The fiscal cliff put political bickering aside

This year may have started on a positive note for many investors. It appears that the American fiscal cliff issue has been resolved satisfactorily. Beyond reasonable doubt, the US’s debt burden was and still is a very urgent crisis which has to be tackled, in a way or another. Both the Democratic and Republican parties have successfully negotiated a deal in order to avoid the turmoil of another recession. Interestingly, this dramatic news indicates that the two political parties are not as far apart in their fiscal and monetary mindsets. For example, both parties have incredibly agreed that the tax rates should rise on the highest earners, as they realised that the majority of workers cannot afford to pay any additional contributions to the US coffers at this point in time. However, the two parties were very reluctant in tackling the debt burden in a serious manner. Whilst the Democrats were genuinely unwilling to pursue any tough welfare reforms, the Republicans were hesitant about lowering the country’s defence budget.

Yet, the parties should be applauded for their concerted efforts, as they have acted wisely for the sake of their country’s solvency. For instance, the Republicans and the Democrats have recognised that the inheritance taxes should not be applicable across the board, to all and sundry. They agreed that the inheritance tax ought to be deducted only to the largest estates. In the main, the Democrats appeared to concur with their political rivals’ positions, particularly on the merits of preserving Bush-era tax cuts. On the other hand, the Republicans had quietly discarded their previous policies, namely the part-privatisation of Medicare state healthcare for the elderly.

In  plain words, the deal which was reached during the early hours of New Year’s Day shows that at least the US political system is not broken as it is the case across other jurisdictions. Yet, many commentors argue that the deal on the fiscal cliff leaves many contentious problems which will inevitably have to be resolved somehow, in the medium to long term.

The Fiscal Cliff

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