• 2012: Calamity avoided, as compromise bill extends Bush-era tax cuts for all but the top 1%
• Data releases show a resilient consumer, a real estate revival and manufacturing on the mend
• Labor markets show dull but steady improvement, unemployment at 7.8%
• An early exit (before year-end 2013) from quantitative easing is a possibility
• Fiscal tightening should be offset by a dynamic private sector in next few months
• Continued policy gridlock is the major political risk in the near term
Looking back at 2012, we can say that this was another year of calamities avoided. In other words, what did not happen was more important than what happened. The eurozone did not collapse, and the much-hyped fiscal cliff was averted thanks to a last minute compromise approved by Congress and signed into law by President Obama. However, the sense of relief should be tempered by the recognition that many of the issues the world faced in 2012 remain unresolved—at best, the proverbial can has been kicked down the road.
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