The “fiscal cliff” is a term that’s creeping into the lexicon of economic journalists. It refers to that bizarre political product borne of the negotiations to the increase America’s debt ceiling in 2011. It is designed to inflict the worst case scenario that either of the parties could conceive, imagining that this would deter the partisan bickering that has brought decision making to a standstill since the beginning of 2011.
At the heart of the problem is the huge government deficit and an inability to agree on a course of action to fix it. So the parties agreed to create a sword of Damocles, hanging over the economy, deferred until after the election on November 6, triggered to fall on December 31. They have seven weeks in which to come up with a solution.
That period is a bad time to make any decisions, let alone ones of such consequence.
Should the sword fall, estimates of the damage to the economy range between of 4% to 6% of GDP.
It is right now that these issues should be addressed. It’s also a good measure of candidacy for the presidency.
Politicians are expert procrastinators. The proficiency on display in Europe is impressive. Hopefully the voters in America won’t be as easily beguiled as those in Europe.
America’s economy Fiscal cliffs, multipliers, and the myth of central bank independence
The high price of tax breaks Not so easy Closing loopholes is politically painful
Harvard’s gloomy graduates
The cloud of uncertainty Dithering in the dark Quantifying the effect of political uncertainty on the global economy
America’s budget woes Shift this cliff
Fiscal policy Cliff-diving
CBO: Coming Fiscal Cliff Will Devastate The Economy
Fiscal policy Spending by any other name
America’s economy The two Americas
America’s economy A response from Edward Luce
Barack Obama and the economy The choice
Fiscal policy What the Fed fears
Legal language The hardest sentence in the tax code