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What do we call US Fiscal Cliff

ForexZig.com February 14, 2013
US Fiscal Cliff

US Fiscal Cliff

The word group US Fiscal Cliff became extremely popular since the Presidential elections. In announcement in February 2012, the Federal Reserve Chairman Ben Bernanke introduced the term fiscal cliff for this crisis. In speеch to the House Financial Services Committee he depicted that a massive monetary cliff “of large spending cuts and tax increases“ is going to occur on January 1, 2013.

This term is related to to the situation at the end of 2012, when consecutive tax increases and spending cuts of 600 billion USD were expected to come into force automatically. This amount was about to decrease the budget deficit, but lower growth. The alternative is to reject these planned budget cuts and allow the deficit to continue to grow. This could permit stronger economic growth, but leave the debt issue unchanged.

A complex factor for American politics is the debt ceiling. This is the legal amount by how much the government could borrow, which is a major issue divided between democrats and republicans as well as the people from the States, who are cautious about the US debt ceiling. Only the Senate could rise the debt ceiling, by voting on. It has already been raised on January 30, 2012, to a new high of $16.394 trillion. The interest due on this debt is so high that it is the biggest cost to the American budget. So big that it appears impossible for the United States to get itself out of debt. Recently, it was easier for politicians to push debts away to future leaders by raising the debt ceiling and continuing to spend money that the government didn’t have, instead of budget cuts and increased taxes. Many administrations gave tax breaks, but increased spending as borrowed more.

The Budget Control Act of 2011 claimed that at the end of 2012, if agreement hadn’t been made on the way to reduce the deficit, there would be an automatic rise in taxes and spending cuts. The end of certain tax breaks for businesses, shifts in the alternative minimum tax that could take a larger bite, the end of the tax cuts from 2001-2003 and taxes related to President Obama’s health care law.

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