Guest post by GG Finances
This year American’s New Year gift will be delivered directly from Democrats, and basically on behalf of Obama, who planned the cuts in the budget spending and increase in payroll taxes. In other words, economists and investors are forecasting the so-called ‘Fiscal Cliff’, which is anticipated as en expression of the possible upcoming changes in the US economic situation. Thus, to explain the term, many sources believe that ‘fiscal cliff’ is a severe problem that will horrify not only the government but just simple citizens who will be frustrated and will feel all those impacts and effects on their skin.
The core of the amendments planned to take into force right on the New Year’s Eve is the 2% increase in payroll taxes, read as few in percents, but larger in amounts, which will leak out of US families and reduced budgetary spending.
The numerical representation of all the above mentioned, according to economists’ evaluation, is ‘just another’ $600 Billion which will start flying the US Treasury as of January 1, 2013 to fill the budget deficit.
It is widely believed that the ‘fiscal cliff’ was the issue even before elections, and while the Democrats and Republicans were not likely to solve their controversies and make concessions, the US debt ceiling would reach up to $16bln.
In the situation of an already high level of country debts parties disagreed upon the issues of tax-rate reductions, which were in effect for years, and will expire at the end of 2012. Basically, Obama and Romney opposed each other with this issue, Obama manifesting the changes and the end of Bush tax cuts policy, and Romney stating that the old policy should be kept. Expressed numerically, it could be stated that families whose income is more than $250.000 annually, are subject to those changes, that’s why many investors are confused. Naturally, economists anticipate an unhealthy situation in the country, where average income families will suffer paying more taxes and getting lower salaries. Consequently, it will result in Pentagon budget cut by approximately $55 billions; reduced payments for physicians in Medicare, cuts in the budget of Ministry of Education etc.
This of course will lower the demand in consumer market goods and services and take an effect on GDP as well. In a long run many people will face unemployment as US economy will be in recession. To help the country survive in this situation both parties shall formulate a smoother policy for the people near them to be able to survive in the bowl of this possible changes.
To conclude we will cite Joseph de Maistre’s quote, where he said that “Every nation has the government it deserves.”
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