The much-bandied about “Fiscal Cliff” is already here, according to economists and investors, as businesses curb spending in anticipation of the higher tax rates and reduced spending set to be enacted at the end of this year.
“The fiscal cliff is not just a year-end story,” wrote Michelle Meyer and the economics team at Bank of America Merrill Lynch in a report to clients. “We expect the uncertainty shock to be realized in the coming months, escalating before the election.”
The economists argue in the report that businesses have already started to curb investment and hiring plans in the face of this tightening of fiscal policy, further cutting into GDP.
In fact, Bank of America believes that the first quarter economic growth of 1.9 percent will prove to be the best three-month period of the year. They see 1.5 percent annual growth in the second quarter and just a 1.3 percent GDP in the current quarter.
Fiscal cliff has become common nomenclature for the market bears, referring to the expiration at the end of 2012 of several tax cuts enacted under President George W. Bush, as well as mandatory spending cuts resulting from the debt ceiling fight last summer.Page 1 of 3 | Next Page