US Fiscal cliff - is it all over?

I've just read an interesting comment piece in the Financial Times by Martin Sandbu.  He makes the point that the deal done in the Senate amends the tax rrises scheduled for 1 January 2013 (reversing the Bush tax cuts but not for everyone) will still lead to a fiscal tightening because taxes will still rise for the middle classes.  Furthermore, automatic spending cuts were scheduled to happen from today unless amended; these have been postponed for just a couple of months.  So this quarter may see growth threatened in the US and continuing uncertainty because a spending deal remains to be done.

I think the immediate impact of the deal (assuming it's passed by the House of Representatives) should be positive for economic sentiment in the US, and maybe beyond.  However, Sandbu is right to caution that the politicians have more to do to secure growth in the economy on which world recovery depends.
 
The FT article is at: http://www.ft.com/cms/s/0/7d66f674-5419-11e2-9d25-00144feab49a.html#axzz2GkVlQ7Mg

Stephen Beer, 01/01/2013

 
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