It's the term used to describe the conundrum that the U.S. government will face at the end of 2012. The deficit which is the difference between what the government takes in and what it spends is expected to be reduced by roughly half. Tax cuts implemented during the Bush era are coming to an end and massive spending cuts are to take effect under the current Budget Control Act of 2011. This sharp decrease in the deficit in such a short period of time is known as the fiscal cliff.
One might say that on the surface this seems like a great situation, less government spending and less deficit to finance. Economists are convinced however a sudden decrease in spending combined with increase in taxes is a recipe for a potential greater recession considering the fact that the US employment and housing market has yet to recover completely.
The U.S and Canadian economy are so intertwined that any slowdown in the US economy and decline in consumer confidence will have a considerable effect on the employment and housing market in Canada. Governor of the Bank of Canada, Mark Carney, quotes “The stakes are high for Canada as the U.S. hurtles toward the so-called “fiscal cliff” deadline”.
What can you do?
While the US government works to gets “its house” in order, I believe starting the new year off includes having a close look at our finances and particularly how we manage our mortgage and other debt. CTV recently reported that two thirds of Canadians are concerned about how the Fiscal Cliff will affect their personal situation.
As a mortgage professional I work with clients to explore financial opportunities that could save thousands today and in years to come. Proper allocation and debt management is the greatest contributor to long term financial success so if someone you know could benefit from a mortgage checkup, call or email me today.
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