Canadians worried about US fiscal cliff
Posted December 12, 2012 10:58 am.
This article is more than 5 years old.
VANCOUVER (NEWS1130) – You’ve been hearing a lot about the US fiscal cliff, the potential disaster scenario that could come to pass if automatic spending cuts and tax increases aren’t neutralized soon.
It turns out our economy won’t be immune if American lawmakers don’t cut a deal by the end of the year. A poll out today finds two-thirds of Canadians are worried about what will happen here if the cliff isn’t averted.
Paul Taylor, Chief Investment Officer of Fundamental Equities with BMO Asset Management, admits it could hurt the pace of the economic recovery in Canada, as he points out our economy barely grew in the last quarter, and this one looks modest too.
“In Q-3 we barely grew, the sense is that Q-4 2012 will run at about a one-and-a-half per cent pace here, north of the border. That’s still positive but it certainly runs the risk of hitting stall speed,” explains Taylor.
“We are an open economy. We are dependent on trade, and of course we know that 70 per cent of Canadian exports head from North to South, so we need to be concerned as to what kind of resolution we get to the US fiscal cliff debates and what it means for the trajectory of the US economy,” he warns.
SFU Finance Professor Andrey Pavlov feels no agreement in the US will almost certainly cause a recession in the short run, but at least it will send a message that the deficit needs to be addressed.
He feels a far worse outcome, and a more likely one, is that some sort of agreement is reached that does not address any of the serious long-term deficit issues and postpones the hard choices. This would spell trouble for any investor in the US, and for the Canadian economy as a whole.
