The U.S. fiscal cliff is worrying investors as they try to best navigate the markets and exchange traded funds before hundreds of billions of dollars in tax increases and spending cuts.
If Capitol Hill does not come to a consensus on the fiscal cliff, over $600 billion in tax hikes and spending cuts could lead to greater job loss and push the economy into a recession. [With the Election Over, Get Ready for the Fiscal Cliff]
According to the Tax Policy Center, if all the scheduled tax increases occur, the average household would have to pay an extra $3,4000 next year as income rates rise 3 to 5 percentage points, writes Rick Newman for U.S. News.
Bob Holt for New Jersey News Room reports that the initial $503 in cuts through the next September would lead to a 0.5% economic contraction next year as millions of jobs are lost.
However, some believe that Congress will compromise to avoid spending cuts and tax hikes.
““No one in their right mind would push our country into recession,” Mohamed El-Erian, chief executive officer at Pimco, said in a Bloomberg report, predicting a 70% chance that U.S. lawmakers will come to a compromise. “The major issue for us is not that we resolve the fiscal cliff but do we do it in a way that allows Washington to pivot to turning headwinds into tailwinds.”