Will The US Economy Slip Over The Fiscal Cliff? The Odds Are Higher Than You Might Think

Thursday, October 18, 2012 06:19
Will The US Economy Slip Over The Fiscal Cliff? The Odds Are Higher Than You Might Think

Tags: Economic Outlook | economy | Taxes

Realistically, what are the odds that the economy will indeed slip over the fiscal cliff? Analysts participating in the latest Wall Street Journal economic survey put the possibility at only 17%.
But others say the odds could be much higher. Sixty percent of analysts surveyed said some agreement will be reached but it won’t sufficiently address the underlying debt.

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The chances that a compromise will be reached that will address the long term fiscal issues and deal with the cliff are only slightly higher than the odds that the cliff will occur.
Congressional attitudes are likely to still be contentious—and at an unprecedented level—after the election. That raises the odds the cliff will actually happen much higher than people think.
Separate research at Guggenheim Partners says the potential for slipping over the cliff is vastly underappreciated.
Analysts at the Royal Bank of Scotland say the US economy is on better footing with the improvement in the housing market, steadily improving unemployment, and improvements in both business and household balance sheets.
The cold, hard realities the fiscal cliff threatens will likely apply pressure for leaders to do something, even if it simply means extending the current tax laws until they can be sufficiently dealt with.
But that would remain a drag on the economic recovery, keeping improvement at a 2% rate or lower.
Regardless of who wins the election, the reality of the fiscal cliff will make it difficult for either candidate to resolve much of the problem unless Congress can make a bipartisan effort at some sort of compromise.

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