From the editor: Increasingly Top of Mind is the impending US “fiscal cliff”—$600bn in tax
increases and spending cuts that will occur on Jan 1, 2013 should Congress not act, made
even more nail-biting as the US is expected to hit its debt ceiling by mid-Feb—the “perfect
storm for fiscal chaos.” In an interview with our DC expert—Alec Phillips—we discuss the most
likely scenario (no cliff, but drag) and other (mostly scary) outcomes while former Senator Judd
Gregg weighs in on the political motivations. We make the case that US assets (USD/T-bills)
might actually perform well in the midst of a fiscal calamity and likely dividend tax rate hikes
may have less of a negative impact than feared. A bleak history of roads out of debt and
dangers of not “minding the fiscal speed limit”—too much belt tightening too fast— leave us all
the more concerned about the US fiscal future and implications for US growth.


Inside
Interview with Alec Phillips—Fiscal cliff in focus
GS Washington DC political economist
4
Interview with Senator Judd Gregg—The politics
Former US Senator from New Hampshire
8
If the US runs out of money…buy USD?
Thomas Stolper, FX Strategy Research
11
Dividend tax hikes something to fear?
Stuart Kaiser, US Portfolio Strategy
12
When in debt, regret? Then correct
Jose Ursua, Global Economics Research
14
Minding the fiscal speed limit


Jari Stehn, US Economics Research