We need to get this to the Fiscal Cliff! What could go wrong? (Photo credit: DonkeyHotey)

Kicking Spending Cuts To March 1st But Raising Taxes

When the Fiscal Cliff solution came about at the beginning of the year, the Democrats received a lot of what they wanted in tax increases on the rich but gave nothing in return. The cuts were delayed until the end of February, which has now arrived. The cuts are about to happen in a $85 billion reduction in new spending for 2013 which is good for our budget trouble and slightly negative for growth. But growth was slowing already for a number of reasons related to natural disasters, tax increases, and business regulation. Now the country hopes to either live through the sequester or modify the sequester to make smarter cuts than just the generic across the board cuts required.

The cuts are to be spread evenly between defense spending and non-defense spending. The cuts will occur over the course of 10 years totaling $110 billion and hopefully allowing the current debt ceiling to stop from expanding ever higher. Many predict that the stock market and many services will be affected by the cuts while others predict that the country will continue to move forward and the public will not notice the reduction in new spending that is occurring.

I feel slight sell off this week has been a combination of things including the ending of earnings season and some slight fear of the sequester. Once the dust settles and earnings season begins a new, the market should move higher once again.

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