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Fiscal Cliff or Fiscal Slope?

“While the U.S. Congress views the convergence of more than $600 billion in tax increases and spending cuts set for Jan. 1 as a “fiscal cliff,” the metaphor misses the economic reality of what could follow” (Bloomberg).

Economists are trying to calm the public’s view of the approaching fiscal “cliff.” In the beginning of 2013, taxes are expected to rise, along with several spending cuts, and the legislative and executive branches are seemingly still going to be at disagreement. “‘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 claims that the fiscal cliff should be deemed a fiscal slope, meaning the economic aftermath will be a slower accumulation of problems rather than an abrupt recession.

Negotiations between Obama and Congress are being stalled, and “the Congressional Budget Office estimates that the U.S. would probably enter a recession in the first half of 2013 if Congress doesn’t act to avoid the tax increases and spending cuts.”Of course, there are those that support the “cliff” rather than the more optimistic “slope.”

“The folks who argue that it’s a fiscal slope are really ignoring the psychological impact that it would have on the business community,” Dutta said. “We face a cliff in the sense that this would be a notorious political failure if Congress failed to avert a recession, because that’s effectively what the government is threatening right now.”

Financial markets have been growing, the housing market has been recovering, unemployment has been decreasing, and demand has been picking up. Hopefully these political negotiations don’t send us into another downward spiral.