The fiscal cliff is the coinciding action of tax increases and spending cuts that will activate on Jan. 1, 2013 unless Congress and the White House take some action to either delay or change them.
Should these two actions combine, you'll watch $7 trillion be tagged onto the nation's debt over the next decade. This would come out to around $500 billion next year,according toCNN.
Not helping matters is that we've unofficially hit the middle of summer; the clock is ticking louder for the fiscal cliff as expectations for political stagnation instead of a resolution have increased ahead of Election 2012.
A recent Morgan Stanley (NYSE: MS) survey highlighted the fiscal cliff concerns.
According to MarketWatch, 65% of global investors - 71% of U.S. respondents - believe that "the fiscal cliff will cause significant uncertainty in markets for the rest of the year, but think policy makers will ultimately agree to extend most or all of the expiring stimulus and tax measures."
But only 24% of global investors believe the risks surrounding it are overblown.
Greenspan Weighs in on Fiscal CliffWith more global investors voicing fiscal cliff concerns, can anything calm nerves?
Former Federal Reserve Chairman Alan Greenspan last week tried to deliver some reason on the approaching debacle.
"The one thing that I think we have to recognize is starting from where we are at the moment, there is no way to resolve this issue without some pain," Greenspan said on CNBC's "Closing Bell." "There is no set of policies which can prevent the type of consequences of the imbalances we currently have."
Greenspan said the fiscal cliff's problems of rising taxes and spending cuts don't have to pummel the economy simultaneously.
"It's an issue we can resolve, and we will resolve it, but let's remember that's not where our problem is," he added.
Where are the problems? In the numerous fiscal deficits for the Eurozone countries.
IMF Sees Possible Fiscal Cliff DisasterWhile the euro region's debt problems add up, the International Monetary Fund (IMF) is pointing fingers at the U.S. fiscal concerns.
In its annual U.S. economy review, the IMF joined the growing number of those worried about a potential fiscal cliff disaster to hit.
The organization said in its report last week, "Failure to reach an agreement on near-term tax and spending policies would trigger a severe fiscal tightening. . .with negative growth early next year and significant negative repercussions on an already fragile world economy."
Adding to a gloomy forecast and uncertainty is the need for the U.S. to increase the national debt ceiling early next year.
The IMF said, "It is critical to remove the uncertainty created by the 'fiscal cliff' as well as promptly raise the debt ceiling, pursuing a pace of deficit reduction that does not sap the economic recovery."
IMF Managing Director Christine Lagardecommented that policy makers will probably not address the fiscal cliff until after the November election. She also believes that it would be a better idea to deal with the fiscal cliff earlier rather than later.
Lagarde told CNBC, "If there was an agreement earlier on, it would be a serious confidence booster for the U.S. economy."
Related Articles and News:
What is the "Fiscal Cliff?"
How I Learned to Stop Worrying and Love the Fiscal Cliff
US Needs to Deal With 'Fiscal Cliff' Soon: IMF's Lagarde
The Washington Post:
IMF warns: "Fiscal cliff' of tax hikes, spending cuts puts U.S. economy at risk
Fiscal cliff a real risk, "Grexit' coming, survey shows