Q. What is the fiscal cliff?
A. The term refers to more than $500 billion in tax increases and across-the-board spending cuts scheduled to take effect after Jan. 1 – for fiscal year 2013 alone – unless Mr. Obama and Republicans reach an alternative deficit-reduction deal. Ben Bernanke, the chairman of the Federal Reserve, who is not known for catchy phrases, coined the metaphor “fiscal cliff” last winter to warn of the dangerous yet avoidable drop-off ahead in the nation’s fiscal path. It stuck.
In summary, because Republicans and Democrats in Congress could not come to an agreement a couple years ago, they decided to kick the can down the road in hopes that they could fix everything by 31 December 2012. If they fail to come to an agreement, then lots of bad things will happen. [Read more]