News Column

Positive Outlook: Cohen Column

Nov. 27, 2012

Isaac Cohen --

The return from the Thanksgiving holiday in Washington has brought some positive signals, accompanied by some severe warnings about the risk the U.S. economy may fall over a so-called fiscal cliff.

This dire scenario will happen if the outgoing Congress and the reelected President Obama do not agree on how to prevent imminent tax increases and drastic budget cuts, which next year would sink the U.S. economy into another recession.

First, the warnings. In a recent speech, Federal Reserve Chairman Ben Bernanke said uncertainty about the fiscal cliff, the federal government debt limit and the unsustainable path of the federal budget are already having adverse effects on the economy. Additionally, the White House released a report saying that the threat of increases next year can curtail consumer spending during the holiday season.

There are also positive signals revealing a disposition among both parties to find common ground to avoid the dismal consequences of disagreeing. For instance, several prominent Republican senators have recognized that any solution will have to include changes on the revenue side, either through eliminating tax deductions or even raising taxes for the most affluent, or both. If such is the case, meanwhile, the White House has signaled its disposition to look into reductions in some social programs.

Additionally, executives from some of the biggest corporations are engaged in a campaign to encourage both parties to come to an agreement.

Isaac Cohen is an international analyst and consultant, a commentator on economic and financial issues for CNN en Espaņol TV and radio, and a former director, UNECLAC Washington Office.

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Source: (c) 2012. All rights reserved.

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