As I had previously Posted, the whole idea of a Fiscal Cliff and the urgency of Balancing the National Debt had only occurred just after President Barack Obama took office. The so-called Fiscal Hawks certainly had no trouble authorizing the “Bush Tax Cuts” in the early 2000s. To borrow a term from My Dad, Congress had that “Bass Ackwards”. Generally, you raise Taxes when the Economy is strong–as President Bill Clinton did–and over-spend (stimulate) when the Economy is weak.
The Financial Markets certainly don’t seem concerned with the Fiscal Cliff; because stocks have rebounded nicely from their recent swoon. Interest rates on US Treasury obligations have stayed quite low. Even when S & P lowered Treasury Debt, from AAA to AA+, the rate that the Treasury pays on its Debt dropped by quite a bit.
I believe that Paul Krugman, Professor of Economics and International Affairs at Princeton University, is also a columnist for the New York Times, described the situation quite well in last Friday’s newspaper. Professor Krugman won the Nobel Prize, in Economics, in 2008. “for his analysis of trade patterns and location of economic activity”.