Fiscal Cliff To Be Fiscal Drag Amounting To 1% Of 2013 GDP

JPM's Michael Feroli, who already quantified the impact of the 2% payroll tax cut expiration at $125 billion, has estimated the impact of the Fiscal Cliff on the US economy for 2012. The verdict: 1%. This is just on the Obama tax [cut|hike]. If and when any spending cuts are actually announced or enacted, this number will only go up, as will apparently the market. From JPM's Michael Feroli: The Senate-passed budget deal is broadly in line with our prior fiscal cliff expectations, which is to say a resolution which imposes considerable near-term headwinds to growth while doing very little to address longer-run fiscal sustainability issues. The table below summarizes our current assessment of the fiscal drag associated with fiscal-cliff-related measures, which we still see subtracting about 1%-point from GDP growth in 2013.   The heart of the deal is the extension of lower- and...