fiscal cliff

According to the New York Times, the fiscal cliff is a metaphor for the possible $500 billion in tax increases and across-board spending cuts that are scheduled to take place January 1, 2013. This is unless the Obama administration and Republicans can reach an alternative deficit-reduction deal. If the deadline is reached before a new deal is decided on, then taxes would raise dramatically for nearly every taxpayer and business. In addition, the financing for most military and domestic programs would be cut.  

The problem is, that the emergency unemployment plan placed to save $26 billion (but end payments to the millions of Americans that remain jobless and have exhausted 
state benefits) is expiring. Medicare payments to doctors and physicians would be reduced by $11 billion. This is because Congress this year hasn't passed the expected fix which blocks the cuts; that have otherwise been required by a 1990's cost-control law. Yet, the largest amount of cuts would come from $65 billion from federal programs that would be concluded throughout the final nine months of the 2013 fiscal year. This cut was a mandated deal made between Obama and Congress in August of 2011, in order to end a standoff in raising the nation's debt limit. 

Simultaneously, the Bush-Era tax cuts are about to expire. In 2001 and 2003, President Bush and the Republican leaders of Congress thought that they were rewriting the tax code permanently; however, the laws passed actually gave the cuts an expiration date at the end of 2010. Yet in 2010, President Obama and Republican leaders made a deal to extend the expiration dates back two more years. This was done as part of a broader package meant to support the still-fragile economy. Basically, what this all means is that Americans are looking right in the eyes of the beast and Congress is too scared to shoot it down in it's path in order to prevent dramatic tax increases across the board.