Since the U.S. reached the debt ceiling in late 2012 and the country’s credit rating was downgraded for the first time in history, talks of reaching a fiscal cliff have loomed.
The fiscal cliff is a term used to describe what will happen after the start of the new year if there is no budget reform. If Congress does not reach a deal extending tax cuts by the time the Budget Control Act of 2011 goes into effect, taxes will be raised for anyone in the workforce. The result may be another recession.
How can it affect you?
If congress does not reach a deal, $661 billion in new tax hikes will start affecting your first paycheck (a two percent increase) after January 1st. On January 2nd, $78 billion in sequester hikes will begin cutting on some government and private sector workforces, likely causing layoffs and budget cuts.
How can this problem be solved?
A solution is an extension on tax cuts for the middle-class. However, Democrats and Republicans will most likely take this to the eleventh hour. John Boehner admitted that Congressional progress towards reaching a compromise has reached a stalemate.
The House will vote on a middle-class tax cut extension next week, which may stall our economy’s cliff diving.
According to CNN, gsectors that will be affected by the cliff-dive come January 1st include:
- Food Safety and Inspection Service agency,
- The CDC,
- The NIH,
- The Maternal, Infant, and Early Childhood Home Visiting Program,
- The Office of Lead Hazard Control and Healthy Homes,
- Gallaudet University (an education program for the deaf and hard of hearing),
- Social Security.
It seems that Obama’s pressure towards Congress to pass a tax-cut extension are more “bargaining tactics” and less “honest compromise.” Obama has doubled his request for higher revenues, and Republicans aren’t having it. Orrin Hatch called the plan “a classic bait-and-switch on the American people.” Mitch McConnell even burst into laughter when Geithner outlined the White House’s plans.
Obama has warned of a ‘Scrooge’ Christmas if Republicans in Congress don’t sign off on a deal.
Here’s a fiscal cliff countdown just in case you haven’t started saving that extra two percent.
Maegan Vazquez, a Texas born sophomore at New York University, brings her young woman’s lens on all things political to Heartfeldt Blog every Monday. Send news tips to email@example.com