Since the election ended in the United States the news channels, both here and across the border, have been talking about nothing except the pending Fiscal Cliff. Not as much as a peep about it prior to the election but the cliff is all that most news organizations want to prattle about today.

What is the Fiscal Cliff?

The Fiscal Cliff will take place on Jan 1, 2013, when pre-determined tax cuts and breaks end and pre-determined spending cuts start. Type Fiscal Cliff into Google and you can find countless stories and articles. The fear is that this “cliff” will not be dealt with in time and the United States will fall back into a recession. It is estimated that millions of jobs would be eliminated and millions of dollars being spent in the economy would evaporate due to these cuts and tax increases. When the U.S. sneezes, Canada gets a cold. If the US falls into another recession it could/can pose a problem for our own economic recovery. If anyone was watching the market volatility the past week, most of it seems to be connected with the Fiscal Cliff.

If the U.S. drives over this cliff, one good point would be that the deficit could be drastically cut, some estimates say as much as 50%. However, it would happen so severely many feel the economy could not handle it in the short term.

Why are we at this cliff?

The “cliff” has been known for some time but with the Presidential election taking place in November, it was not in the Republican’s best interest to lend a hand to the Democrats to address this problem ahead of time. Why would they want to go into an election helping stave off an economic disaster? This is called Partisanship and there has been plenty of it from both sides.

Can this cliff be avoided?

Much like Aug 2, 2011, when the U.S. government went to the 11^th hour to raise the debt ceiling, one can expect the same dramatics this time around. The two parties, with midterm elections 2 years away, can work together to find some kind of solution. They may take it to the wire or the solution could come days after Jan 1, 2013, but common sense says there will be some sort of solution, perhaps temporary or short term. You can see it is in no one’s best interest to have the U.S. economy fall back into a recession. Neither party wins at this stage.