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Teresita Diaz: Fiscal Cliff

The Budget Control Act of 2011 created a fiscal cliff of automatic spending cuts and tax increases set to take effect in January 2013. The chairman of the Federal Reserve warned Congress in 2012 that failing to address the fiscal cliff could severely damage the economy. The national debt has grown to around $16 trillion and the annual budget deficit is $1.1 trillion. To reduce the deficit, the Budget Control Act mandates $100 billion in spending cuts and $400 billion in tax hikes, but allowing these changes could harm the fragile economic recovery. Congress must compromise on a solution before the December 31 deadline or the economy will face trouble in 2013.

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Lola Gonza
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23 views

Teresita Diaz: Fiscal Cliff

The Budget Control Act of 2011 created a fiscal cliff of automatic spending cuts and tax increases set to take effect in January 2013. The chairman of the Federal Reserve warned Congress in 2012 that failing to address the fiscal cliff could severely damage the economy. The national debt has grown to around $16 trillion and the annual budget deficit is $1.1 trillion. To reduce the deficit, the Budget Control Act mandates $100 billion in spending cuts and $400 billion in tax hikes, but allowing these changes could harm the fragile economic recovery. Congress must compromise on a solution before the December 31 deadline or the economy will face trouble in 2013.

Uploaded by

Lola Gonza
Copyright
© Attribution Non-Commercial (BY-NC)
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Download as DOCX, PDF, TXT or read online on Scribd
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Teresita Diaz

Fiscal Cliff
Period 6

Budget Control Act of 2011 a deal president Obama signed on August 2011 that ended the battle in congress by creating cap on the debt ceiling set by congress on the amount money the federal government can legally borrow set the results of $560 billion tax increases and spending cuts that take effect in January 2013 called the Fiscal Cliff. The chairman Ben Bernake in February 2012 in front of congress said that without action the U.S. faced a massive fiscal cliff of large spending cuts and tax increases" on Jan. 1, 2013 thus creating the phrase fiscal cliff. The national debt is the total of all debt over the years and currently is around $16 trillion and the annual shortfall of $1.1 trillion. In order to stop the increase of the national debt and reduce the record-high deficit the Budget Control Act was created by congress. In order for the fiscal cliff to take effect the government has to cut $100 billion in cuts to the government agencies and $400 billion in tax hikes. The act of doing this could harm the growing but fragile U.S. economy. The tax increases are the tax breaks passed during President Bushs term that president Obama extended. Congress need to make a decision which means the need to compromise before December 31 deadline or the economy will be hurt. If the Congressional Budget Office is correct the United States economy could be in trouble for the first half of next year and 1.4 million fewer jobs would be created in 2013. Like everything that the government does there is always a fight on how to do it. The Republicans say is one way and Democrats say is the other but how well they compromise by the deadline of January 1 will decide if there is going to be a Fiscal cliff on January. Republicans do not want to increase taxes but would like to cut spending. Many Republicans to prove their point are going as far as signing a pledge saying that they will not

increase taxes. Their concern is that if the debt grows more than it would be harder for the government to borrow money on reasonable rates in the future. Democrats want to increase taxes on the wealthy and do less drastic cuts on the government to reduce the deficit. Their main concern is that cuts on the federal government programs will hurt the consumer spending, government workers, and programs for the lower class such as food and education.

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