Europe is already in recession. In addition, almost all of the emerging markets too are slowing down. According to professor, Nouriel Roubini, there have been no advancements in the Eurozone. As a result, another banking crisis may hit the Eurozone and also the US. This is supposed to have even greater impact than that of the one which already has weakened the world economic powers, back in 2008. So, the US too is on fire, with the increasing debates and concerns over the advancing recession.
In addition to this, there is also the emerging tension regarding the bleak job market in the US. As a result of the unemployment, people are finding themselves more deeply in debt. Most are trying to pay down the debts through different debt relief options like that of debt consolidation and debt settlement, the debt problem simply refuses to go away.
The fear regarding the recession
Many economists are of the opinion that the recession actually may come in 2012 itself, instead of the supposed date of 2013. According to market watchers and economists, tax changes and spending cuts may be the greatest reason bringing on the recession. So, what are all of these tax cuts about?
By January of 2013, a new set of measures are set to begin. This is supposed to take out around $500 billion and even more than that from the economy within the next year itself. Some of these measures or changes will be:
1. Expiration of the tax cuts from that of Bush era
2. Expiration of the middle class protection from Alternative Minimum Tax
3. Onset of $1 trillion with regards to the cuts on blunt spending
4. Reduction in the “Medicare doctors’ pay”
Now, if the Congress actually is going to let all of these changes take effect, the inflation adjusted-growth with regards to 2012 would be a mere 0.5%. With regards to the changes, the economists are also of the opinion that the economy is set to shrink by a significant 1.3% in the very first part of 2013. Then, by the second half, it may contract by an additional, 2.3%.
So, according to the Congressional Budget Office or the CBO, “Given the pattern of past recessions as identified by the National Bureau of Economic Research, such a contraction in output in the first half of 2013 would probably be judged to be a recession.”
So, if the overall situation is to be considered, the rate of unemployment would grow high. As a result, the taxable income is supposed to grow lower, and this is again supposed to result in poor tax revenue. This may also lead to increased spending with regards to the safety provisions like those of the benefits for the jobless.
Facts on the suffering economy
As per the economist, Joe Stiglitz, a Nobel Prize winner, though there have been some little signs of recovery with regards to the US economy, these have been really very weak. According to Stiglitz, there has been no such change which can be considered as the great economic recovery. The facts which prove this are:
- Though the 5th year is set to come after the great recession, there are less than 6.6 million jobs in the US, if compared to the number before 2008.
- Around 23 million people with proper ability are still unable to get any job. Moreover, they are living in such a state for long term basis.
- Wages in general are falling.
- Rate of unemployment exceeded 8%.
So, where do these facts lead us to? It shows that we are still in the same condition as the just after the recession in 2008. However, in order to know whether or not the recession is actually going to strike, we will simply be required to wait and watch. There is actually little that we can do, without the government taking any real action Top image: Flickr | Damian Gadal).
Steven Robert is a financial writer who has in depth knowledge on contemporary financial issues. With the spurring debt obligations among the US consumers, more and more people are looking for genuine advice and Steven Robert loves to help the debtors with his articles. He covers issues regarding debt and provides solutions to them. To know more on debt and to check out the opinion of various people on the same, you may visit https://twitter.com/debtcc.