The fiscal cliff has been avoided, temporarily, but what does this mean for us? If left unresolved, the fiscal cliff situation would have resulted in over $600 billion in tax increases and spending cuts, potentially sinking the US economy into a second recession. After months of deadlocked negotiations, the US Government passed a deal on January 1, 2013, temporarily postponing the fiscal cliff. Below are the most important facts you should know about their short-term solution:
Are taxes going to increase? Absolutely. Several tax cuts will expire for individuals earning over $400,000 per year and families earning over $450,000 per year. This includes dividend and capital gain rates, which will increase to 20% from 15% for these taxpayers.
Will the US deficit decrease? No, as a matter of fact, the Congressional Budget Office says that this resolution will increase the budget deficit. Direct spending will also be increased by nearly $330 billion over the next 10 years.
Will we have spending cuts? Not yet. Spending cuts have been postponed for two months, meaning we will most likely approach a second fiscal cliff in March 2013.
Is the debt limit increasing? Most likely. The federal government just hit its debt limit, which means that it’s only a matter of time before they’re forced to increase it.
What about tax cuts? Tax cuts will remain permanent (until the next fiscal cliff) for individual/family taxpayers earning under $400,000/$450,000 annually.
What does this mean for gold? Gold has reached its 12th year of consecutive gains, increasing over 500% amidst one of the most severe global recessionary cycles in history. The precious metal is expected to continue benefiting from unwise government actions, potentially increasing another 5%-10% in 2013.