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Falling Off the Fiscal Cliff?

September 28, 2012

 

Collectively, these provisions would represent a fiscal tightening of 4% of GDP in 2013 if Congress were to do nothing, more than enough to sink the already fragile U.S. economy into a recession.
-Libby Cantrill, senior vice president, PIMCO
-Josh Thimons, executive vice president and portfolio manager, PIMCO

  • When we look at how the fiscal debate is likely to play out, rather than how it should play out, our base case is the fiscal cliff will likely be resolved in a short-term deal before the end of the year, making what was a cliff more like fiscal black diamond - still dangerous, but not likely to land the economy in a body cast.
  • The most likely scenario is an eleventh-hour deal that avoids the cliff but still reflects roughly 1.5