The fiscal cliff and you
Here's a quick way to understand the battle over the fiscal cliff.
The fiscal cliff sounds like a nightmare. But it comes with real numbers that have real impacts on the lives of most Americans. Here's an in-depth look at them:
The fiscal cliff started to affect business decisions this fall. That's why you saw small declines in manufacturing in Friday's jobs report, for example.
It appears to be a worry for consumers now. The University of Michigan's latest consumer sentiment survey shows confidence dropping to a four-month low. That suggests households are concerned about a potentially sharp fall in their after-tax incomes.
The CBO data suggests they might want to be concerned.
The CBO estimates suggest the 20% of households with the lowest incomes might see their taxes rise by $412.
If you're in the middle 20% of income levels -- between $39,791 and $64,484 -- the average increase would be $1,984. If you're in the top 20% -- $108,267 or above -- the CBO is estimating an average increase of $14,173.
If you're in the top 1% -- with income above $506,210 -- the average increase might be about $120,500.
The threat of the cliff is the result of Congress' inability in 2011 to come up with a package that would satisfy everyone. It came after threats of a government shutdown, a downgrade of U.S. debt by Standard & Poor's and a short, intense panic in financial markets that sent the major stock market averages down.
The provisions of the cliff were part of a deal made by Congress in an August 2011 budget bill. It set up a so-called Super Committee of members of Congress and the Senate who were supposed to hammer out $1.2 trillion in spending cuts over 10 years. If they couldn't come up with a plan, then a mandatory combination of spending cuts and tax increases would kick
The Super Committee couldn't agree on a plan, with Democrats and Republicans essentially deciding to wait until after the 2012 election to make decisions.
The CBO sees the cliff cutting the federal deficit but also causing a recession, just as the economy is gaining some strength, that might not end until the end of 2013.
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On the other hand, if you believe more taxes are the answer, you obviously also believe the gov doesn't spend too much. In that case, feel free to write them a check and leave the rest of us alone.
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