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Obama to make public statement on fiscal cliff

November 09, 2012 09:55 IST

Barack ObamaGetting down to his job soon after his electoral victory bid, the US President Barack Obama would make a public statement on Friday, the White House said.

"The President will deliver a statement in the East Room about the action we need to take to keep our economy growing and reduce our deficit," the White House said in a statement.

In his statement, Obama is expected to discuss the tax increases and spending cuts that are set to take effect in January, and will likely urge Congress to take action on both.

He is unlikely to put forward a new plan.

The President would make his remarks two days after the House of Representatives Speaker, John Boehner, indicated that he is ready to begin negotiations on a deal to reduce the deficit.

"Mr President, this is your moment. Let's challenge ourselves to find the common ground that has eluded us," he said.

Fiscal cliff for the US refers to the effect of a series of enacted legislation which, if unchanged, will result in tax increases, spending cuts, and a corresponding reduction in the budget deficit at the end of 2012.

The Non-partisan Congressional Budget Office on Thursday warned that going over the fiscal cliff would spark a recession.

At the same time it said that simply voiding the tax and spending increases would add trillions to the debt. Unemployment would rise from 7.9 per cent to 9.1 per cent by the end of 2013 if the US went over the fiscal cliff, CBO said.

"States is facing fundamental budgetary challenges.

"Federal debt held by the public exceeds 70 percent of the nation's annual output (gross domestic product, or GDP) -- a percentage not seen since 1950 -- and a continuation of current policies would boost the debt further.

"Although debt would decline to 58 per cent of gross domestic product in 2022 under the current-law assumptions that underlie the Congressional Budget Office's baseline projections, those projections depend heavily on significant increases in taxes and decreases in spending that are scheduled to take effect at the beginning of January," CBO said.

"To put the budget on a path that is more likely to be sustainable than if current policies were continued, lawmakers will need to adopt a combination of policies that require people to pay more for their government, accept less in government benefits and services, or both.

"However, making policy changes that are large enough to shrink the debt relative to the size of the economy -- or even to keep the debt from growing -- will be a formidable task," it said.

Economist have warned that fiscal cliff if not addressed would have not only disastrous consequence on this country but would also have unintended adverse impact on the global economy and other countries as well.

A day earlier the House of Representatives Speaker, John Boehner, called for bipartisan approach to address the issue of fiscal cliff.

Meanwhile Standard and Poor's said the potential for continued gridlock among legislators in a still-divided, post-election Washington could have profound effects for the US economy.

It could also affect many of the various borrowers that Standard & Poor's Ratings Services rates, as the country heads toward the "fiscal cliff" of simultaneous tax-cut expirations and spending cuts under sequestration, it warned.

Image: Barack Obama

Lalit K Jha in Washington
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