lunes, 16 de julio de 2012

What's a fiscal cliff and is the US about to fall off it?

US growth will drop next year if Congress and the President can't come to an agreement to steer away from the "fiscal cliff". Politics will decide if the US goes off the cliff or avoids it.

Last summer, Congress's delay in raising the US debt ceiling cost the country its AAA rating. The compromise that finally got the higher debt ceiling approved created the fiscal cliff that's now looming.

In a nutshell, the fiscal cliff (which could also be thought of as the triple witching hour) is what will happen to the economy when the tax cuts in the $747 billion stimulus package run out, some or all of the Bush tax cuts are allowed to expire, and the automatic cuts to federal expenditures beginning in 2013 Congress approved late last year take effect.

Estimates put the impact of the cliff at 5 points of GDP. Ouch...

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