Experts are now forecasting failing costs
Business analysts are now stating that even if the President was able to reach a deal with the Republic Party in the Congress today, there will still be a significant drag taking place affecting the economy next year. This will be the first year for the famous fiscal impasse in the United States.
Even though most negotiators are focusing on maintaining the tax rates that were placed during the era of President Bush, other changes are also expected to be implemented during the next days. For example, there will be a three percentage jump off in all taxes related to social security. This is a change that will equal almost an extra $2,000. Most business observers first expected that there will be a lower tax reduction regarding payroll with almost 4.35. However, it is becoming obvious now that some political leaders are willing to increase the rate to 6.2%.
Due to this massive increase in the taxes, business analysts believe that growth in the economy will stop at 3.1% during the end of next year, which is considered to be extremely low. The president is determined to preserve the taxes that were created in the Bush era but the Republican Party are fighting this decision as much as they can. Republicans are also trying to implement higher spending cuts because they believe that this will curb all the budget deficits. Even though hopes definitely dimmed today that any deal will be reached, many observers believe that the impact of tax increases or spending cuts will not affect the economy instantly. There is also the possibility that a compromise will be struck during next week. If both parties failed to even reach a compromise, the government might have to pull back some of its spending on other issues affecting the economy such as unemployment or insurance.
Economists believe that if the country ends up hitting a recession, the citizens will never forgive both parties, especially that they had so much hope by electing President Obama again. Washington has a long history of delaying compromises that affect its economy such as the debt ceiling issues that took place during 2011. Last week, most stocks ended up getting sold off after hopes for reaching a deal or compromise faded. This means that the pressure placed on the stock market will increase tomorrow and many believe that the stock market will end up losing millions once the trading process begins in the morning.