US faces 2013 recession after 'fiscal cliff': CBO

Easily the most frustrating thing about being a long-term investor nowadays is how short-term focused Wall Street has become in recent years (or more accurately,  the last two decades). Quarterly earnings reports and whether companies slightly beat or slightly miss estimates made by a bunch of number-crunchers in New York result in huge share price volatility. Owners of real businesses would be the first to tell you that small quarter-to-quarterly fluctuations in sales and profits are far less important than the long-term strength, viability, and competitive position of their companies.

Automatic tax hikes and spending cuts will go into effect in 2013 causing a "fiscal cliff" recession according to the CBO. Massive spending cuts and tax hikes due next year will cause even worse economic damage than previously thought if Washington fails to come up with a solution, Congress' budget referee said on Wednesday.

No substantive progress has been made in the talks between the White House and the House over the last two weeks WASHINGTON – House of Representatives Speaker John Boehner said there was no progress on Thursday in “fiscal cliff” talks with U.S. Treasury Secretary Timothy Geithner and criticized President Barack Obama and Democrats for failing to “get serious” about including spending cuts in a final deal.

WASHINGTON — The “fiscal cliff” impasse is raising the odds that Congress will fail to meet a year-end deadline to avert steep tax hikes and budget cuts that could push the nation into another recession. With talks between President Barack Obama and House of Representatives Speaker John Boehner at an apparent standstill, analysts said on Friday that it was increasingly likely that Washington won’t be able to reach a deal before Jan. 1. “It’s time to contemplate a plunge off the cliff,” Potomac Research Group analyst Greg Valliere wrote in a research note.

A deal worked out by U.S. Senate leaders to avoid the "fiscal cliff," was far from any "grand bargain" of deficit reduction measures. But if approved by the U.S. House of Representatives, it could help the country steer clear of recession, although enough austerity would remain in place to likely keep the economy growing at a lackluster pace.

Political gamesmanship, bitter ideological divisions and repeated miscalculations by both parties over the past two years all helped to put the country on the road to the fiscal cliff. Absent passage of some last-minute deal between the White House and congressional leaders tomorrow, the fiscal crisis will be upon us. It's an economic fiasco designed entirely by our own lawmakers-the same ones now feuding over a deal to avert their creation.

By Faisal Humayun: To spend or not to spend is the biggest dilemma for policymakers in the United States at this juncture. This article looks into the forecast made by the CBO if fiscal restraint were to be exercised in 2012 and 2013 and its implications. The CBO Projections