Or will there be cutbacks on government purchases of goods and services from certain industries, such as aerospace and defense, or cutbacks on entitlements that would affect health care and social insurance? Or will a viable fiscal plan combine various types of tax increases and spending cuts?
Until the path is chosen, uncertainty encourages firms to defer hiring and investment decisions and complicates the financial planning of both individuals and firms. The longer it takes to reach a resolution on a credible plan to reduce future deficits, the more damage is done to the economy in the near term.