The news channels are abuzz about the Fiscal Cliff, the colloquial term used to describe the moment at the end of 2012 when the Budget Control Act of 2012 is scheduled to take effect. What this means is that a variety of tax cuts that have been implemented since the Bush years will expire and deep spending cuts, (which were agreed to in 2011 in a government deal to cap the deficit) would be enforced.
WHAT THIS MEANS
The cuts would affect over a thousand government-sponsored programs including Medicare. If we go over the cliff the consequences would be dire. The government would be forced take out at least $500 billion out of the economy in order to reduce the deficit by $560 billion. Most economist believe this will throw the county right back into a recession.
WHAT YOU COULD LOSE
- Tax cuts. It will be the end of both the Bush era tax cuts Obama’s payroll tax holiday. According to the Washington Post, the taxes on a family making $72,240 with two children a year will increase by $3,289.
- Emergency unemployment benefits. This was money Obama allocated for the chronically unemployed to help people during the Great Recession of 2008.
- Medicare: Medicare providers would suffer a 2 percent payment cut. This would likely impact benefits and services.
- Security: According to the Miami Herald, federal cuts would mean less FBI and border patrol agents, park rangers and air traffic controllers. A study by George Mason University states that 277,000 federal workers and 470,000 federal contractors could lose their jobs.
- Assistance for those in need. Programs for low-income people will suffer severe cutbacks. The New York Times listed some of those programs as housing assistance and childcare nutrition assistance, home heating assistance and programs for the disabled.
- Head Start: Education programs such as Head Start, would be affected. Around 100,000 children would no longer be able to benefit from this program.
- Education: Subsidized student loans and educational grants like the Federal government’s PEL grant program that helps low-income students would be cut by over $140 million.
- Health: The Center for Disease Control and the National Institute of Health would be cut by a combined $3 billion.
- Defense: The Department of Defense would see its budget cut by almost 10 percent.
- Housing: Low income housing programs like Section 8 Housing Assistance will see deep cuts possibly affecting over 2 million low-income people.
Some economists fear that such severe cuts across most sectors of the Federal Budget would pull the country back into a recession, which is why the fiscal cliff is getting so much attention.
The Obama administration refuses to ease on their plan to raise taxes on people making more than $250,000 a year. The Republicans don’t want any tax increases for the wealthy and favor more cuts on social programs.