With just a few weeks left in 2012, all eyes in Washington are on Capitol Hill and the “fiscal cliff” negotiations. As usual, Congress and the President are taking highly contentious issues down to the wire before cutting a deal—never a situation that ends well for taxpayers.
Federal Reserve Chairman Ben Bernanke coined the term “fiscal cliff” while urging Congress to avoid a steep dropoff for the economy at the end of the year thanks to tax increases and automatic budget cuts.
There is no agreement right now on how to avoid it, however. When Treasury Secretary Tim Geithner presented the White House’s plan to House Speaker John Boehner (R-OH) last week, Boehner said, “You can’t be serious.” Thus far, President Obama’s answer to the fiscal cliff is a proposed $1.6 trillion in tax hikes plus new stimulus spending—and expanded power for himself to raise the debt ceiling without congressional approval. He suggests only magnifying the policies that brought us to the fiscal cliff in the first place.
Heritage’s Romina Boccia, James Sherk, and Katie Tubb have explained “What’s in the Fiscal Cliff?” and recommended solutions to several of the immediate problems. They note that American individuals, families, businesses, and the military will all be harmed if the nation goes “off the cliff,” so to speak, or if a bad deal is done in Washington. Here are some of the major components of the fiscal cliff.