The Fiscal Cliff

Over the weekend the G20 met in Mexico to discuss many of the economic issues facing the globe today.  While Europe is of concern to everyone the main issue that came out of the meeting was the U.S. and the impending fiscal cliff.  Most of the G20 members are very concerned that if the U.S. does not act quickly things will go very badly for the rest of the world.  The problem in dealing with the fiscal cliff is that there is no easy answer.  If the government raises taxes they will slow the economy down.  If they keep spending without austerity they create an even bigger hole in the deficit.  The only solution for the U.S. is to grow our way out and with expensive policies such as Obamacare and other such regulations, there is stagnation in the economy resulting in slow growth.  Regardless of who gets elected tomorrow there is a lot of work to do and quickly.  The markets will respond to positive movements in pro-growth policy but if we stay on the current path the U.S. will eventually become another Japan with 20 years or more of stagnation.

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