One barely-discussed issue during the US election campaign is America’s impending budget crisis.
If Democrats and Republicans cannot agree on a 2013 budget by December 31st, the very next day the country tumbles over what has been dubbed a “fiscal cliff”.
George Bush’s tax cuts for the rich are due to run out next year, and over 100 billion in spending cuts split 50/50 between defence and the other budgets kick in automatically.
Some expect Congress will postpone the crisis by a few months rather than suck over 600 billion dollars out of an already aenemic economy in just 8 weeks time.
“On the fiscal cliff and the debt ceiling, whoever is going to be elected and re-elected tomorrow will be faced with that challenge, and will have to tackle that issue up front, very shortly. Because the beginning of 2013 is in two months time,” said IMF Managing Director Christine Lagarde speaking at a G20 summit in Mexico today.
Lagarde is urging a deal as is the market, but analysts are beginning to warn that Wall Street is not taking the possibility of no deal seriously enough.