In a recent report on global economic conditions, the International Monetary Fund (IMF) asserted that the realization of the “fiscal cliff” – a combination of drastic spending cuts and considerable tax increases set to take effect at the end of the year – would most likely lead to a fresh recession.
Many other economists, such as The New York Times’ Paul Krugman, have also voiced concerns about the effect of withdrawing money from the economy so rapidly. Among this group, the consensus is that maintaining growth continues to be the most important priority for current policy-makers.
However, Peter Schiff, president and CEO of Euro Pacific Capital, has a different take on the issue, asserting that the short-term pain of withdrawing federal funds from the economy will be worthwhile if the nation can ultimately emerge in a more solid fiscal situation.
“Our economy is so screwed up from years and years and years of bad monetary and fiscal policy that it’s going to painful to correct that problem, but we have to do it,” Schiff told a reporter from Yahoo! Finance’s Breakout blog. “We can’t keep avoiding the pain and in the process making the problem worse, because then we’re just going to have even more pain in the future to fix an even bigger problem.”
Lawmakers still working to resolve impasse on taxes, spending
Earlier this month, The New York Times reported that a bipartisan group of Senators is working to design a comprehensive, long-term plan that would cut the deficit without the blunt force trauma that going over the fiscal cliff would deal to the fragile economic recovery. Top Senate Republican Mitch McConnell told The Times that the final shape of any deal would depend heavily on the results of next month’s election.
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