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Gaming Industry - Hardest Hit By Fiscal Cliff - A Must Read For Our Members Who Want To Know What The US Fiscal Cliff Is

Mben

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According to Moody's Investors Service, the gaming industry in the US will one of the hardest hit industry along with auto, newspaper and lodging. Defense and healthcare face reduced spending too. According to this <a href="http://www.beaumontenterprise.com/news/article/Moody-s-Fiscal-cliff-threatens-gambling-industry-4124876.php" >article</a>, basically the across-the-board spending cuts and tax increases scheduled to begin Jan. 1 could undercut U.S. economic growth and cause the economy to contract, the report said. This in turn would undermine consumer confidence and limit disposable income.Casinos could see profits decline by as much as 10 percent as more gamblers stayed home.  The sector's economic health depends entirely on customers' discretionary spending habits, the report said.<a href="http://www.moodys.com/" >Moody's Corporates and the Fiscal Cliff Report</a>  For those of you who do not know what the US Fiscal Cliff is, I have highlighted the basics in the article below that I found explaining exactly what it is in easy to understand terms.   What is the Fiscal Cliff ? Fiscal Cliff is the popular shorthand term used to describe the conundrum that the U.S. government will face at the end of 2012 , when the terms of the Budget Control Act of 2011 are scheduled to go into effect.Among the laws set to change at midnight on December 31, 2012, are the end of last year's temporary payroll tax cuts (resulting in a 2% tax increase for workers) , the end of certain tax breaks for businesses, shifts in the alternative minimum tax that would take a larger bite, the end of the tax cuts from 2001-2003, and the beginning of taxes related to President Obama's health care law. At the same time, the spending cuts agreed upon as part of the debt ceiling deal of 2011 will begin to go into effect. According to Barron's, over 1,000 government programs - including the defense budget and Medicare are in line for deep, automatic cuts. In dealing with the fiscal cliff, U.S. lawmakers have a choice among three options , none of which are particularly attractive:1. They can let the current policy scheduled for the beginning of 2013 - which features a number of tax increases and spending cuts that are expected to weigh heavily on growth and possibly drive the economy back into a recession - go into effect. The plus side: the deficit, as a percentage of GDP, would be cut in half.2. They can cancel some or all of the scheduled tax increases and spending cuts, which would add to the deficit and increase the odds that the United States could face a crisis similar to that which is occurring in Europe. The flip side of this, of course, is that the United States' debt will continue to grow.3. They could take a middle course, opting for an approach that would address the budget issues to a limited extent, but that would have a more modest impact on growth. Possible Effects of the Fiscal Cliff If the current laws slated for 2013 go into effect, the impact on the economy would be dramatic . While the combination of higher taxes and spending cuts would reduce the deficit by an estimated $560 billion , the CBO estimates that the policies set to go into effect would cut gross domestic product (GDP) by four percentage points in 2013, sending the economy into a recession (i.e., negative growth). At the same time, it predicts unemployment would rise by almost a full percentage point, with a loss of about two million jobs . A Wall St. Journal article from May 16, 2012 estimates the following impact in dollar terms: In all, according to an analysis by J.P. Morgan economist Michael Feroli, $280 billion would be pulled out of the economy by the sunsetting of the Bush tax cuts; $125 billion from the expiration of the Obama payroll-tax holiday; $40 billion from the expiration of emergency unemployment benefits; and $98 billion from Budget Control Act spending cuts. In all, the tax increases and spending cuts make up about 3.5% of GDP, with the Bush tax cuts making up about half of that, according to the J.P. Morgan report. Amid an already-fragile recovery and elevated unemployment, the economy is not in a position to avoid this type of shock.The cost of indecision is likely to have an effect on the economy before 2013 even begins. The CBO anticipates that a lack of resolution will cause households and businesses to begin changing their spending in anticipation of the changes, possible reducing GDP before 2012 is even over.For more about the Fiscal Cliff, read <a href="http://bonds.about.com/od/Issues-in-the-News/a/What-Is-The-Fiscal-Cliff.htm" >here</a>. -- Edited by Mben on Wednesday 19th of December 2012 04:13:03 PM
 
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