Fiscal Cliff

fiscal cliff

so what exactly is the Fiscal Cliff? I’m sure you seen the phrase - Fiscal Cliff - dominating the radio, TV, internet, etc. for the past month and days to come. Pundits (politicians) and economists at Harvard turned their attention to the dire predictions of the possible and theoretically outcome of “the fiscal cliff.” Overall, at its core, this event could leave a deep impact and dominate our lives for the foreseeable future. Think of it as the economic version of Hurricane Sandy that swarmed the Wall Street (the Northeast) few weeks ago. It all begins with the December 31, 2012 expiration of the Bush tax cuts. Originally, these tax cuts were schedules to end back in 2010; however, they were extended for two years in a horse trade between President Obama and the GOP (Republican Party) controlled Congress. If you can recall the 2010 election victory, wherein President Obama agreed to continue tax cuts for all Americans in an exchange for Congress agreeing to extend the unemployment benefits for ones out of work. So, if the Bush tax cuts is just allowed to expire - it will raise taxes for most Americans. And another godawful news is that the temporary, Obama administration’s two percent tax cuts, is also scheduled to expire on December 31st. Nothing done, on January 1st, millions of Americans will be paying $2k to $3k additional dollars in taxes each year - leaving them with $3k less to spend (on our Capitalistic consumer driven economy).   These cuts hit all areas of the federal budget, including the Medicare, the Education, the FEMA, and the Defense. When you add up the increased payment of taxes and the cuts in government spending, we are looking at taking somewhere around $800 billion out of the U.S. economy next year—producing the potential for devastating consequences. Now, Obama administration and the GOP have quite different thoughts on taxing the ones who earn more than $250,000 a year. The whole government is sort of polymorphic now. Although the media might make you feel cacophonous (or that this post is obfuscation) for the next week, the White House will soon release the economic road-map for the upcoming years.