Tags: Joy | fiscal | cliff | hold

Ameriprise’s Joy: Economy on Hold Until Fiscal Cliff Is Addressed

Friday, 09 Nov 2012 08:03 AM

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The economy will remain stuck in a holding pattern of tepid growth until lawmakers steer the country away from a one-two punch of tax hikes and spending cuts due to strike next year, said David Joy, chief market strategist at Ameriprise Financial.

At the end of this year, the Bush-era tax cuts and other benefits are scheduled to expire at the same time cuts to government spending are scheduled to kick in, a combination known as a fiscal cliff that could send the country into a recession next year if left unchecked by Congress.

Partisan bickering over tax hikes and spending cuts could delay decision making.

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

Since businesses will spend the coming months not knowing what they will be paying in taxes next year, many will keep plans to expand and hire on hold, which will keep a lackluster economy running on autopilot.

“The economy will be on hold until the fiscal cliff is addressed,” Joy wrote in a note, according to Fox Business Network.

“Longer-term, the economy will limp along until whatever budget deficit deal we’re going to get, if any, is done. If no deal is made, the economy will struggle.”

With Democrats keeping control of the White House and the Senate and Republicans maintaining control over the House, political gridlock is likely.

“That’s what is spooking the market. If it’s business as usual — if the Republicans are saying they are standing pat and not willing to discuss a single tax hike and Democrats say they won’t accept anything less than a tax hike — we’re just back to where we were,” said Sam Stovall, chief investment strategist at McGraw-Hill’s S&P Capital IQ, Fox Business Network added.

Other experts point out that the problem is a global one, in that if the United States slides into a recession for failing to address the cliff, the world could follow suit.

“The U.S. economy will enter into recession unless the country avoids the fiscal cliff,” said Mitsushige Akino, Tokyo-based chief fund officer at Ichiyoshi Asset Management Co., according to Bloomberg.

“In that case, the global economy will also go into recession. The process for solving the fiscal-cliff issue is expected to run into trouble.”

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

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