US worst-case scenario: going over fiscal cliff

  • It’s Obama’s right to see Anwar or not, says Dr Mahathir – Bernama
    It’s Obama’s right to see Anwar or not, says Dr Mahathir – Bernama

    Former prime minister Tun Dr Mahathir Mohamad said it was up to the president of the United States whether to see opposition leader Datuk Seri Anwar Ibrahim or not. "It is his (Obama) right, up to him who he wants to see, he does not even want to see me, a former prime minister," Dr Mahathir (pic) told reporters in Putrajaya today. He was... …

  • Karpal’s Bukit Gelugor seat will stay DAP’s, analysts say
    Karpal’s Bukit Gelugor seat will stay DAP’s, analysts say

    GEORGE TOWN, April 24 — Analysts believe that Barisan Nasional (BN) does not stand a fighting chance in Bukit Gelugor, and even said it may not be worth the ruling pact’s time to contest the seat... …

  • Tuhan Harun case postponed again to July 22 – Bernama
    Tuhan Harun case postponed again to July 22 – Bernama

    The Lower Shariah Court today postponed again the case of leader of the “Tuhan Harun” deviant sect, Harun Mat Saat, to July 22. Judge Abdul Wahid Mohd Ali set the date after hearing the application from Pahang Islamic Religious Department deputy prosecutor Mohd Fahmi Abd Jalil that he needed more time to examine the legal representation... …

  • What if flight MH370 is never found?
    What if flight MH370 is never found?

    Despite assurances from Malaysia and Australia that the search will continue for Malaysia Airlines flight MH370, the lack of significant leads after almost seven weeks are leading many to ask: What if the jetliner that disappeared over the southern Indian Ocean is never found? At the start of the massive international search effort, such a... …

  • New law to give Sarawak natives freedom in purchasing customary rights land
    New law to give Sarawak natives freedom in purchasing customary rights land

    Bumiputera from Sarawak could eventually buy Native Customary Rights (NCR) land outside their ethnic group or community when the state amends its Land Code in November. Chief Minister Tan Sri Adenan Satem (pic, right), in disclosing the government's intention to table the amendment at its Budget sitting, said with the amendment the Iban, for... …

  • Cops cannot declare May Day rally illegal, lawyer says
    Cops cannot declare May Day rally illegal, lawyer says

    KUALA LUMPUR, April 24 — There are no provisions under the Peaceful Assembly Act (PAA) 2012 that allows the authorities to declare the anti-GST rally planned for May 1 as illegal, human rights... …

Letting the US economy go over the fiscal cliff would push the United States, and probably other countries, into a new crisis that political leaders now say they are determined to avoid.

The fiscal cliff, a combination of mandated tax increases and spending cuts, will occur in January unless President Barack Obama and Democratic and Republican lawmakers forge a long-sought deal.

If they fail, federal government spending for the 2013 fiscal year, which began on October 1, will be slashed by $109 billion.

Tax increases would be broad-based. According to the Tax Policy Center, a nonpartisan research center, nearly 90 percent of Americans would pay more taxes, boosting the country's tax revenues more than 20 percent above what they would be without the cliff.

Middle-class households would be hit with an almost $2,000 tax increase on average.

Economists fear that the tax hikes, likely to curb consumer spending, combined with sharp cutbacks in federal spending, would drive the world's largest economy back into recession.

The US Federal Reserve has warned for months that it lacks the means to prevent the economy from falling back into a slump. Despite massive support from the central bank, the struggling economy has not yet fully recovered from the Great Recession that ended in June 2009.

Federal Reserve chairman Ben Bernanke, who coined the term "fiscal cliff," has put the onus on Washington to unlock political gridlock and come up with sustainable budget plans.

According to the latest projections from the Congressional Budget Office (CBO), the fiscal cliff would result in the economy shrinking 0.5 percent in 2013, and the unemployment rate would rise to 9.1 percent, compared with the 7.9 percent jobless rate in October.

An economics professor at the University of Maryland, Peter Morici, sees that scenario as too optimistic.

Morici said the fiscal cliff could trigger "cataclysmic consequences" for the economy.

"Unemployment would rocket past 15 percent, state government finances would collapse, homeowners would default on mortgages, and hundreds of banks would fail," he said.

IHS Global Insight analysts noted that the fiscal cliff is just one of several global events the firm had analyzed for the its worst-case outlook for 2013.

The doom scenario also incorporates a worsening of the eurozone financial crisis, escalating conflict in the Middle East and a hard landing in China's economic slowdown.

The scenario "is predicated on a confluence of these events happening in succession, significantly impacting global demand and commodity prices in 2013," IHS Global Insight analysts said.

US gross domestic product (GDP) would shrink 1.7 percent 2013, they projected, but that would be mild compared with recessions in other countries, such as Italy or Spain, where the contraction would exceed 4 percent.

The nonpartisan CBO predicts that if the economy topples over the cliff, the budget measures will reduce the government deficit to 4.0 percent of GDP in 2013, from 7.6 percent in 2012.

For former Republican congressman Bill Frenzel, now a guest scholar at the Brookings Institution, toppling over the fiscal cliff "is good policy, but only if you like recessions, enjoy unemployment, and don't mind living in the ashes."

"Responsible politicians will avoid it at all costs."

With the fiscal cliff imminent and the November 6 elections over, Obama and leaders of Congress have said they would do everything they can to find a compromise to avoid it.

Follow @YahooMalaysia on LINE for daily news updates.

Comments on Yahoo pages are subject to our link to Comments Guidelines. You are responsible for any content that you post. Yahoo is not responsible or liable in any way for comments posted by its users. Yahoo does not in any way endorse or support comments made by its users.

  • MH370 passenger’s partner tells of strange email from sacked Fox officer The Malaysian Insider
    MH370 passenger’s partner tells of strange email from sacked Fox officer

    The partner of an American passenger aboard the missing Malaysia Airlines flight MH370 has spoken about how a Fox executive who was recently sacked by the news station had contacted her offering to raise funds on her behalf. Sarah Bajc, whose partner Philip Wood is among the 239 people on board the missing plane, told the Sydney Morning Herald... …

  • My last moments with Pa: Ramkarpal Singh The Malaysian Insider
    My last moments with Pa: Ramkarpal Singh

    A week after the tragic crash that took the lives of veteran lawyer and politician Karpal Singh and his personal aide, Michael Cornelius, his son Ramkarpal recounts the final hours with his father that fateful day. This is his story, as told to V. Anbalagan, assistant news editor. “My parents (Karpal and Gurmit) had gone to Pantai Hospital... …

  • The Poop on Pooping: 5 Misconceptions Explained

    Here is the truth behind five common misconceptions about defecating. Misconception No. 1: Daily pooping is normal, and optimal. …