- Fiscal cliff
The phrase ‘fiscal cliff’ has been coined to capture the large and predicted reduction in the US budget deficit expected as specific laws kick into effect from 2013.
In combination, these laws would put a big squeeze on the US economy as the combined impact will be to increase taxes (in some cases by ending existing tax breaks originally designed to stimulate the economy) and also reduce state expenditure.
Critics worry that this double whammy will send the US economy spiralling back into deep recession. Estimates on the precise impact of this vary – The Washington Post says it equates to a deficit reduction of 5.1% of US gross domestic product (a measure of national annual output). That would see the US trying to reduce its deficit faster than Britain, Spain and Greece, and at the fastest US rate since 1968.