It's now official. The so-called fiscal cliff that had nearly everyone (especially Republicans) nervous has been averted due to a bipartisan deal in Congress. The deal contains the following provisions in a nutshell: no income tax rate hikes for those making less than $400,000 per year (but the top marginal rate is hiked back to Clinton levels on those making above that threshold), various tax deductions are capped at $250,000, the so-called "Obamacare taxes" are left untouched (and thus go into effect), unemployment benefits are extended, spending cuts are postponed by two months, and the payroll tax (i.e. FICA) rates are raised back to pre-stimulus 2009 levels. So although most Americans will see slightly smaller paychecks in 2013 (due to the 2% payroll tax hike), thanks to the deal there will not be a massive amount of aggregate demand sucked out of the economy, and there will most likely not be another recession as a result--at least for now.
However, the deal only addresses one side of the ledger--revenue and taxes. The other, bigger side--government spending--will not even be touched until February at the earliest. Just in time for when the debt ceiling needs to be raised again, most likely in March. So we can expect another "cliffhanger" around that time, albeit a somewhat smaller one. But I guess that's the price we pay for kicking the can even further down the road.
To the President and everyone in Congress: Please listen to what the True Spirit of America Party has to say, at least about economic policy and the national debt. Our nation's future depends on it.
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