- Much of Washington's focus on the "fiscal cliff" is driven by two possible economic outcomes: Either the White House and Congress forge a grand bargain to resolve the budget battle and economic growth takes off, or they fail and recession hits. But the result of the fight could well be something in between: more middling growth next year as business and consumer confidence suffers from another drawn-out spectacle.
- Even the best-case scenario would be a deficit-reduction agreement between President Barack Obama and congressional leaders that would take effect in two stages. They would enact some deficit-reduction measures immediately and set the stage for an overhaul of the tax code and entitlement programs next year. That still means months of working out the thorny details of tax and spending policy, prolonging the uncertainty that has weighed on businesses and consumers.
- With the FOMC and ECB rate decisions and key data releases now out of the way, the global marketplace faces few risk events heading into the close of 2012. As such, it is likely that focus will turn to the macro picture, as fiscal cliff talks in the US drag on with little progress or substance.
Print 13:56, 14 Dec 2012 - Economic commentary - Source: WSJ
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