The Fiscal Cliff and the Fiscal Multiplier

Shortly after the fiscal budget crisis that resulted in the Budget Control Act of 2011, I wrote about the fiscal multiplier. The act was the compromise between Republicans and Democrats to get a federal budget passed for fiscal year 2012, but it set up the conditions for this year's fiscal cliff -- tax increases and spending cuts that go into effect Jan. 1, 2013. Neither party wants to see this.

The idea was that both parties in Congress would get together with the executive branch and work out a federal budget that would be less strict than what the Budget Control Act requires. Unfortunately, this never happened because 2012 was also an election year and both parties found themselves falling back on their respective ideologies to appease core constituencies....381 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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