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United States fiscal cliff
In the United States, the fiscal cliff refers to the economic effects that could result from tax increases, spending cuts and a corresponding reduction in the US budget deficit beginning in 2013 if existing laws remain unchanged. The deficit—the difference between what the government takes in and what it spends—is projected to be reduced by roughly half in 2013. The Congressional Budget Office estimates that this sharp decrease in the deficit (the fiscal cliff) will likely lead to a mild recession in early 2013.
The laws leading to the fiscal cliff include the expiration of the 2010 Tax Relief Act and planned spending cuts under the Budget Control Act of 2011. Nearly all proposals to avoid the fiscal cliff involve extending certain parts of the Bush tax cuts or changing the 2011 Budget Control Act or both, thus making the deficit larger by reducing taxes or increasing spending. Because of the short-term adverse impact on the economy, the fiscal cliff has stirred intense commentary both inside and outside of Congress and has led to calls to extend some or all of the tax cuts, and to replace the spending reductions with more targeted cutbacks. The protracted negotiations over this have also generated heightened policy uncertainty over the eventual tax and spending landscape in the US.
The Budget Control Act was a compromise intended to resolve a dispute concerning the public debt ceiling. Some major programs, like Social Security, Medicaid, federal pay (including military pay and pensions), and veterans' benefits, are exempted from the spending cuts.[note 1] Spending for defense, federal agencies and cabinet departments would be reduced through broad, shallow cuts referred to as budget sequestration.
The United States public debt would continue to grow even if no mitigating actions are taken to avoid the fiscal cliff. However, over the next ten years, the smaller deficit will lower projected increases in the debt by as much as $7.1 trillion or about 70%, resulting in a considerably lower ratio of debt to the size of the economy. For the first year (from fiscal year 2012 to 2013), federal tax revenues are projected to increase by 19.63%, while spending outlays are expected to decline by 0.25%.[1](table-1.6)[note 2] These changes would raise 2013 tax revenue to 18.4% GDP, above its historical average of 18.0% GDP, while reducing spending to approximately 22.4% GDP, still above the 21.0% GDP historical spending average.[2]
The US debt-ceiling became involved in the fiscal cliff debate when Treasury Secretary Timothy Geithner introduced the President's authority to raise the country's borrowing limit as a part of his first formal proposal.[3] Although not strictly part of the fiscal cliff,[note 3] the current debt-ceiling will also expire around the end of the year, unless "extraordinary measures" are used.[4]
Etymology
The term fiscal cliff has been used in the past to refer to various fiscal issues.[5] The term started being used in the current context near the original expiration of the Bush tax cuts in 2010.[6][5] In 2011, the term started to be used to refer to the deficit reductions that would occur in 2013 under current law.[5][7]
In late February 2012, Ben Bernanke, chairman of the U.S. Federal Reserve, popularized the term "fiscal cliff" for this crisis.[8] Before the House Financial Services Committee he described that "a massive fiscal cliff of large spending cuts and tax increases" would take place on January 1, 2013.[5][9][10]
Some analysts have argued that fiscal slope or fiscal hill would be more appropriate terminology because while the cumulative economic effect over all of 2013 would be substantial, it would not be felt immediately but rather gradually as the weeks and months went by.[11][5][12][8]
SOURCE: http://en.wikipedia.org/wiki/United_States_fiscal_cliff
The laws leading to the fiscal cliff include the expiration of the 2010 Tax Relief Act and planned spending cuts under the Budget Control Act of 2011. Nearly all proposals to avoid the fiscal cliff involve extending certain parts of the Bush tax cuts or changing the 2011 Budget Control Act or both, thus making the deficit larger by reducing taxes or increasing spending. Because of the short-term adverse impact on the economy, the fiscal cliff has stirred intense commentary both inside and outside of Congress and has led to calls to extend some or all of the tax cuts, and to replace the spending reductions with more targeted cutbacks. The protracted negotiations over this have also generated heightened policy uncertainty over the eventual tax and spending landscape in the US.
The Budget Control Act was a compromise intended to resolve a dispute concerning the public debt ceiling. Some major programs, like Social Security, Medicaid, federal pay (including military pay and pensions), and veterans' benefits, are exempted from the spending cuts.[note 1] Spending for defense, federal agencies and cabinet departments would be reduced through broad, shallow cuts referred to as budget sequestration.
The United States public debt would continue to grow even if no mitigating actions are taken to avoid the fiscal cliff. However, over the next ten years, the smaller deficit will lower projected increases in the debt by as much as $7.1 trillion or about 70%, resulting in a considerably lower ratio of debt to the size of the economy. For the first year (from fiscal year 2012 to 2013), federal tax revenues are projected to increase by 19.63%, while spending outlays are expected to decline by 0.25%.[1](table-1.6)[note 2] These changes would raise 2013 tax revenue to 18.4% GDP, above its historical average of 18.0% GDP, while reducing spending to approximately 22.4% GDP, still above the 21.0% GDP historical spending average.[2]
The US debt-ceiling became involved in the fiscal cliff debate when Treasury Secretary Timothy Geithner introduced the President's authority to raise the country's borrowing limit as a part of his first formal proposal.[3] Although not strictly part of the fiscal cliff,[note 3] the current debt-ceiling will also expire around the end of the year, unless "extraordinary measures" are used.[4]
Etymology
The term fiscal cliff has been used in the past to refer to various fiscal issues.[5] The term started being used in the current context near the original expiration of the Bush tax cuts in 2010.[6][5] In 2011, the term started to be used to refer to the deficit reductions that would occur in 2013 under current law.[5][7]
In late February 2012, Ben Bernanke, chairman of the U.S. Federal Reserve, popularized the term "fiscal cliff" for this crisis.[8] Before the House Financial Services Committee he described that "a massive fiscal cliff of large spending cuts and tax increases" would take place on January 1, 2013.[5][9][10]
Some analysts have argued that fiscal slope or fiscal hill would be more appropriate terminology because while the cumulative economic effect over all of 2013 would be substantial, it would not be felt immediately but rather gradually as the weeks and months went by.[11][5][12][8]
SOURCE: http://en.wikipedia.org/wiki/United_States_fiscal_cliff
I've divested about a 1/4 of what I had in the market, but that's only because I had some losers backed.
I'm not sure what everyone else is doing, but I'm staying in. Anyone who plays the market, and is in it with a "get rich quick" mentality, either has too much money to play with and it won't effect them one way or the other if they lose it, or they're too stupid to see that the stock-market, over time, always ends up recovering.
It may have some extreme highs and lows, yes, but over a 25 year period, it'll always end up coming back stronger and more stable (my opinion anyway).
I'm staying IN.
I'm not sure what everyone else is doing, but I'm staying in. Anyone who plays the market, and is in it with a "get rich quick" mentality, either has too much money to play with and it won't effect them one way or the other if they lose it, or they're too stupid to see that the stock-market, over time, always ends up recovering.
It may have some extreme highs and lows, yes, but over a 25 year period, it'll always end up coming back stronger and more stable (my opinion anyway).
I'm staying IN.
I heard people are taking money out of the stock market.
"...Do you think this 'fiscal cliff' may have scared people into spending less..."
I think that peopl, in general, are making less money that they were in 2007. Their paychecks may be the same as they've always been, but when you factor the COL increases across-the-board, and just about EVERYTHING costing 25-35% more than it did in 2007... people have less to spend on "stuff" than they used to.
Honestly, I'm making the SAME as I was in 2007 (no more, and no less), but I spent WAY, WAY less this year on "stuff" than I have in previous years, not because I'm scared of the fiscal-cliff, but because I simply have LESS disposable income as I have in previous years.
I think that peopl, in general, are making less money that they were in 2007. Their paychecks may be the same as they've always been, but when you factor the COL increases across-the-board, and just about EVERYTHING costing 25-35% more than it did in 2007... people have less to spend on "stuff" than they used to.
Honestly, I'm making the SAME as I was in 2007 (no more, and no less), but I spent WAY, WAY less this year on "stuff" than I have in previous years, not because I'm scared of the fiscal-cliff, but because I simply have LESS disposable income as I have in previous years.
I just read where this shopping season, sales were lower than they've been since 2008. Do you think this 'fiscal cliff' may have scared people into spending less ?
"I look for em to come up with some stupid stop gap measure at the last minute and address the whole of it later. Another kicking the can down the road."
The beauty (for Congress) of the whole thing is that they can just keep kicking the can down the road, without ever really having to deal with it. Nobody wants to be the "bad guy", so they keep coming up with stop gap measures to get us out of a crisis, but there are never any long term solutions. That way, nobody ever has to be blamed.
I, personally, think those tax hikes will go into effect and kept there.
Did anyone read the link that rivil posted?
The beauty (for Congress) of the whole thing is that they can just keep kicking the can down the road, without ever really having to deal with it. Nobody wants to be the "bad guy", so they keep coming up with stop gap measures to get us out of a crisis, but there are never any long term solutions. That way, nobody ever has to be blamed.
I, personally, think those tax hikes will go into effect and kept there.
Did anyone read the link that rivil posted?
Yep. Makes me sick, the lot of them.
I agree completely it is fear mongering. I think the very worst thing to come out of it would be sequestration...but even that can be remedied after the ball is rolling, which is likely what they'll do if we go over. They're not going to kleave those automatic cuts in place like they are going to be set up.
It's more about politics than anything else, I think...and a way for each side to point fingers at the opposite party.
It's more about politics than anything else, I think...and a way for each side to point fingers at the opposite party.
True, and I think its time we called em on it, personally. I look for em to come up with some stupid stop gap measure at the last minute and address the whole of it later. Another kicking the can down the road.
The republicans figure if they go over the cliff, they cannot be accused of raising taxes. The dems have nothing to lose either because if they go over they can come back and give those making 250 or under the tax cut and the republicans can be given credit for agreeing to cuts instead of rate hikes.
Tricky thing is, we have been told if we go over that cliff, we may have our credit downgraded again, and then we get to fight over the rise of the debt ceiling again, and come March we will face another government shutdown I'm afraid.
Politics.
The republicans figure if they go over the cliff, they cannot be accused of raising taxes. The dems have nothing to lose either because if they go over they can come back and give those making 250 or under the tax cut and the republicans can be given credit for agreeing to cuts instead of rate hikes.
Tricky thing is, we have been told if we go over that cliff, we may have our credit downgraded again, and then we get to fight over the rise of the debt ceiling again, and come March we will face another government shutdown I'm afraid.
Politics.
"For whatever reason it seems like both the Federal Government and the media like keeping the US public fearful." As long as they exercise the "fear factor" to the utmost, they think they have better control.
Fiscal cliff ?? Makes me think of chicken little yelling "the sky is falling."
For whatever reason it seems like both the Federal Government and the media like keeping the US public fearful.
For whatever reason it seems like both the Federal Government and the media like keeping the US public fearful.
First sentence, when you open the link:
"Perhaps the most important thing to understand about the melodrama known as the "fiscal cliff" that's been gripping Washington for the past month is how ridiculously overhyped it's become."
That was an "enlightening" video. I think everyone needs to watch it. Thanks rivil.
"Perhaps the most important thing to understand about the melodrama known as the "fiscal cliff" that's been gripping Washington for the past month is how ridiculously overhyped it's become."
That was an "enlightening" video. I think everyone needs to watch it. Thanks rivil.
Yup, time for more finger pointing. Might as well.... nothing else happens in DC.
I think you guys are right. When you get the time take a look at this.
You may not entirely agree but it does point to how this cliff has been a set up by Obama as well as the Republicans.
Yeah, I am thinking more to being an independent these days.
http://www.upworthy.com/why-fiscal-cliff-is-an-incredibly-stupid-metaphor?c=ufb1
You may not entirely agree but it does point to how this cliff has been a set up by Obama as well as the Republicans.
Yeah, I am thinking more to being an independent these days.
http://www.upworthy.com/why-fiscal-cliff-is-an-incredibly-stupid-metaphor?c=ufb1
I think the politicians and media have blown the whole thing out of proportion. If it were as drastic as some say, they wouldn't even "consider" not doing anything. I don't think they WANT to make a compromise. If they just it go, each side can sit and point fingers at the other side for not compromising.
I, too, agree with teko -- let's all hold hands and go it together, cuz I don't trust Congress with it.
I, too, agree with teko -- let's all hold hands and go it together, cuz I don't trust Congress with it.
I'm in FULL agreement with Teko on this... I believe the best thing that could happen, would be for us to slide down the slope/hill (ie: go over the cliff).
If you want to know how to fix a problem that you don't know the size of (which is the case here), what better way to see how BIG it is, than to let it simply happen???
I think that we all THINK we know what the problem areas are, but what better way to get the REAL picture, than to let the cream rise to the surface, metaphorically speaking?
I'm with Teko...
If you want to know how to fix a problem that you don't know the size of (which is the case here), what better way to see how BIG it is, than to let it simply happen???
I think that we all THINK we know what the problem areas are, but what better way to get the REAL picture, than to let the cream rise to the surface, metaphorically speaking?
I'm with Teko...
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