Fiscal Cliff

I bet you've been hearing politicians talk about the so called "fiscal cliff" that is looming ahead in the future. What is the fiscal cliff and what is so bad about it? Well sometimes when a Congress and the president cannot agree on economic policy, they mandate a self imposed future crisis in order to force themselves to work together on unpopular spending and tax policies. If President Obama and the Republican Congress cannot work out a deal, then there will be $500 billion dollars worth of tax increases on all levels of society as well as spending cuts towards major important government establishments and organizations. What the politicians didn't realize was that the measures from the 2011 deal are taking effect at the same time as changes to many other other benefits and economic policies. Many fear that if we go off this cliff, we may go into a double-dip recession.

You make be wondering what exact spending cuts and tax increases this fiscal cliff include. Well all of the Bush-era tax cuts expire as well as the 2-percentage-point cute in payroll taxes that Obama pushed in 2010. For some people that's reducing people's pay by $1,000.00 a year. Many people would have to pay the alternative minimum tax in 2012, raising their taxes even more! There would also be numerous spending increases across the board. Trillions of dollars across domestic policies as well as military spending.


If you have the same question as me you may be asking yourself why can't the Republicans and Democrats agree on anything. Surprisingly, both sides agree that most of the things included in the fiscal cliff are bad and should not happen. However, the thing they disagree on most is the Bush rates on incomes for the top 2% of taxpayers. Obama seems steadfast that he will not extend the Bush-era tax cuts to those top percentage again. One thing is for sure though, that they need to reach some sort of agreement before the new year or else horrible things will happen.