US 'May Have To Go Over The Cliff,' Says Report
by Mike Godfrey, Tax-News.com, Washington
05 December 2012
In a newspaper article, William Gale from the Brookings Institution has suggested that the only way to get the United States Congress to implement tax reform and longer-term fiscal consolidation may well be "to go over the fiscal cliff."
In a piece for USA Today, Bill Gale writes that, while, “ideally, the President and Congress would agree to stimulate the economy now and implement gradual, balanced fiscal consolidation over the next decade, … going over the cliff might be the only way to reach that outcome.”
He points out that: “About 90% of Republicans in Congress have tied their hands by signing the no-new-taxes pledge (although a few have recanted recently). Yet polls indicate that 70% of Americans want a package with tax increases and spending cuts. And President Obama won re-election while advocating USD1.6 trillion in higher taxes on high-income households.”
As it would not require a vote, Gale believes that it may well be necessary to suffer the fiscal cliff – involving more than USD600bn of tax increases and automatic spending cuts on January 1 next year if Congress takes no action – to provoke a compromise in subsequent negotiations. He calls this a “silly and potentially dangerous way to make law”, but perhaps the “only path to a balanced fiscal plan.”
However, his forecast is that: “If we do go over the cliff, all is not lost. Going over the cliff is the opposite of ‘kicking the can down the road’. It does the heavy lifting of budget reform by raising revenues, cutting spending and putting the nation on a more sustainable fiscal path. Policymakers could still negotiate further changes - just from a new starting point.”
“Going over the cliff would not have immediate sharp impacts,” he concludes. “But we would need to provide economic stimulus at least large enough to offset the short-term impact of the cliff. … It would be nice if our political leaders could simply negotiate a deal. But … going over the fiscal cliff, coupled with stimulus, will be the only path to a sensible and balanced solution.”
To see today's news, click here.
Tax-News Reviews

A review and forecast of Cyprus's international business, legal and investment climate.

A review and forecast of Malta's international business, legal and investment climate.

A review and forecast of Jersey's international business, legal and investment climate.

A review of the latest budget news and government financial statements from around the world.
Stay Updated
Please enter your email address to join the Tax-News.com mailing list. View previous newsletters.
By subscribing to our newsletter service, you agree to our Terms and Conditions and Privacy Policy.
To manage your mailing list preferences, please click here »