We all heard about it, on television, newspapers, magazines, the Internet, radio, and even friends, family, and teachers. The matter of the fact was that the year 2012 proved a crucial year to our economy, especially in reference to our present tax laws/ codes. Still, many may not have understood what the famous Fiscal Cliff was, let alone acknowledge what was the reasoning behind this so called “cliff”.
The issue at hand involved three (3) key topics that if unsolved by the January deadline, would have sent the entire country into chaos, no doubt.
The first issue at hand included spending cuts. Back in August of 2011, legislation passed scheduled automatic spending cuts, in order to cut $55 billion from a vast array of domestic programs, such including infrastructure and education, as well as another $55 billion from military funding, which would have taken effect in January of this year, 2013. The legislators had difficulty arranging the matter to satisfy all interests and decided upon postponing the cuts until March 1, 2013. Such was enabled due to lawmakers taxing transfers between the traditional individual Retirement Accounts (IRS’s) and Roth IRA’s; this was also enabled through some other cuts made, which are more discreet in nature. Hence, domestic programs and our military will not feel the heat until later on this year…
The Budget Deal was also a key factor of the Fiscal Cliff that was, unfortunately, overlooked. Congress has had a difficult time enacting a budget for the 2013 fiscal year (beginning in October of 2012), in reality. To patch up the hole, In September, Congress passed a measure that would keep government alive until March 27, 2013; they enacted a “stop-gap spending measure”, called “continuing resolution”. However, during the Fiscal Cliff negotiations, Congress once again pushed the budget to the side, leaving it until March to pass additional legislation to allow the government to continue running.
Another urgent issue at the time of the Fiscal Cliff negotiations was the famous debt ceiling, which to many Americans may be considered surpassed and completely shattered. For reference, the debt ceiling is the limit that is legally placed as to how much debt government has and is expected to have in the upcoming fiscal cliff. Congress can raise the debt ceiling, or, as shown in these negotiations, not dealt with. The emergency here is the fact that if government does not settle the debt ceiling this year, the government will have to shut down and end up on default on existing loans.
It’s apparent that the government left much more to the sake of time, and it is also evident that lawmakers still had much legislation and issues at hand that they wanted to cover and pass. As a prediction, one of the major issues not addressed during negotiations yet on the horizon was that of entitlement programs. Apparently, some lawmakers wanted a reduction in Social Security benefits, and a higher eligibility age to be enrolled in Medicare. However, no changes were made with this; still, we know for a fact that 2013 will bring plenty of talk about this in Congress and the nation.
The Fiscal Cliff Deal itself primarily dealt with tax revenues, as well as the tax law/ code. The Deal included eleven primary issues and negotiations, which shall be further explained in Part 2.
TO BE CONTINUED