The Fiscal Cliff – A Stopgap Arrangement

January 3, 2013 in U.S.

Politicians in America effectively kicked the can down the road as they dithered, again, on arriving at a lasting solution to the country’s problems of an unsustainable budgetary deficit and debt.

The stop gap arrangement, which gives them another two months to bicker and posture, will see a rewind of the traumatic situation just witnessed, because that’s when the country will also hit its borrowing limit, as no meaningful spending cuts or revenue raising measures are happening as of now.

Literally at the eleventh hour, the Senate and the House passed legislation that did away with large tax hikes on most Americans except the wealthy, and prevented massive expense cutbacks such as in defence and welfare.  But Republicans, smarting from what is being called a victory for President Obama, are gearing up to extract their pound of flesh, mostly as expense cutbacks, when the debt ceiling comes up in two months.

That will be accompanied by the twin Damocles’ Swords of a US default and a credit downgrade.

Expect more histrionics and last minute deal-mongering in spite of President Obama’s urging “a little less drama,” though he appears to have the advantage after averting the fiscal cliff.

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Saul Griffith is an investor and trader in stocks, commodities and forex, writing under a pen name. Saul has professional accounting qualifications and extensive experience in industry and the financial markets. He also has an abiding interest in breaking news that could be a harbinger of new trends and give insight into an instrument’s potential for providing value, growth or yield. Additionally, he keeps abreast of technology and political developments – in his opinion these are areas which could help shape global recovery from the current turmoil. Connect the author on Google: +Saul Griffith.

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