Several weeks ago, we talked to you about the so-called “fiscal cliff,” and what it all means. Now 20 days later, lawmakers are running out of time to make a deal before the end of the year.
If you’re still wondering what it will mean to you, CBS breaks it down:
- Thanks to expiring tax cuts and breaks, many families would see their taxes increase by $2,400. Less money coming home means less to spend, so businesses suffer, as well.
- $1.2 trillion in federal spending cuts begin to kick in, though those cuts are phased in over time. In other words, this doesn’t mean an immediate government shutdown, though the cuts could cripple some federal agencies.
- Federal unemployment benefits would cease for 2 million Americans.
All told, if we go over the cliff, we could see another recession, a spike in unemployment and turmoil in financial markets. In other words, this would affect everyone.
In your own household, there are some things you can do to prepare for the worst. If you can squirrel away some money, do it, as January could be rough. In general, just plan to be frugal.
There are a number of ways this situation could play out, as The Washington Post points out:
- Just go over: If this happens, the scenarios above would likely happen.
- Just go over and then make a deal: In this case, some of the scenarios above would happen, but could be mitigated by a retroactive agreement.
- Extend: This kicks the can down the road a ways, pushing the arguments back for another year or two, in hopes that the economic situation gets better. Meanwhile, the deficit would continue to grow.
- Small deal: Instead of trying to make a huge deal, Republicans could agree to allow tax cuts to expire for the wealthy and Democrats could find spending cuts. This would prevent the big drop-off predicted in the cliff and give lawmakers more time to work things out.
- Grand bargain: This is the big fix, the huge deal that mixes tax increases and spending cuts over time to gradually bring down the debt. That said, with only a few days to go, the hopes of a “grand bargain” may be fading.
You can make your voice heard in the debate by writing a letter to your U.S. representative. Click here to find out how you can do it.