by Cameron Smith, Douglas Holtz-Eakin
American Action Forum
December 05, 2012
This analysis finds that going over the fiscal cliff would not only have an effect on unemployment, but also on the financial markets as well. It notes that “cliff diving would have significant impact on financial markets, impair asset values, exacerbate credit stringency, and amplify the direct effects on the main street economy. Moreover, contrary to what some have asserted, such impacts cannot be ‘unwound’ by retroactively legislating away the fiscal cliff.” Additionally, this analysis finds that the fiscal cliff’s impact on financial markets could result in a broader economic downturn as large as 3 percent of GDP. That downturn could “persist beyond the two quarters needed to qualify as a recession.”

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