With a fiscal cliff looming over the American people, the country is left to wonder what is awaiting its citizens in the coming year.
A fiscal cliff will take place in the United States if certain laws remain intact that can result in increased taxes, spending cuts and a parallel decrease in the budget deficit.
The phrase ‘fiscal cliff’ has been used to reference a variety of fiscal issues, beginning in 2010 to refer to the expiration of the Bush tax cuts and what is likely to take place if that happens.
In 2011, the term was used in reference to the deficit reductions that might occur in 2013 under the existing laws. Ben Bernanke, chairman of the United States Federal Reserve, used the term in
February to describe the approaching crisis.
According to a New York Times article by Annie Lowery, analysts are saying that the terms ‘fiscal slope’ or ‘fiscal hill’ would be more appropriate because the change would be gradual—not a plunge.
The article goes on to quote Chad Stone, the chief economist at the Center on Budget and Policy Priorities, a research team based in Washington, who wrote in an analysis, “The slope would likely be relatively modest at first. A relatively brief implementation of the tax and spending changes required by current law should cause little short-term damage to the economy as a whole.”
The present laws that can lead to a fiscal cliff include: Bush tax cuts expiration, extended by President Barack Obama in the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 and across the board spending cuts to programs as engaged by the Budget Control Act of 2011.
New taxes executed by the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, termination of the two percent social security payroll tax cut and the expiration of procedures deferring the Medicare Sustainable Growth Rate can also contribute to a fiscal cliff in the country, plus an expiration in federal employment benefits.
According to the Congressional Budget Office, an increased risk of a recession during 2013 will result if the deficit is suddenly decreased, but lower deficits and debt may very well improve long-standing economic development.
The 2013 deficit is expected to be lessened by half.
According to an article by Ken Thomas of the Associated Press, Obama will travel to Philadelphia, Pa. Nov. 30 to try compelling Republicans to escalate taxes on the wealthy, while extending tax cuts for families earning $250,000 or less.
The article also states the “White House said the president intends to hold a series of events aimed at building support for his approach to avoid across-the-board tax increases and steep spending cuts in defense and domestic programs.”
According to the article, the president’s strategies have been criticized by many, including Senate Republican Leader Mitch McConnell, R-Ky., who said that “rather than sitting down with lawmakers of both parties and working out an agreement, he’s back out on the campaign trail, presumably with the same old talking points we’re all familiar with.”
“If the president wants a solution to the challenges of the moment, the people he needs to be talking to are the members of his own party, so he can convince them of the need to act,” McConnell said.
In a Wall Street Journal article by Damian Paletta and Carol E. Lee, House Speaker John Boehner, R-Ohio said, “People in both parties agree we need a ‘balanced approach’ to deal with our deficit and debt and help our economy create jobs.”
If the parties do not reach an agreement regarding the fiscal cliff, it could cost the country billions of dollars in an already struggling economy and may lead to a global recession.
