The Phaserl


Looking down the fiscal cliff

by Zarathustra, Also Sprach Analyst:

On 1 January 2013, the United States could be looking down the fiscal cliff of about US$600 billion of tax increases and spending cuts.  That is, if the congress fails to reach any compromise.

The fiscal tightening will happen should the congress not extend the Bush tax cuts and the payroll tax cuts (i.e. let them expire).  On top of that, as part of the deal for last year’s increase of the debt ceiling, a super committee was formed and was asked to come up with some US$1.2 trillion over the next ten years.  And as the super committee failed to do so, an automatic spending cuts will kick in on 1 January 2013 as part of the deal to raise the debt ceiling (known as sequester).  Not to mention that the debt ceiling will likely be met again early next year.  With the coming election and all the usual gridlock in the congress, political uncertainty is arguably quite high.

The table below by Goldman Sachs illustrates the timeline of the important dates of key political events which could have potential impact of fiscal policy.

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1 comment to Looking down the fiscal cliff

  • Ed_B

    Oh my God! Fiscal tightening? If we can’t spend 40% more than we earn how will we ever survive?! Live within our means? HOW??? Just because our ancestors did it for 200+ years doesn’t mean that we can… whine, cry, snivel… :-/

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