Understanding the Fiscal Cliff

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Last week Fed Chairman Ben Bernanke once again warned Congress about the impending fiscal cliff. To be sure, there are a lot of perspectives on this issue and many players weighing in. We’ve rounded up highlights from the multitude of opinions on Capital Hill and Wall Street.

• President Obama and Speaker of the House John Boehner have — as usual — staked off grounds on either side of the debate: Obama insists tax rates on the wealthiest 2% of Americans must rise, and Boehner wants to reduce deficits without a tax hike. (Reuters andHuffington Post)
• The political wrangling back and forth has the stock market a tad nervous.Forbes columnist Steve Schaefer likens it to the period after Lehman Brothers’ collapse when Congress could not agree on the initial TARP resolution to avert a complete meltdown of the US financial system. (Forbes)
• On the other hand, most professional investors seem to believe that US policymakers will reach a compromise, with 70% of the respondents in a recent poll saying that the fiscal cliff will be averted. (Enterprising Investor)
• Adding to the general tenor of discord, David Horsey asks whether “the bozos who created the ‘fiscal cliff’” can be trusted to save us from it. (Los Angeles Times)
• Despite all the talk about China, the United States remains the world’s single largest and most important economy. So, if the fiscal cliff hits, it could sendshock waves around the globe. (Time)
• The Congressional Budget Office even weighed in on the issue, stating that the fiscal cliff could send the US economy into recession. (Wall Street Journal)
• What if the cliff does hit? This article explains why the fiscal cliff is the US version of an austerity program. (Enterprising Investor)

While the timing and impact of the fiscal cliff loom, one thing remains crystal clear: Bernanke, Obama and Boehner (among many others) must work together for the long term best-interests of the United States economy.