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Date
October 2, 2012

The Fiscal Cliff

Transcript

John Epperly: The drought is devastating to farmers because of the fact that, that is, like, our income. I know some people are even going out of business because of this.

Maggie: The government says the drought is slowing the nation’s economy, costing the country $12 billion just last spring.

And those economic problems in Europe are causing a drop in many American exports – products made here that are sold overseas.

But according to experts, the number one problem facing our country’s economy? The upcoming so-called “fiscal cliff.”

Last year, congress couldn’t agree on how to handle the country’s budget deficit, the gap between what the government spends and what it collects from taxes.

So lawmakers came up with a deadline to figure it all out. If no agreement is reached by the end of this year, seven trillion dollars in cuts and tax increases automatically kick in. That means deep cuts in things like defense spending and higher taxes on people’s paychecks.

Economists say it’ll be enough to push our country over the fiscal cliff and seriously damage the U.S. economy.

With Washington lawmakers deadlocked over the budget for years, the unwillingness to compromise is having an effect.

Bayard Winthrop: I think that the lack of substantial and positive debate is undermining the economy.

Maggie: Bayard Winthrop started American Giant, a new men’s clothing business, in San Francisco this year. But he says Washington indecision is holding his business back.

Bayard: It doesn’t breed a lot of optimism. So we’re hiring, but we’re not hiring as aggressively as I think we would be if I had real confidence that we were on a pathway towards growth nationally.

Maggie: Confidence is also important when it comes to America’s credit rating. Credit rating is a grade, an evaluation of a country’s ability to pay back its debts, and how much other people trust the country to pay back future debts.

The U.S. borrows a lot of money to pay for federal programs.

The worse the credit rating is, the more money the country has to pay in fees to borrow that money.

With a really bad credit score, the country might not be able to borrow money at all.

According to Fitch, an agency that rates credit, “Uncertainty about U.S. fiscal policy is the single biggest near-term threat to global recovery.”

So without a solid plan from congress, the U.S. is edging even closer to that fiscal cliff.

Maggie Rulli, Channel One News.

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