The Fiscal Cliff.

This article that I am going to talk about goes over many different aspects revolving around the “fiscal cliff”. A quick recap of the article:

  • Tax cuts which result in a larger bill for taxpayers
  • Raising the debt ceiling
  • How it affects Canada

Prior to reading this article, I had no idea what a fiscal cliff was. A fiscal cliff is “the biggest tax increase and spending cut in history”. The reason why the fiscal cliff is such a big problem is because the tax increase indicates that government is cutting down on their expenses and if the citizens do that as well, then there will be no money flowing into the economy, which may very well cause the United States to go back into recession- going over the “fiscal cliff”. The US government cutting expenses and raising taxes will certainly be of benefit towards paying off their debt, but the main concern is still that how the economy may react to this. A solution that the article mentions is for the US to raise their debt-ceiling, which is the maximum borrowing power a government entity has, yet again. The current situation of the US also affects Canada because of the large percentage of exports that are shipped into the United States. If the US falls into a recession, this will obviously have a negative impact on exports in Canada and as a result, Canada’s economy.

Sources:

http://www.cbc.ca/news/business/story/2012/11/09/fiscal-cliff-faq.html 

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