Finance: US Economy Heading Toward the Fiscal Cliff

Nov. 14, 2012
Paradoxically, a double-dip recession could lead to a stronger recovery.

How's this for a conundrum: If the U.S. Congress does nothing prior to Jan. 1 to prevent the full fiscal cliff from occurring, the country will almost certainly slip back into recession, predicts Jason Thomas, director of research for The Carlyle Group.

See Also: Manufacturing Industry Finance News & Trends

The immediate result, he says, will be "a short-term disaster." However, this also would result in a dramatic lowering of the deficit, by just over $600 billion, which could ultimately lead to faster growth in 2014 and robust growth by 2017.

Thomas sees the three keys to global economic growth in 2013 as being:

  1. The scale of the deceleration of China
  2. The Eurozone
  3. Unemployment in the U.S.

On the third point, Thomas says, "Hiring has not actually increased. What's made the situation appear to have gotten somewhat better is that layoffs have slowed down."

Any recession that the U.S. might experience, though, should be easier to weather, Thomas believes, because of lessons learned from the previous recession.

"Companies today are more liquid, banks are better capitalized and the economy has buffers that didn't exist four years ago," he says.

See Also: U.S. Manufacturers Warn Over Fiscal Cliff

Sponsored Recommendations

Voice your opinion!

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