Whoever wins the November elections will have to deal with what is known as the "fiscal cliff." The paralysis caused by the disagreement between the Republican dominated House of Representatives and the Senate and White House, controlled by the Democrats, has led to the postponement of several fiscal policy decisions.
By the end of the year, there is the expiration of tax rebates, while already approved, drastic spending cuts become effective. Additionally, the federal government will reach the debt limit and emergency unemployment benefits will also expire. All this end-of-year bunching of postponed decisions constitutes the fiscal cliff.
The bipartisan Congressional Budget Office has described the consequences, if the disagreement persists. The U.S. economy would fall into another recession, as a result of a projected contraction in economic growth of 1.3 percent.
Therefore, by the end of 2013, the unemployment rate would increase, by one percentage point, to 9.2 percent. By contrast, if the tax cuts are extended and if all the spending cuts are eliminated, the Congressional Budget Office projects a rate of economic growth of 4.4 percent and the creation of 2 million new jobs.
Given this scenario, the expectation is that the results of the election will contribute to overcome the deadlock. If such is the case, a bipartisan agreement could be reached during the lame duck session of the outgoing Congress, between the election in November and the inauguration in January.
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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