During this time. there were several mesasures being planned and owed to ensure that the deficit induced as a result of this bailout could be recovered over a course of the next 10 years through stringent economic policies such as that of increasing the tax, cutting down on tax benefits, reducing the amount spent on defence and also that of the health sectors.
IMAGE CREDIT: WIKIPEDIA
However, after an year since the bailout, there does not seem to be any action being taken up until now in this act of recovering the deficit amount. As a result, several tax related benefits would automatically be cut short as a part of the recovery bill. This act is termed as the "Fiscal Cliff" as this would result in a downward spike in the US GDP as the spending power of the consumers would be cut down drastically, thereby pushing the country back to recession again.
In order to overcome this, Mr Obama had cut short his vacation for this year's Christmas and has called down for a quick review with the opposition to come up with a negotiable plan to escape this fiscal cliff. This needs to be done well within the next 5 days after which, once the US enters into year 2013, the whole economy can be jeopradised if no stringent action is taken to avoid the fiscal cliff.
As a result, it would be interesting to see how not just the US economy, but also the global short market would respond to any kind of deal comes out of this talk between the ruling president Mr Obama and the opponents.
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