At present, investors are paying close attention to the relevant negotiations, fearing that once the "fiscal cliff" takes effect, the US economy will once again fall into a recession cycle.
Pessimistic market participants believe that if the "fiscal cliff" negotiation fails, its impact on the US economy will gradually be reflected: First, tax increase and expenditure reduction measures will mainly dampen the enthusiasm of enterprises for recruitment and aggravate the unemployment problem; The public debt deficit will continue to be unsustainable, and social security and medical reform will also aggravate the sovereign debt and continue to rise.
According to the research of a non-partisan tax policy center, if the fiscal cliff breaks out, the average tax revenue of families with an annual income of 50,000 to 75,000 dollars will increase by 2,400 dollars. Because consumers will reduce their spending because of the decrease in income, enterprises and the job market will suffer losses. The Congressional Budget Office (CBO) predicts that Americans will see the government cut service spending; Some federal government workers will be forced to take vacations or be fired, and enterprises will lose government procurement business. It is estimated that the United States will lose 3.4 million jobs.
Since then, the economic downturn and high unemployment rate are expected to force the Fed to invest more money and even buy more US debt. Excessive issuance of dollars will increase the risk of deficit monetization, inject too much liquidity into the global economy, and raise future inflation expectations. The confidence of the dollar will also be weakened, and its position as a global reserve currency will be in jeopardy.
To make matters worse, America's AAA sovereign credit rating may be downgraded, causing panic in global capital markets. On February 25th, 65438, Dagong International Credit Rating Co., Ltd. put the credit rating of the United States on the negative watch list.
However, there are still different views on whether the financial cliff will cause irreparable damage to the American economy as predicted by pessimists. The US Congressional Budget Office predicts that if we fall off the "fiscal cliff", the US economy will fall into recession in the first half of 20 13, but after overcoming this difficulty, the economic growth rate will accelerate in 20 14, and the job market will also improve. Generally speaking, the "fiscal cliff" will bring resistance to the US economic recovery in the short term, but it will not cause an irreparable blow.
In addition, some analysts pointed out that even if the fiscal cliff really comes, it will have little negative impact on GDP. First of all, even if government projects are cut, the impact on GDP is not great, because it is not government spending that mainly affects the US economy. Sometimes the reduction of welfare projects can also reduce waste, not to mention the transmission effect is not necessarily great. Secondly, what is the effect of tax increase? For example, if you raise taxes on the rich, even if Buffett raises taxes, his tax rate will be the same as that of the general public.
Therefore, many analysts believe that no matter what the outcome of the negotiations is, people should not be too pessimistic about it, because the US government can take some unconventional measures to alleviate the impact of the "fiscal cliff", and the impact of fiscal austerity will be gradual, not as drastic and irreversible as falling off the cliff, so it may be more appropriate to call it "fiscal slope".