Australia and the USA – The Fiscal Cliff

Here we are in 2013 – even before the year began (late last year in fact) and to be more precise, three hours before the midnight deadline on January 1, the US Senate agreed to a deal to avert the ‘fiscal cliff‘ (a ‘political tripwire’ set in place by Politicians where the position is such that the rate of money flowing out is greater than the amount flowing into the Government pot, generally due to Congress bills passed, and thus accumulating an unmanageable debt).

The Senate version passed two hours after the deadline, and the House of Representatives approved the deal 21 hours later. The government technically went ‘over the cliff’, since the final details weren’t hashed out until after the beginning of the New Year, but the changes incorporated in the deal will be backdated to January 1. The fiscal cliff agreement is good news to some extent but an unnecessary, self-inflicted burden on the economy and financial markets.

Basically, it’s a package which reversed tax cuts, agreed on a small increase of tax – stopping the need to impose big income tax increases, and increased investments tax, and minimised the need to exercise large cuts in spending for the pentagon and government.