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Economic Insights: Capitol "Cliffhanger": Thriller or Chiller?

December 31, 2012

Whatever the outcome of the last-minute jockeying in Washington, meaningful fiscal reform remains unlikely.
-Milton Ezrati, senior economist, Lord Abbett

 

None of the "fiscal cliff" negotiation matters—if, that is, the Mayan calendar is right. On the assumption, however, that those impressive people miscalculated and there is reason to look into 2013, two things are clear: first, whether there is a deal or not, Washington, as per usual, has no intention of fundamental fiscal reform and, in the popular phrase, will at best kick the can down the road, and second, even if Washington fails to make a deal before year-end, recessionary forces will build slowly enough to give the government time to remedy the situation in the opening weeks of the year. Of course, if they still fail, then the recession becomes almost certain.

 

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