Is the Fiscal Deal a Solution?

Jan. 4, 2013
The recent deal on the fiscal cliff provides some relief, but you can still expect to see a slowing economy later in 2013.

The President and the Congress managed to encompass all scenarios with the Fiscal Cliff Deal that was reached on Wednesday January 2.  Taxes were raised significantly; slight cuts were agreed upon; and the “can was kicked down the road” for two months on more talks on spending cuts.

There will be one dollar in cuts for every forty-one dollars in tax increase.  That is a terrible idea, but it is one we will have to live with - for now.  Today’s fiscal deal in Washington can be undone to some degree by a future Congress (such as the one being seated now). 

There are three good things to come out of the discussions. One, the increased taxes will be applicable to households making $450,000 as opposed to the originally proposed $250,000.  In addition, the dividends and capital gains tax increases are gentler than would have occurred without the bipartisan agreement.

Lastly, the dreaded Alternative Minimum Tax annual problem looks to have been successfully handled, saving a potential 20 million households from a sharply higher tax bill on 2012 income.  The AMT should not be an issue in the coming years because of the pending legislation. 

The most asked question today has been whether the Deal changes our outlook for 2013.  No, it does not. Consumer problems are coming, and those problems will slow the entire economy down in 2013.

About the Author

Alan Beaulieu Blog | President

One of the country’s most informed economists, Alan Beaulieu is a principal of the ITR Economics where he serves as President. ITR predicts future economic trends with 94.7% accuracy rate and 60 years of correct calls. In his keynotes, Alan delivers clear, comprehensive action plans and tools for capitalizing on business cycle fluctuations and outperforming your competition--whether the economy is moving up, down, or in a recession.

Since 1990, he has been consulting with companies throughout the US, Europe, and Asia on how to forecast, plan, and increase their profits based on business cycle trend analysis. Alan is also the Senior Economic Advisor to NAW, Contributing Editor for INDUSTRYWEEK, and the Chief Economist for HARDI.

Alan is co-author, along with his brother Brian, of the book MAKE YOUR MOVE, and has written numerous articles on economic analysis. He makes up to 150 appearances each year, and his keynotes and seminars have helped thousands of business owners and executives capitalize on emerging trends. 

Prior to joining ITR Economics, Alan was a principal in a steel fabrication company and also in a software development company.

Sponsored Recommendations

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!