Now that the heat of the presidential election is over, the threat of a “fiscal cliff” looms ever closer. The “fiscal cliff” refers to the spending cuts and tax increases that will automatically begin in January unless policymakers intervene.
President Barack Obama and House Speaker John Boehner have stated that they are willing to work together to come up with a deficit reduction package. However, other Republicans and Democrats are in an all-too-familiar deadlock. The disagreement between the two parties lies in one topic—tax cut extensions for the wealthy.
While both parties agree about granting tax extensions for the lower and middle classes of America, Democrats are fighting for the expiration of the Bush-era tax cut for families that make over $250,000 annually, whereas Republicans wish to maintain the cut going forward.
Last Friday, Obama held strong on his position for letting the tax cuts lapse: “I am not going to ask students and seniors and middle-class families to pay down the entire deficit while people like me, making over $250,000, aren't asked to pay a dime more in taxes.”
Boehner, on the other hand, maintained that taxing upper-class Americans would only hurt job growth and advocates eliminating special interest loopholes and reducing government benefits. (Fox News, 11/13/12)
The economic package set to expire not only consists of the Bush-era tax cuts, but also includes the expiration of the payroll tax cut and budget cuts to such programs as Medicaid and Social Security. In the event of the fiscal cliff, Americans may see a sharp reduction in take-home pay and diminished support from existing government programs.
According to a recent Washington Post-Pew Research Center poll, 51% of Americans think the fiscal cliff will not be averted due to Washington gridlock, and 53% of Americans are inclined to blame Republicans in Congress if the event occurs. (Washington Post, 11/13/12)
If the “fiscal cliff” does take effect, many fear that another recession could be the result – with businesses likely slowing production and hiring, and possibly reinstituting layoffs as they try to recoup losses and stay afloat. At a Wall Street Journal CEO Council Conference in Washington, 73% of participating CEOs said the "fiscal cliff" was their primary concern at present.
Readers: Has talk over the fiscal cliff impacted business plans for 2013?