US Fiscal Policy – 22 June 2012

Under current law there will be a large fiscal contraction in the United States in 2013.  If it went ahead […]

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  • Under current law there will be a large fiscal contraction in the United States in 2013.  If it went ahead it could significantly impact the economy.
  • However, experience suggests that many of the spending cuts and tax increases will be deferred. We expect the fiscal headwind in 2013 to be similar to that of 2012. The situation is unlikely to be clarified until after Presidential and congressional elections late in the year; as a result uncertainty will remain elevated.
  • An improved outlook for state government finances might provide some offset to Federal policy.
  • Longer-term, current policy settings are not sustainable and major policy adjustments will be required.

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