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United States Fiscal Cliff


The United States Fiscal Cliff refers to the effect of a series of enacted legislation which, if unchanged, will result in tax increases, spending cuts, and a corresponding reduction in the budget deficit. If the legislation in question remain unchanged, the economy might put U.S. back into recession.

Fiscal cliff which include automatic federal-spending cuts and tax increases will hit in January 2013 unless President Obama and Congress agree to find some other way to reduce budget deficit. President Barack Obama is planning to hold a new series of talks with the leaders of the Congress to find a 'grand bargain'.

The term 'fiscal cliff' was coined by Ben Barnanke, chairman of U.S. Federal Reserve. He first used the term for the crisis before the House Financial Services Committee in late February 2012.

The laws in question include Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 and the spending reductions ("sequestrations") under the Budget Control Act of 2011.

If no agreement is reached, it would result in a $2,200 tax hike for an average family of four next year.

President Barack Obama's political stand

President Barack Obama is pushing to extend income tax cuts due to expire on January 1 for middle class Americans. However, he is looking to increase tax rates for the rich, an approach which is opposed by Republicans in Congress. President Obama has met small business owners at the White House on 27 Nov 2012 and will talk to middle class families and top CEOs before the end of the year.

Timeline

November 29, 2012: House of Representatives Speaker John Boehner has criticized President Barack Obama and Democrats for failing to get serious to include spending cuts in the fiscal cliff deal. He said that they have not made any substantive progress on the "fiscal cliff" talks.

Decemeber 2, 2012: Democrats and Republicans differ over plans to avert fiscal crisis. Treasury Secretary Timothy Geithner, who is now Obama's chief negotiator with congressional Republicans challenged the Republicans to improve on is offer. Calling the White House plan balanced and detailed, he said that he is willing to hear suggested improvements on the plan. Geithner appeared on all five major news networks. However, House Majority Leader John Boehner called the plan non-serious and said he was flabbergasted when the plan was presented to him.

December 6, 2012: A Quinnipiac University poll showed that nearly 65% of those surveyed supported proposal of higher taxes for Americans who are making more than $250,000.

United States Fiscal Cliff in News

President Obama reiterates that the wealthy should pay more in taxes
President Obama says the majority of Americans agree with his approach in raising taxes for the wealthy

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