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The Fiscal Cliff

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Describe the so-called fiscal cliff and the expected impact for the State of Mississippi and the Mississippi Delta and for the firms herein using the key words you may have learned. Key words may include buy not limited to demand/supply, elasticity, subsidies, consumer spending, business spending, confidence, uncertainty, budget deficits, national debt, loss of credibility, double-dip, etc.

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The fiscal cliff is a term that describes the precipitous situation that the US government will face at the end of 2012. At the end of 2012 the conditions of the Budget Control Act of 2011 come into force. At the end of 2012, there will be an increase in minimum tax, commencement of taxes that support Obama's health care law, end of specific tax breaks for businesses, end of temporary payroll tax cuts, and the end of tax cuts that have been in place since 2001-2003. The sudden implementation of these laws at the end of 2012 increases the risk of recession but are designed to increase the prospects of long term economic growth. There is a possibility that with the fiscal cliff there may be a double-dip recession. This means that the gross domestic product growth may slide back to negative after a period of positive growth. This will create uncertainty in the economy. The risk is that a recession followed by a short-lived recovery followed by another recession may occur because of ...

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