Fiscal Cliff Is Closer Than You Think
The fiscal cliff may be six months away, but it is already affecting the United States economy.
As I warned at the beginning of last month ( see column ), unless current law is changed, taxes will rise and spending will fall big time, come year-end.
Taxes are set to jump by $500 billion, while federal spending is set to decline by more than $130 billion. Combined, this will equal 5% of our gross domestic product.
Along with Europe’s debt crisis and the uncertainties over the longevity of the euro, this is enough to turn weak growth into an outright downturn — in other words, a new recession.
And as I pointed out back on May 1, don’t think for one minute that this scenario will not unfold until 2013. It will very likely unfold sooner.