Big changes to the
for the following year became even more inevitable when Democrat Barack
Obama was re-elected for a second
presidential term. Cost cutting and tax raising in the U.S. is
likely to shook portfolio of investors and the world's largest economy will return
to recession. United States
One of the biggest headaches for investors has been a slow but firmly in a debt quagmire running
economy. This is due not only to the country's excessive desire to spend a lot
of money for the fight against terrorism, but also temporary tax relief, which
was for a decade.
For these reasons, in 2009 the U.S. U.S.
recorded a far 10% of the budget deficit and for the first time in U.S. history solvency risk has gained not only
theoretical but also practical value - investors realized that the
may actually go bankrupt.
However, debt increasing and spending a lot can be stopped at least in 2013,
when the law will enter into force for
country to raise taxes, cut spending and
reducing the budget deficit. United States
Just over a decade alarmingly from 32% to nearly 70% bloated
gross domestic product (GDP) requires
action, because in the long run public debt can become out of control. To deal
with that it was brought the fiscal
discipline against the abolition of tax relief in 2013, 1st of
January, and it is welcome and may possibly contribute to what investors had
not seen since the presidency of Bill Clinton's era - U.S.
non-deficit budget. However, it will certainly have dire economic consequences
so this change in the tax base would be baptized fiscal cliff and a result of
that it means the end of the tax relief and spending cuts mix. Fiscal cliff
threat can be easily imagined when we
realize that every working person's income tax rate jumps by 4-5 percent points (depending on the level of income),
capital gains taxes will grow by 5 percent points and the costs of defense
programs will be reduced by almost 10% - and that's just beginning a long
painful list. These increased taxes only through 2013 would collect additional
350 billion USD (939 billion. £) and would up almost 3% of the U.S. total
annual GDP. The belt tightening would make a damage for U.S economy, which has not already
recovered. It is calculated that if it would be such a scenario, the economy
will stand back about 0.5%, while unemployment will back to the 9.1% level. So
on one hand we have a growing unmanageable debt, on the other - the recession. To sum up, for which of these evils American policy is shifting and what
American investors should expect from it ? U.S.
Usually half of the investors ideologically is closer to the Republican position, which is more favorable to investors than the Democrats position. Economy does not achieve required acceleration and as a result of that former presidential candidate Mitt Romney insisted his party position to extend tax relief futher at least for a while. It is obvious that greatest achievement for investors would be a delay of unpopular and difficult decision at the stock market. In the short term this would have a positive impact on the consumption targeted sectors and would let to banks to have a possibility to improve home loaning sector.
Not so many days ago it became clear that the president will continue to be Democrat Barack Obama and as result of that it must be considered that at least for the time being him a president the initiative of addressing the generated problems will be exactly in the hands of Democrats party, what means that it will be considered to cut expenses and to introduce bigger taxes. Everyone recognizes that the country need to save now and the only question is what areas will suffer from it the most. The best way to save money would be cutting of war industry market. Moreover, it could be introduced progressive taxes and as a result of that richer society would get more money to government.
While the options are still debated, we can be almost certain that in 2013 U.S expenses are likely to start cutting and taxes will increase for everyone despite people’s level of living. To conclude, it is clear that dreamland isn’t as powerful as it was a few decades ago.