Among the many problems resulting from the US falling into the 2013 Fiscal Cliff, there is a high probability of a serious stock market collapse. But that is only a symptom of a life-threatening ailment.
The Fiscal Cliff's disaster is compounded by the huge public debt and budgetary deficits, and the US faces a gargantuan problem pocking through the debt ceiling that must be raised again this January to avoid default.
"Fiscal cliff" means huge tax increases and non discretionary spending cuts, a one-two punch that would certainly knock the US economy out (followed by the rest of the World) for several years to come. The US is sliding to the edge of the cliff because the President and US Congress have failed to reach a bipartisan debt-reduction plan up to the last few minutes of 2012. Democrats protect spending programs at any cost and higher income-tax increases, while Republicans tend to seek debt and spending reduction and lower tax rates for all. And the US and the rest of the World will fall into depression because the 2011's Budget Control Act will apply if the President and Congress fail to agree on a reasonable and consensual adjustment of spending and taxes by January 1st, 2013.
This 2011 Act will initiate 10 years of massive accross the board spending cuts and tax increases as the only way of stopping the runaway public debt that otherwise would rise to over 18 trillion dollars by December 2013. The problem is that the 2011 Act is too much, too fast and interferes in sound economic decisions in some of the wrong places.
This kind of "solution" will suddenly take $500 billion in government spending our of the economy next year alone just at a time of high unemployment, fragile housing market and higher inflation hidden under a less visible but quite real loss of purchasing power by the US Dollar.
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