Nearing the Edge What You Need to Know About the Fiscal Cliff

Nearing the Edge What You Need to Know About the Fiscal Cliff Photo from Flickr.com by StockMonkeys.com  Why is the impending fiscal cliff causing so much worry among politicians and citizens alike? If the previously agreed-upon tax increases and spending cuts do indeed go into effect at the beginning of 2013, many fear that the U.S. will immediately face another recession. The reason for this is that the Congressional Budget Office estimates that if taxes were increased and spending cut, the GDP would fall by roughly four percent in 2013, causing negative growth, and therefore a recession. However, in this scenario, the deficit as a percentage of the GDP would be cut in half, which many will agree is a definite plus side. Another possible path for avoiding the fiscal cliff involves involves cancelling some (or possibly even all) of the scheduled tax increases and spending cuts, which would only add to the United States already substantial deficit. If the government decided to take this course of action, it is widely thought that America may find itself in a total economic crisis mimicking that of what is currently transpiring in Europe. Can compromise be reached before the beginning of 2013? It seems doubtful, given that compromise has not been the most popular concept in politics as of late. Thomas Kenny agrees, saying that the oncoming fiscal cliff is a concern for investors since the highly partisan nature of the current political environment could make a compromise difficult to reach. The reality of upcoming tax increases and spending cuts isnt an entirely new concept; lawmakers have been aware of it for about three years. But because of the general tension and lack of agreement in Congress, solutions for this problem have not been agreed upon. The main way to solve this impending problem involves bipartisanship, with members of both parties working together. With a decision of this magnitude that needs to be made before 2012 ends, politicians need to roll up their sleeves, lay their party affiliations aside, and engage in a concept that most people are taught in kindergarten compromise.