President Obama and the Republicans in the US Congress both believe the US tax system is broken, but differ vastly on how to fix it.
Hopefully concentrating their minds is the so-called ‘Fiscal Cliff’ which economists say would be a disaster for the US.
Unless a compromise can be reached, six hundred billion dollars worth of tax increases and spending cuts hit early next year.
To avoid that a budget has to be agreed by January first.
Experts have said US GDP could fall 4.5 percent and unemployment would rise to nine percent if there is no agreement.
Former top banker and member of the President’s Council for Jobs and Competitiveness Robert Wolf said that brutal slashing of spending would have a huge negative effect: “Every dollar spent is a 1.6 multiplier. If you look at where we lost most jobs it was in the construction industry. For every one billion dollars spent, it actually creates between 25,000 and 30,000 jobs.”
The expectation is that Congress will postpone the crisis by a few months rather than suck over 600 billion dollars out of an already anaemic economy in just eight weeks time.