical average.

Democrats and Republicans agree something must be done. That's a good starting point for a successful negotiation. What that “something” should be is where they differ.

The Democrats want to make minor cuts to spending and increase taxes on the rich by letting the Bush tax-cut legislation lapse.

The Republicans want to avoid any increase in taxes but slash government spending, except on the military.

These were the positions that led to the Budget Control Act of 2011, the first act of the fiscal cliff pantomime, which went under the name of the "debt ceiling crisis".

Yes, it's all part of the same thing.

The act specified government spending cuts of about $US1.5 trillion ($1.43 trillion) over 10 years and the formation of a super-committee to produce legislation committing congress to these reductions.

But the bill contained a nasty poison pill: if congress failed to approve at least $US1.2 trillion in spending cuts, across-the-board government cuts in mandatory and discretionary spending and tax increases would commence from January 1.

That poison pill is the "fiscal cliff".

In failing to reach agreement, the super-committee marched everyone towards the cliff and now we're standing on the edge of it.

The angst comes from the potential effects of falling over it. Tax revenues will rise by about 20 per cent and government spending will contract by about 0.25 per cent.

The Tax Policy Centre estimates that those earning $US50,000 a year will pay about $US2000 more in taxes next year. Those on $US500,000 will pay an extra $US50,000 and the top 0.1 per cent will get slugged an extra $US634,000.

The impact will be a sure-fire, double-dip, super-quick recession, another million people out of work and anything from a 2 to 5 per cent contraction in GDP.

You'd think that would bring US politicians to their senses but, to quote Winston Churchill directly this time, "You can always count on Americans to do the right thing – after they've tried everything else."

Right now they're trying everything else.

Obama has said "no deal" to any proposal that doesn't involve revoking the Bush era tax cuts. That forces the Republicans to make the argument for tax cuts for the rich and pain for everyone else.

Good luck with that.

Obama has a few more slight but notable advantages.

First, he won the recent election. Second, the balance of power in the Senate has shifted slightly towards the Democrats. Third, when negotiating with the Republicans over the debt ceiling last year, Obama faced an election. Default wasn't an option then.

Now, dealing with the political consequences of a recession are much reduced, especially if the blame for one can be slated to the Republicans.

Finally, plenty of Democrats like the idea of higher taxes on the rich and lower defence spending. All they have to do to get that is … nothing. And Republicans know it.

So there's a good chance, and more time than everyone thinks, to get a deal done and avoid another recession.

If a deal isn't reached, February or March next year will be key. By then, congress will need to approve another increase in the debt ceiling and the pantomime will resume.

This time, though, it's different.

There's far more pressure on the Republicans to come to the table in a manner that doesn't make them look like hair-shirted Tea Party nutters, which is what cost them the election.

They might struggle to understand the economic consequences of the fiscal cliff, but you'd expect them to alight on the political ones quick-smart – after they've tried everything else first.

Let them have their fun, rest easy, and use any market volatility to pick up a few cheap stocks before a deal is done.

This article contains general investment advice only (under AFSL 282288).

John Addis is editor at Intelligent Investor. BusinessDay readers can enjoy a free trial offer. For more Intelligent Investor articles click here.