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Moody’s Chief Economist John Lonski on the looming fiscal cliff and its potential impact on the markets economy.
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-- of -- on our lawmakers to find a solution to the looming fiscal clip we talked a lot about this.
So what are they doing now one -- think they'd be holed up right in DC somewhere frantically crunching numbers talking trying to come to consensus.
Now the reality is this.
The infamous jail break house members taking off until after the election the earliest three cents recess that is since 1960.
Here with more John Lonsky Moody's chief economist -- I.
If I can't get over congress and their lack of willingness to do anything at all.
What is the threat to the markets what is -- threat to the economy if we don't get some kind of solution to these looming problems.
Well for the time being the markets are doing quite well I think the financial markets are waiting for the results of the November elections to get a better handle.
As to how -- clip will be resolved what form is it gonna take.
It's it could -- be skewed towards increase taxes or -- -- huge trip towards.
Reductions in government spending over time.
There was a report out today by Citigroup that the stocks could go to put down 20%.
If there isn't some kind of change out -- you believe that's right.
All -- think that could very much be the case especially if we fall off the -- left.
If we go ahead and have the spent deep spending cuts and increases in taxes that are part of the worst case scenario.
And that case will probably get a contraction by real GDP.
-- three to 4% annualized for the first -- 2013 and that most definitely is gonna put us in -- painful.
Recession unemployment wolf war perhaps well above 10%.
You know you look at what happens.
As we approach this fiscal -- the 123 punch if you well.
First the bush tax cuts go away that hurts only have another way the taxes that's the Obama -- Obamacare taxes that come into play.
And finally the Alternative Minimum Tax.
Dad starts to hurt millions of Americans.
There's all kinds of additional taxes that come -- to play two and it's it's my feeling that Americans really don't know the breath of changes that they're gonna be facing come April 15 -- Next year.
Well you know the average taxing increase is going to be a close to -- -- thousand dollars to reach of every American.
That could prove costly what we want to remember is that the United States historically went through one period.
Where there was a sharp contraction by government spending at many.
Fear the return of the Great Depression I'm talking about the end of World War II.
But since we just concentrated on the shore up.
Reduction you know this very brief -- severe cutback in government spending.
The recession was painful but very brief and then we yesterday two week period of prolonged prosperity.
We can afford deep cutbacks in spending we can't help ward.
Very Big -- Greece's.
Well like taxation and big increases by taxation will that create another recession -- there -- lots -- signs were going their already.
Well that's true -- there is so weak hitting -- taking place globally.
We had indications double worse city business activity in Europe and to China this is beginning to -- US exports and US consumers and US businesses.
Themselves are shying away for a major expenditures especially businesses.
-- terms of capital spending until.
Fiscal cliff uncertainties are resolved but we're not gonna resolve those uncertainties until we get the election out of the way.
That's why I think these upcoming presidential -- and October will be of the utmost importance and the very much might have the power to move.
Financial markets considerably.
Wow okay well I'll be watching them you'll be watching them.
They little popcorn while -- watched presidential debates mr.
-- thanks for coming on tonight it's always great to see you you have such terrific insights thank you.
My pleasure thank you.
