This week in politics

Fiscal Cliff

Lawmakers in Congress are under pressure this holiday season to hammer out a deal to prevent the coming of the so-called “fiscal cliff,” a political buzzword for the tax increases and spending cuts that will kick in at the start of the new year. But the New York Times reports that as of Wednesday, there’s still no deal to resolve the political impasse.

Yet with days left before the fiscal punch lands, both sides are exhibiting little sense of urgency, and new public statements Wednesday appeared to be designed more to ensure the other side is blamed rather than to foster progress toward a deal.

Politicians and economists don’t seem to agree on what the effects will be if tax hikes kick in come 2013. While politicians on the Hill say the result could be another economic crisis, many economists and skeptical of these doomsday predictions. As Matthew Yglesias reports for Slate.com,

According to the Wall Stree [sic] Journal tick-tock, President Obama told John Boehner that the road in which they don’t reach a fiscal-cliff agreement features “a spike in interest rates and a global recession.” As Paul Krugman argues, and Brad DeLong follows with even more detail, this is an extremely unlikely particular case of the general myth of the bond vigilantes.

And from Bloomberg Businessweek:

“Cliff conjures up Wile E. Coyote, and January comes, and all of a sudden you plunge into a deep recession inevitably and it all happens fast,” said Chad Stone, chief economist at the Center on Budget and Policy Priorities in Washington. “That’s not the way things would unfurl.” He said he prefers the term “fiscal slope” to describe how the effects would accumulate gradually during 2013.

So far, perhaps the only real development seems to be growing public fears that a deal won’t be reached, according to a new Gallup poll.

Additional news:

Links compiled by Thy Vo ’14.

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