Growing fears on recession clouds hovering over United States of America has raised an alarm. Due to the expiration of Bush Tax cuts and spending cuts under Budget Control Act of 2011, alternate minimum tax reversion, and extension on social security payroll tax cut of 2% are the factors contributing to fiscal cliff. As a corrective measure, if Congressional Budget office does not undertake any steps towards controlling middle income tax, the overall income tax would rise which would impact the economic growth.
Consumer spending has increased to significant levels with a five year high revenue mark on Thanksgiving Day thereby increasing consumer confidence. The confidence will not last for long if the middle class tax cut action is ignored by the Congress. Though consumers are still wary about Congress avoiding the fiscal cliff in the nation, Fed Chairman, Ben S Bernanke, has urged the White House and Congress to collectively work on avoiding the fiscal cliff.
Reducing the fiscal deficit may lead to higher taxes and reduction in government spending but the same could result in uprising the economy in a powerful form in the next year. The entire focus of offsetting fiscal cliff is to gain consumer confidence in the nation thereby leading to higher spends and monetary rotation in the system. As a positive sign, the housing industry has depicted positive growth which brings s a sigh of relief to the nation but the fiscal cliff has become a major concern whose impact needs to be minimized at the earliest by Congress.