The fiscal cliff has been pushed back at the beginning of this year with a bill. President Obama put it in ink on Wednesday, January 2nd with his a famed auto-pen. The fiscal cliff was all anyone could talk about in the last months leading up to 2013. News stories never stopped raving about it. They struck fear into the hearts of Americans, talking of spending cuts and tax increases. In the final days before the New Year, the decision still hadn’t been made and the nation seemed certain to hurtle over that cliff.
So what happened to all the hype? What exactly was the fiscal cliff and why was it so easily averted?
The fiscal cliff comes from the Budget Control Act of 2011. This act dictated that as of midnight on December 31st, certain tax breaks would be removed and other taxes for Obama’s health care law would go into effect. The end result would be a rise in taxes. The fiscal cliff was also set to deeply cut spending on over 1,000 government programs—including the defense budget and Medicare—in an effort to better balance the budget.
This cliff scared people, and the government took that into consideration. The senate met on December 31st to discuss the cliff once again. Just 2 hours after the deadline, they agreed upon a deal. The house approved it within a day and the President had his signature placed on it by January 2nd.
This deal did raise taxes on the public, just not to the degree that the fiscal cliff previously entailed. It also reversed the Bush tax cuts for individuals raking in more than $400,000 a year and couples with an income of over $450,000. The federal budget cuts have merely been suspended for 2 months, giving the legislative branch more time to agree on the details of that agreement.
It wasn’t easily averted, that’s for sure. The congress, house, and president had to compromise on a deal that would reduce the stress load we were expecting. Although taxes were raised, they weren’t as bad as the cliff was asking for. Although the spending cuts weren’t averted forever, they were delayed for a time. This deal has the potential to moderate the fiscal cliff to a level that people can agree on, and hence, make for a better 2013 than the news projected for us.