Experts: The Longer the Cliff Dive, the More the Economic Suffering

Friday, 28 Dec 2012 12:15 PM

By Dan Weil

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
A brief dive off the fiscal cliff wouldn’t hurt the economy and financial markets much, but an extended plunge would, experts say.

Tax increases and spending cuts totaling $607 billion will start Tuesday if Congress and the president can’t reach an agreement to forestall them. The two sides are meeting Friday at the White House to come up with a mutually acceptable plan.

Jack Ablin, chief investment officer at BMO Private Bank, doesn’t believe a cliff jump would last long.

Editor's Note:
 
'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.

“I think the market will be upset if we go over the cliff, but it won’t crater,” he told Politico. “Ultimately, this will get patched up in the first few weeks of the year. One risk we do run is another [credit rating agency] downgrade.”

But if the automatic fiscal austerity isn’t reversed, gross domestic product will likely shrink 0.5 percent in the first half of the year, according to the Congressional Budget Office.

Already, the Standard & Poor’s 500 has dropped 2 percent since House Republicans rejected Speaker John Boehner’s plan that would raise taxes on the wealthy eight days ago.

To be sure, not all markets are likely to suffer from a cliff dive. “As painful as that is, I think it’s a very good scenario for the bond market,” Bill Irving, portfolio manager of the Fidelity Government Income Fund, says on the firm’s web site.

Editor's Note: 'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.

© 2014 Moneynews. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web

Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Retype Email:
Country
Zip Code:
 
You May Also Like
Around the Web

Most Commented

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved