What is the fiscal cliff of US?
- Thread starter Saint
- Start date
It is a combination of things, raising the debt ceiling and creating a realistic budget that promotes economic growth and addresses the long term fiscal issues (debt). If congress does nothing, taxes will increase across the board in January and that will impede economic growth. There are automatic spending cuts, that kick in if congress does nothing, and those spending cuts will hurt economic growth and employment.
Yes
No, it has nothing to do with QE period. QE only affects monetary policy, how much money is in the economy. Fiscal policy is the realm of congress, how much money is spent and on what.
Congress is responsible for the fiscal cliff. They created it and congress and only congress can fix it.
Carcano
Valued Senior Member
The Federal Reserve alters the angle of the cliff by purchasing more debt from the Treasury at a lower interest rate than the open market...so the cliff becomes less steep, but continues to grow higher.
It also helps by re-mitting almost all of that interest back to the treasury, which it must do by law.
Eventually, Congress must raise taxes on the wealthy AND cut military spending drastically.
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It remains to be seen what Republicans will do. But my bet is Republicans will be much more amenable to averting the fiscal cliff now the election is over and they took a shellacking in this election. But it won’t be easy for Republicans. Republicans will try to save some face, disguising tax increases as tax reforms. But in reality there will be little if any tax reform. Republicans will increase taxes and call it tax reform and hope no one notices.
eyeswideshut
Registered Senior Member
The moment that revenues do not cover the interest of the debt ?
No that is you making stuff up. Currently interest on the national debt is about 6% of federal expenditures.
Carcano
Valued Senior Member
He said 'revenues'...not 'expenditures'.
Carcano
Valued Senior Member
Private banks write off debt that is declared non-collectible...and it's removed from the books.Can the banks write off all the debt?
The US central bank, the Federal Reserve would never write off money owned by the government.
eyeswideshut
Registered Senior Member
Sorry but I like my defination better than yours.
How many fiscal cliffs can one have ?
Can the banks write off all the debt?
I don’t know what you mean by the question. Banks have nothing to do with it. If you mean can the owners of US debt write off the US debt they hold on their balance sheets, in the US, only if it becomes nonperforming like any other debt they would hold on their balance sheets.
However there is no good reason why US debt would ever become nonperforming. Because the US government can always increase taxes and/or print more money to pay its debts. That is something individuals cannot do. The only way the US could default is if the congress chooses to default on its debt (e.g. failure to raise the debt ceiling). US taxes are at historic lows, US tax rates have not been at these low levels since before The Great Depression. So the US has plenty of room to raise taxes.
Yeah, I am sure you do. It just doesn't have anything to do with reality.
eyeswideshut
Registered Senior Member
I think you are missing the point...
There is not going to be fiscal cliff type of event until the scenario which I presented is in hand because I know and you know that the debt ceiling is going to be raised once again, that is the reality.
It's the debt ceiling and our budget deficit. Personally, I think we went over the cliff quite some time ago. We're just building up speed on our way down at this point.
eyeswideshut
Registered Senior Member
That is the another way to look it, to which I agree
No I am not missing the point. The fiscal cliff is not what you are representing it to be. Additionally the senario you are using is not a believable one for reasons already explained.
eyeswideshut
Registered Senior Member
Ok, so, how many fiscal cliffs one can have ?
Or are you trying to say that the fiscal cliff has been, is, and will be, in other words, it is the permanent state of the State ?