The European Politics Blog

Blogging about politics and current affairs in Europe


A lot has been debated in the media about the influence the ethnic minority has had on the recent US elections; Hispanics, Asians, Native Americans and African Americans currently makeup about 20 % of the population. Winning the popular vote with a margin of almost three million votes has been no easy feat for the first ever African American president the country has ever had, who has now begun his second term in office. Although diversity played a key role in securing President Obama’s victory in the 2012 US elections, there is no arguing that he is now set to govern over an America torn apart by the looming dangers of the fiscal cliff, a term coined by the head of the Federal Reserve, Ben Bernanke.

Deficit reduction measures are yet to be agreed upon but the fiscal cliff threatens to induce many cuts and tax increases which will automatically come into effect by January 2013 if the Republicans and Democrats cannot agree on measures to reduce the US budget deficit. The total amount for cuts is expected to add up to $ 1.2 trillion over the next nine years with $65 billion coming in the first year. The fiscal cliff also includes the expiration of tax cuts for the rich, originally passed by George W. Bush and continued by Obama, and a temporary 2 % federal income tax cut. If an agreement is not reached before the end of the year, the US budget deficit for 2013 would be cut almost half to $560 billion. About a year ago, Standard & Poor’s slashed America’s AAA rating to AA+ noting a negative outlook, stating:

The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics. The political brinksmanship of recent months,highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed.

Although reducing half of the budget deficit would reduce the huge debt that has been racked up, it would have a terrible effect on the economy because 2013 growth would decrease, according to figures released by the Congressional Budget Office, making it almost impossible to escape a recession. In addition, the IMF’s World Economic Outlook report on the US, published last month, highlights that the cuts would have a dire effect on the country’s major trading partners, namely Europe.

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