Saturday, January 5, 2013
The Fiscal Cliff Deal
There was also some amusing news the last few months about the consequences of going over the fiscal cliff. A small part of the bill would have ended U.S. farm support programs and many articles warned about milk prices doubling as a result. This new "dairy cliff" was another concern brought up by the media. The new compromise only postpones the issue for a year. The most recent farm law expired in September and the failure to pass another five year proposal resulted in the law reverting back to the rules enacted back in 1949 where the government would buy milk until prices reached "parity" with its cost immediately before WWI. After adjusting for inflation, the milk-support price would be roughly double what it costs today to $7 per gallon.
Aside from the looming dairy cliff, the threat of $110 billion in automatic spending cuts was only postponed for two months, not directly addressed this time. There is a very large issue at hand with increasing the debt ceiling limit as the government deficit pushes up to $16.4 trillion. Even though the markets rallied year-end as the government reached a compromise on the fiscal cliff, there are still plenty of big decisions to be made in 2013.