In late July, Federal Reserve Chairman Ben Bernanke testified in Congress that economic activity slowed in the first quarter, and that only small gains were expected in the second. One of the most important things he said in his testimony was that “fiscal decisions should take into account the fragility of the economy,” in other words, that lawmakers need to consider how their bipartisan staunchness is detrimental to gains in the economy. “[D]o no harm,” he said.
He was talking about how lawmakers will handle what is being called the “fiscal cliff” which is a series of policies that could make or break the economy. These policies include expiring Bush-era tax cuts and huge spending cuts.
The Congressional Budget office says should Republicans and Democrats compromise, the slow growth we are seeing in the economy will continue. However, Republicans are pushing for spending cuts and tax cut extensions, and Democrats want to see some tax cuts expire along with only some spending cuts. They are basically in a dead lock.
US News reported a summary of the situation reported by Professor Steven Fuller of George Mason University, “The results [of failure to compromise] are bleak but clear-cut. The unemployment rate will climb above 9 percent, pushing the economy toward recession and reducing projected growth in 2013 by two-thirds. An already weak economy will be undercut as the paychecks of thousands of workers across the economy will be affected from teachers, nurses, construction workers to key federal employees such as border patrol and FBI agents, food inspectors and others.”
As long as worries over the fiscal cliff and how our Congress handles it are looming over our heads, and the heads of big business, investors, and small companies, don’t expect too much improvement in the economy.
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