The ‘Fiscal Cliff,’ Explained –

A critical negotiation is occurring right now.  The Q&A gives some basic definitions, but the graphic “Staking Out Positions…” is a useful summary of where various sides are lining up. In the past the so-called “Gang of 8” was a way for top Senate leaders to push proposals up the chain–but it doesn’t appear to be working this time around.

Q. If we go over this so-called cliff, what happens?

A. Taxes would rise for nearly every taxpayer and many businesses. Financing for most federal programs, military and domestic, would be cut. Many economists say that while annual budget deficits are too high, these new taxes and spending cuts would be too much deficit reduction, too suddenly, for a weak economy. More than $500 billion equals roughly 3 percent to 4 percent of gross domestic product. The Congressional Budget Office has said the result would be a short recession, though some analysts say the measures could be managed so they do less damage. “Slope,” they argue, is a better metaphor than cliff.

viaThe ‘Fiscal Cliff,’ Explained –


3 thoughts on “The ‘Fiscal Cliff,’ Explained –”

  1. I don’t believe that any political party has addressed this issue thoroughly enough, or even been able to describe a palatable plan to the public. The fact of the matter is that there is not an easy and magical plan to balance our budget – we must increase taxes. And not just for the higher tax brackets. The problem with the American tax system lies in its complexity. These complexities allow for numerous loopholes and deductions. If we want to increase governmental revenue the answer is not in cutting more social programs – it’s in reforming them to run more efficiently. The answer is in increasing the tax base – we need to tax more people. A flat tax would provide an easy system for the IRS to not only levy taxes, but also a simpler way to audit and catch tax evaders. We need to streamline the amount of deductions and eliminate as many as we can. Taxes should not be placed on corporations – if we tax growth, we’ll see less of it.

  2. I am very interested how U.S. will pass this test this time. We can observe myriads of actors trying to use their leverage they have to influence different sets of negotiations. We see Republican governors of 60 percent of U.S. states trying to use first month of President Obama’s second term to negotiate on exchanging insurance( Both democrats and republicans are strongly held responsible by the interest groups of doctors and medicaid advocates,giving little space for two parties to negotiate. The article did say that (for the very same reason) both parties want to avoid fiscal cliff since it taps on their supporters’ main interest, but again I think it is extremely difficult for the parties to come to an agreement by the given deadline. I surmise that the fiscal cliff will take place, and republicans could use it as a leverage against Obama administration and criticizing the democratic party.

  3. it’s pretty clear from election exit polls that the majority of American support an increase in taxes, and more specifically an increase in tax rates for the rich. Although the Republicans want to keep taxes on the rich at status quo levels, I think that they have a mandate to raise taxes, and I feel like this is one compromise that they’re not going to be able to get the democrats to go along with. Immediately passing an extension of the Bush tax cuts for the middle class could be a critical way of signalling to wall street that Congress will take action, that sequestration will not take place, and that Washington is still capable of acting responsibly.

Leave a Reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s