Nowadays one can barely watch the news or search the internet without at least hearing mention of the fiscal cliff. But what exactly is it? This is a question many Americans are finding themselves asking. If this apocalyptic “cliff” is so serious why do we not know exactly what it is? Let’s examine it and keep it simple, without all the big, financial lingo associated with it. First things first, people should know that the fiscal cliff is not something we just learned about last month; the government has been aware of this cliff’s impending doom for almost a year now.
Why we are just now starting to hear about it is a good of a question as any. But nonetheless; if a conclusion is not reached by January 1st, the nation could be in some serious trouble, according to top economists. December 31, 2012 is a date that looms large on the calendar of U.S. politicians, bankers and investors. It is a day that many associate with a cataclysmic event that will change the American way of life; it is the day that the U.S. will stumble over the "fiscal cliff'. Fear mongering and political maneuvering are central to the "fiscal cliff' story detailed in headlines, which report on frantic last minute negotiations between Democrats and Republicans to advert the near disaster.
The "fiscal cliff', however, is an invented term applied by politicians to the date various temporary legislative changes to the country's tax code and spending policy take effect. Politicians began instituting temporary tax cuts with the intention of later transforming them into permanent law in the 1990s. According to a Center on Budget and Policy Priorities report, this practice exploded during the George W. Bush administration and was accompanied by budget gimmickry to hide their effect on the federal deficit.
Negotiations drag on in Washington with media hysteria pushing the Democrats and Republicans to strike a deal that could include the permanent extension of the Bush era tax cuts to avoid economic catastrophe. The "fiscal cliff' and the tales of doom that surround it are, according to the CBO and numerous experts in the field, just exaggerations and tall tales. The "fiscal cliff' appears to be another 2012 apocalypse theory that is debunked, upon close examination, by the same sources being cited to support it.