Warnings of the looming fiscal cliff amounted to mere murmurs as the U.S. election came to a close.
But the morning after, the murmurs turned into full-scale panic. The markets dove, pundits screamed and foreign ministers issued public warnings.
So what is the fiscal cliff? In simplest terms, it’s a failsafe.
When President Obama and Congressional Republicans couldn’t reach deficit deal during the debt ceiling debacle, the two sides agreed to implement deep automatic cuts to sacred cows for both parties.
The agreement includes extreme cuts to domestic and defense. At the same time the Bush Tax cuts will expire of January 1st.
If not fixed or addressed, the country’s unemployment might jump back up to 9.1 per cent.
Bank of Canada Governor Mark Carney says the cliff poses “immediate risks” to the Canadian economy.