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Macroeconomics  |  November 22, 2012 17:02:08

How can it end up with a fiscal cliff: 4 scenarios

Fiscal reef is dangerously approaching. The drastic increase in taxes and spending cuts that have automatically come into force on 1 January 2013, when the White House and Congress agree otherwise, may, according to some economists to 4% impact on U.S. GDP. Although the markets expect that the two parties finally agree on a compromise, they are still in the game even more pessimistic scenarios.

First Compromise

Many analysts still expect that Obama and Boehner find common ground to the U.S. economy avoid the worst. Addressing budgetary issues would then be spread over a longer period.

Any agreement will probably require that the Democrats agreed to preserving the Bush tax breaks for the wealthiest. In return, the Republicans will have to settle for a long-term austerity package, which will include an increase to the budget revenues (taxes) and spending cuts. With this option we can also expect any increase in the debt ceiling debate around debt reduction over the next year.

Second Sweeping under the carpet

Postponing problems later is a common practice Washington. Some election statements suggest that it may not be time or otherwise. President may establish an agreement that will not change the currently set tax and expenditure policies for the next three to six months. It buys you time to take in the following year, reaching a broader agreement with the Congress.

Delaying but can produce complications. It is not clear how such a step evaluated by rating agencies.

Third Great deal

The president and congressional leaders could return to negotiations, which began last year. But it is very unlikely (if not impossible) to make the grand bargain that would include a credible long-term plan to reduce the national debt, developed by the end of the year.

What if after all just waiting for the fall of the U.S. fiscal cliff, and how it can prepare investors, can be found on the web Investment

Egan-Jones: Neither solve the fiscal cliff save American rating
Egan-Jones: Neither solve the fiscal cliff save American rating

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