A Fiscal Cliffhanger
Wall Street economists worry about a year-end fiscal cliff in which steep tax increases and spending cuts totaling some 4% of GDP could push a weak economy into a deep recession. The worry is that even after the November elections, Congress would remain too gridlocked to prevent the double whammy of tax hikes and sequestration from happening.
I'm not worried. I believe Congress will muddle through as it usually does, doing the bare minimum to avoid a catastrophe, but otherwise kicking the can down the road on important decisions. Whatever happens at year's end won't be pretty. Congress will have to deal with the expiration of the Bush tax cuts, the many other expiring tax provisions, the Medicare "doc fix," and much more. I doubt that the 15% tax rate on dividends and the upper-income Bush tax cuts will be extended, but I believe that the remainder of current tax rates will be (accounting for some 80% of the projected revenue effect). Congress will find some way to punt on the sequester as well....338 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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