According to a National Association of Manufacturers (NAM) report set to be released today the impending fiscal cliff is already impacting the US economy.
The NAM report "predicts that the economic damage would deepen considerably if Congress failed to avert the cliff, destroying nearly 6 million jobs through 2014 and sending the unemployment rate soaring to near 12 percent. Across the nation, companies are bracing for the fallout by laying off workers, letting jobs go vacant and postponing major purchases."
NAM reports William H. Gross, founder and co-chief investment officer of Pimco, argues that if a deal is not reached soon to avert the fiscal cliff, rating services and global creditors may desert the US in favor of "other nations more focused on breaking the long-term habit of debt addiction."
Gross wrote in a Washington Post op-ed: "If so, a long-term secular trend of higher interest rates, a lower dollar and stunted GDP growth would contaminate an already polluted fiscal chemistry lab with a fiscal gap of growing and unacceptably large proportions."
“Fiscal cliff” is the popular shorthand term used to describe the conundrum that the U.S. government will face at the end of 2012, when the terms of the Budget Control Act of 2011 are scheduled to go into effect.
Among the laws set to change at midnight on December 31, 2012, are the end of last year’s temporary payroll tax cuts (resulting in a 2% tax increase for workers), the end of certain tax breaks for businesses, shifts in the alternative minimum tax that would take a larger bite, the end of the tax cuts from 2001-2003, and the beginning of taxes related to President Obama’s health care law. At the same time, the spending cuts agreed upon as part of the debt ceiling deal of 2011 will begin to go into effect.
According to Barron's, over 1,000 government programs - including the defense budget and Medicare are in line for "deep, automatic cuts."