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A Project Report on

“THE UNITED STATES’

FISCAL CLIFF”

(Submitted to Department. of Commerce, Shri Ram College of

Commerce in partial fulfillment of B.Com (Honours) 2010-13)

Submitted by:

APARNA JINDAL

Sec –K

Roll no. – 59

Submitted to:

Mr. SANTOSH KUMAR Mr. AMIT SACHDEVA

(Faculty Mentor) (Head of the Department)

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ACKNOWLEDGEMENT

I would like to extend sincere thanks to my faculty Mentor Mr. Santosh Kumar

for his constant support and guidance. He helped me in every possible way to

delve deeper into various aspects of the project and attain a profound

understanding of the topic.

I would like to thank Shri Ram College of Commerce for providing a platform

to work on this extremely knowledgeable project and for providing access to

needful information which was necessary for successful completion of the

project work.

I would also like to thank my family and friends for being a constant support

throughout.

Aparna Jindal Mr. Santosh Kumar Mr. Amit Sachdeva

(Student) (Faculty Mentor) (Head of Department)

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DECLARATION

This is to certify that I, APARNA JINDAL, student of B.Com (Honours), Section-

K has successfully completed the project under guidance of my faculty Mentor

Mr. Santosh Kumar.

The project work is an original piece of work. The project is based on my

knowledge and research and is not copied from any published sources.

APARNA JINDAL

Roll no. – 59

Sec - K

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INDEX

S.NO. CONTENTS PAGE NO.

1 Introduction - The Term ‘Fiscal Cliff’ - Etymology 4

3 Background- How it all Started

US Increasing Debt and Rising Debt Ceiling

Federal Government Budget Deficit

What added to the Deficit – The Policies

5-13

4 What is Fiscal Cliff

What does the Fiscal Cliff look like

Projected Impact on GDP and Deficit

The 2012 Fiscal Cliff Debate

What is the worst that could happen

How are Congress and others reacting to the Fiscal Cliff

14-21

5 What is the Deal – American Taxpayer Relief Act 2012

Key Provisions of the Act

Desired Impact

Actual Impact

22-30

6 Conclusion – Author’s Say 31-32

7 Glossary 33

7 References 34-35

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THE TERM ‘FISCAL CLIFF’- ETYMOLOGY

No sooner had President Barack Obama awoken from his election night victory rally than the media was discussing the next pressing issue sitting atop his in-tray- FISCAL CLIFF. The phrase "fiscal cliff" is now part of the American lexicon, describing the automatic tax increases and spending cuts due to take effect on 1 January, a combination which economists say would push the US into recession - with global consequences. While “fiscal cliff” negotiations may produce high drama for journalists and partisans as well as desperate uncertainty from Main Street to Wall Street, they are an absolute gold mine for wordsmiths, with linguaphiles assiduously tracking the phrase’s origin.

Federal Reserve Chairman Ben Bernanke is widely credited with coining "fiscal cliff". But the bearded man is the creator of neither the original term, nor its current usage. "Fiscal cliff" is an expression that has been thrown around for decades with a variety of meanings and associated with numerous problems of finance. The earliest reference we could find was in New York Times article about homeownership in 1957. Written by Walter Stern, the article used the term to refer to people over-borrowing to buy their first home. "To the prospective home owner wondering whether the purchase of a given house will push him over the fiscal cliff, probably the most difficult item to estimate is his future property tax."

Fast forward to 2012: We now think of the "fiscal cliff" as a more specific term referring to the expiring Bush tax cuts and sequester. Bernanke thrust that meaning of the term into the public eye on February 29, 2012, when he spoke before the House Committee on Financial Services: "Under current law, on January 1st, 2013, there is going to be a massive fiscal cliff of large spending cuts and tax increases.”

IS IT REALLY A CLIFF?

In short, what has been dubbed a cliff is more like a fiscal slope that gets steeper as time goes on. Derek Thompson, business editor at The Atlantic states that “cliff is the wrong metaphor” and that it is a more gradual fall. "You talk about a cliff, it's extremely sudden and the second you step off the edge you plunge to your death. But that's not going to happen once you step over the edge of the corner of 2012 and 2013. We're not going to fall off anything. There is no ledge. There is no plunge. There won't be a recession on January 1. Many Americans won't feel the spending cuts or even notice higher taxes for weeks.”

Several policy and economic analysts projecting its complicated and wide-ranging potential impact said the term “fiscal hill” or “fiscal slope” might be more appropriate: the effect would be powerful but gradual, and in some cases, reversible.

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HOW IT ALL STARTED?

UNITED STATES INCREASING DEBT AND RISING DEBT CEILING

The U.S. Treasury has borrowed trillions of dollars over the past decade, much of it from foreign investors, to help finance two long wars, rescue its financial system, and promote economic growth via fiscal stimulus.

Each year, the government spends more than it takes in, and this gap must be funded with debt, or more specifically, bonds issued by the U.S. Treasury. The US is unique in one way however – it has a DEBT CEILING, which limits the amount of debt the US can be in at any given moment. Moreover, by law, the Treasury can’t issue new debt once the country is at its borrowing limit – and this limit, or ceiling, needs to be agreed to by Congress. It was in fact this self-imposed limit that brought the country to the brink of a crisis. The ceiling, which stood at $16.394 trillion in December 2012, means that the US could not borrow any more money. This created a problem as, without borrowing more money, the US could not afford to pay its bills, and, in order to borrow the money it needed, the ceiling

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had to be raised. This, it should be noted, is a pretty standard procedure – since the mid-1960s the ceiling has been raised over 70 times, including 10 in the last decade – 3 of which have been during the Obama premiership. At the end of the 2012 fiscal year (September 30, 2012), the U.S. gross federal debt stood at $16.369 trillion or 104% of GDP. After deducting intra-governmental holdings (largely debt issued to the Social Security and Medicare trust funds), the net federal debt stood at $11.553 trillion, or 72% of GDP.

FEDERAL GOVERNMENT BUDGET DEFICIT

Economy is half the battle of life; it is not so hard to earn money as to spend it well.

- C.H. Spurgeon.

A live example of the same can be seen in United States, where the federal budget deficit

has been one of the most contentious political issues of the last few years. In recent years

U.S. deficit has risen at what is widely believed to be an alarming rate and has increased to

almost 14 times of the 1981 deficit amount.

DEFICIT refers to the amount by which a government’s spending exceeds its income over a

particular period of time. Current fiscal policies generated a deficit of $1.1 trillion in the

2012 fiscal year (7.7% of GDP), of which about 65% (5 percentage points) represented the

“structural” deficit, or the portion of the deficit attributable to policies rather than the

(depressed) economy.

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WHAT ADDED TO THE DEFICIT

To the rest of the world, the fiscal cliff seems like a freak of nature, the unintended consequence of America’s adversarial system of government. But that is too simplistic. The cliff is the product of two much deeper underlying strains. America faces an unprecedented structural gap between federal spending and federal revenue; and the political system is polarised over how that gap should be closed. Both problems have been a long time in the making, and neither is likely to go away even if a plunge over the edge is avoided.

As rightly said by former US President Ronald Reagan “Government is not the solution to our problem, government is the problem", here we go through the legislations under different US Presidencies from 1981 till present, that added to the huge deficit and debt.

RONALD REAGAN (1981-1989)

The 40th President of US, Ronald Reagan, inherited an economy mired in stagflation -- a combination of double-digit economic contraction with double-digit inflation. To combat recession, Reagan promised the "Reagan Revolution," in 1981 which was based on the following fiscal policies of his ‘REAGANOMICS’:

TAX CUTS, which involved reduction of income taxes for high earners and also corporate tax rate.

RONALD REAGAN (1981-1989)

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GOVERNMENT SPENDING CUTS, wherein Major government spending was reduced, except Defense and Medicare, which unfortunately increased government spending by 2.5% annually.

His philosophy was “Common sense told us that when you put a bug tax on something, the people will produce less of it. So we cut the people's tax rates, and the people produced more than ever before.”

However this philosophy didn’t sustain longer with a substantial raise in payroll taxes in 1983 as part of a deal to keep Social Security solvent followed by a higher gasoline levy, and a 1986 tax reform deal that included the largest corporate tax increase in American history. While wealthy Americans benefitted from Reagan's tax policies, blue-collar Americans paid a higher percentage of their income in taxes than before.

GEORGE H.W. BUSH (SENIOR) 1989-1993

At $220 billion in 1990, the deficit had grown to three times its size since 1980. Despite his ‘Read my lips: No new taxes’ pledge, with the United States economy weakening, Bush Sr. bowed to pressure from congressional Democrats, agreed to tax increases and spending cuts. The final deal cut spending by $324 billion over five years and raised revenues by $159 billion.

BILL CLINTON (1993-2001)

DEFICIT REDUCTION ACT OF 1993 proposed to cut spending and increase taxes in order to reduce the budget deficit. This helped to set the stage for the large budget surpluses of the late 1990s because the increased marginal tax rates generated billions of dollars in revenue for the federal government.

It was followed by THE BALANCED BUDGET ACT OF 1997 that included net reductions in direct spending of $122 billion over five years, particularly in defense, Medicare and Medicaid, and increased the debt limit to $5.95 trillion, from $5.5 trillion. It also included tax cuts and new spending on social programs.

The net result of this agreement was $204 billion of net deficit reduction over five years, and a projected balanced budget in 2002.

GEORGE W. BUSH (2001-2009)

The question of what the federal government should do with the large budget surpluses of the late 1990s was a major issue during the 2000, considering which 43rd US President George W. Bush insisted the surplus were funds owed to the American people and should be returned to them in form of tax cuts. The tax cuts had ‘sunset provisions’ i.e. were to be temporary, lasting 9 years before expiring on 31 December 2010.

GEORGE H.W. BUSH (SENIOR) 1989-1993

BILL CLINTON (1993-2001)

GEORGE W. BUSH (2001-2009)

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President Bush gave tax cuts to families in 2001 and to businesses in 2003. These together constituted the "BUSH TAX CUTS".

THE ECONOMIC GROWTH AND TAX RELIEF RECONCILIATION ACT (EGTRRA), 2001

It was the first major tax cut legislation signed into law by President Bush. Its key elements

are:

Reduced income tax rates for most taxpayers by a few points. Created a new 10% tax bracket for lower income levels. Increased the exemption for the Alternative Minimum Tax Capital Gains tax was reduced from 10 per cent to 8 per cent to benefit even the wealthy

section. Doubled the child tax credit from $500 to $1,000. Eliminated the “marriage penalty” by making exemptions for married couples equivalent

to what they would have had if they were single. Provided greater tax deductions for education expenses and savings, particularly

retirement savings plans. Repealed estate and gift taxes.

JOBS AND GROWTH TAX RELIEF RECONCILIATION ACT (JGTRRA), 2003

By 2003, the economy of the United States had fallen into recession following the end of the late-1990s technology boom and in the wake of the terrorist attacks of September 2001. Even though with the growth of the federal budget deficit, President Bush proposed the 2003 Act.

Its goal was to stimulate business spending, freeing up funds to increase employment. Its key elements are:

A cut in the top capital gains rate from 20 to 15 percent A cut in the top individual rate on dividends from 35 to 15 percent. New round of tax cuts which would accelerate some of the provisions in EGTRRA set to

expire and expand other cuts.

IMPACT OF BUSH TAX CUTS

POSITIVE IMPACT: Supporters of the proposal say that the tax cuts increased the pace of economic recovery and job creation by putting more dollars into the pockets of businesses and investors, and ultimately consumers. It saved taxpayers $1.7 trillion over the decade.

NEGATIVE IMPACT: Critics state that the tax cuts failed to spur growth by dramatically decreasing government revenues. This increased each year’s annual deficit, and thereby the U.S. debt. This debt puts downward pressure on the value of the dollar.

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The New York Times stated them as the single biggest contributor to the deficit over the past decade, reducing revenues by about $1.8 trillion between 2002 and 2009. As per CBO estimates in 2012, they added about $1.6 trillion to the debt between 2001 and 2011, excluding interest.

It also widened the gap between rich and poor. According to the Brookings Institute, "Economists Peter Orszag and William Gale described the Bush tax cuts as reverse government redistribution of wealth, shifting the burden of taxation away from upper-income, capital-owning households and toward the wage-earning households of the lower and middle classes."

OBAMA

THE AMERICAN RECOVERY AND REINVESTMENT ACT (ARRA), THE STIMULUS 2009

In February 2009, in direct response to the economic crisis, Congress passed the “Stimulus Bill” representing the largest effort by the federal government to boost the deteriorating economy, and create and save millions of jobs.

The bill cost, though estimated at $787 billion over ten and a half years, including $501 billion in increased spending, and $286 billion in tax cuts, was later revised to $840 billion. The larger provisions include a one–year patch for the Alternative Minimum Tax (AMT), an expansion of food stamps and unemployment benefits, funding for infrastructure projects, increased spending on health care and education, and additional aid to states and individuals.

The CBO estimated that ARRA increased the deficit by $200 billion for 2009, split evenly between tax cuts and additional spending, excluding any feedback effects on the economy. It also stated that the stimulus bill increased employment by 1–2.1 million.

TEA PARTY REVOLUTION, 2009

The Stimulus Bill invited Republican Tea party Protests. The “PORKULUS PROTEST” was

aimed at ensuring Government adherence to the Constitution, reduced taxation, and

reduced spending and waste. It was attended by hundreds of supporters opposing the

president’s “fiscally irresponsible stimulus bill” which Republicans suggest is mortgaging

away the country’s future. In addition, there has been much criticism of the amount of

“pork” in the legislation, i.e., the unnecessary favors or funding given by a politician to

supporters.

BARACK OBAMA (2009-Present)

)

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TAX RELIEF, UNEMPLOYMENT INSURANCE REAUTHORIZATION AND JOB CREATION

ACT, 2010

At the end of 2010 the two sides agreed to a truce, with Obama agreeing to the extension of

tax cuts and Republicans agreeing to more stimulus. Finally, on December 17, 2010,

President Obama signed into law the greatly contested and debated Tax Relief,

Unemployment Insurance Reauthorization and Job Creation Act of 2010. The Act contains a

multitude of new and extended tax breaks, including

a two-year extension of the 2001 Bush-era tax cuts, that were set to expire.

a new 2% payroll tax reduction for 2011,

a two-year patch of the alternative minimum tax (AMT), an extension of federal unemployment benefits, and estate tax relief.

The overall monetary impact of the measure has been placed at $858 billion. However, the provisons are temporary and the new law punts the ultimate fate of the Bush-era tax cuts to 2012, a presidential election year.

BUDGET CONTROL ACT (BCA), 2011

Under US law, an administration can spend only if it has sufficient funds to pay for it. These funds can come either from tax receipts or from borrowing by the US Department of the Treasury. Congress has set a debt ceiling, beyond which the Treasury cannot borrow. It was calculated in 2011 that, if no more money was borrowed, the US would run out of the money it needed to honour its financial commitments by August 2nd – defaulting for the first time in its history. This would create an international crisis in the financial markets. So, raising the debt ceiling became an imperative step.

This time, however, things were not so simple. For it to be raised, both houses of Congress – the House of Representatives and the Senate – need to agree. The proposal ran into problems when members of the House of Representatives (controlled by the Republican Party) refused to raise the debt ceiling, unless the President and his Democrat colleagues also agreed to commit to cutting spending in order to tackle the deficit.

This UNITED STATES DEBT-CEILING CRISIS of 2011 was a political debate in the United States Congress and ended when a complex deal was reached that raised the debt ceiling and proposed measures to reduce the budget deficit through spending cuts. This deal was passed by the Government in the form of BUDGET CONTROL ACT OF 2011 on August 2.

KEY PROVISIONS of BUDGET CONTROL ACT, 2011:

1. DEBT CEILING: The debt ceiling was increased by $400 billion immediately, and it also allows the President to increase the debt ceiling further if Congress does not object.

2. DEFICIT REDUCTION: The spending cuts would come in two stages.

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An initial round would impose $917 billion of cuts over 10 years.

In the second stage, a bipartisan congressional committee called the “SUPER COMMITTEE” would be established to recommend by late November $1.5 trillion in further cuts. If the Committee fails to propose at least $1.2 trillion in savings, then $1.2 trillion of automatic spending cuts, called ‘Sequestration’, would automatically be triggered, starting at the beginning of 2013 unless Congress takes legislative action. Sequestration will be applied equally to defense and nondefense spending.

“[P]art of the law that I signed this summer stated that if congress could not reach an agreement on the deficit, there’d be another 1.2 trillion dollars of automatic cuts in 2013 divided equally between domestic spending and defense spending”

-Obama (2011 Press Conference) Additionally,

Medicare would face a cap on expenditures with 2% reduction, Other sectors like Social Security, Medicaid, civil and military employee pay, or veterans,

would not be hit.

IMPACT OF BUDGET CONTROL ACT, 2011:

The Budget Control Act of 2011 is, as President Obama said upon the bill’s passage, an “important first step” towards putting the country on a more responsible fiscal course.

1. RAISED DEBT CEILING: Since the passage of the act, the debt ceiling has been raised by a total of $2.1 trillion in three increments: by $400 billion in August 2011, $500 billion in September 2011, and $1.2 trillion in January 2012.

2. DECREASE IN DEFICIT: Deficit reduction likely would also have dynamic positive

economic effects, particularly in the medium and long run, predominantly through an increase in national savings that would result in a larger capital stock. These measures are projected to reduce deficit by roughly $2 trillion over 10 years.

3. INCREASE IN DEBT: The national debt rose $238 billion (or about 60% of the new debt

ceiling) on August 3.

4. IMPACT ON GDP AND GROWTH: There are also concerns about potential contractionary effects of the BCA on this delicate economy in the near term. This is a valid concern, but data shows that the up-front cuts to discretionary spending are not significant enough to produce a serious fiscal drag.

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As illustrated by the graph, the BCA’s $21 billion cut in fiscal year (FY) 2012 is projected to reduce growth (on a static basis) by only 0.13 percent of GDP. The impact of the caps on growth slowly declines thereafter.

5. INCREASE IN UNEMPLOYMENT: Because of the relationship between aggregate demand and unemployment; as Patrick Lunsford, Senior Editor of insideARM.com stated in a Forbes magazine blog, "when government spending is slashed, jobs are lost and consumer demand falls.” Moreover, the Economic Policy Institute stated, "The spending cuts in 2012 could lead to roughly 1.8 million fewer jobs in 2012, relative to current budget policy.”

6. S&P’s CREDIT RATING: Credit rating agency Standard & Poor's says it has downgraded

the United States' credit rating for the first time in the history of the ratings, from “AAA” to one notch down “AA+”. S&P said in a statement that "the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges.” A credit-rating downgrade typically leads to higher interest rates, and would have a huge impact on the economy by making it more expensive for the government, companies and consumers to borrow money.

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WHAT IS FISCAL CLIFF?

The "fiscal cliff" is a term used to describe a bundle of momentous U.S. federal tax increases and spending cuts that are due to take effect at the end of 2012 and early 2013. Numerous tax cuts were to expire on December 31, 2012, thereby raising taxes by $494 billion in 2013, and mandatory spending cuts of $1.2 trillion were to automatically go into effect January 3, 2013. In total, the measures are set to automatically slash the federal budget deficit by $503 billion between FY 2012 and FY 2013, according to the most recent Congressional Budget Office (CBO) projections. If these numbers are converted to calendar year 2013, however, this contraction would be substantially higher, close to 4 percent of GDP. The abrupt onset of such significant budget austerity in the midst of a still-fragile economic recovery has led most economists to warn of a double-dip recession and rising unemployment in 2013 if Washington fails to intervene in a timely fashion.

What Does The Fiscal Cliff Look Like?

In January, family income won't plunge into the watery depths and government spending won't collapse. Instead, higher tax rates would reduce family income throughout the year, and mandatory spending cuts would shrink the deficit. The federal government would have to cut programs, fire some people, and cancel some company contracts. It would be bad. It

might turn out to be awful. But it wouldn't be sudden.

Here is an at-a-glance look at the $500 billion in government savings that will take place in 2013. Taxes are in BLUE. Spending is in RED.

The pie, as you can see, is almost all blue. This is a tax cliff. Or a taxy knoll. Whatever.

Half of the savings come from the expiration of the Bush tax cuts, the Obama tax credits, and the payroll tax cut. Another quarter comes from the alternative minimum tax kicking in and walloping upper-middle-class and rich families.

The following set of revenue and spending measures are set to expire or take effect at year's end, representing an acute fiscal consolidation that could be further intensified by a potential showdown over the debt ceiling.

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REVENUE INCREASES 2001/2003/2010 TAX CUTS: The EGTRRA and JGTRRA series of legislation, often

referred to collectively as the "Bush tax cuts," and extended by Obama’s Act 2010 will expire on December 31, 2012, raising all income tax rates (top will go from 35 to 39.6 percent), as well as rates on estate and capital gains taxes.

ALTERNATIVE MINIMUM TAX: The alternative minimum tax (AMT) will also automatically apply to millions more citizens, returning back to their 2000 tax year levels.

PAYROLL TAX CUT: The Social Security payroll tax holiday will expire December 31, raising the rate from 4.2 to 6.2 percent.

OTHER PROVISIONS: Several other policies such as the Research and Experimentation tax credit, many of which are typically enacted retroactively, are due to sunset at years' end.

AFFORDABLE CARE ACT TAXES: Some provisions in the Obama health-care legislation, including increased tax rates on high-income earners, are set to take effect in January 2013.

Spending Cuts

BUDGET CONTROL ACT: The so-called super committee failed to agree on a deficit-reduction plan and so, the automatic sequester legislated by the Budget Control Act of 2011 will hit January 2. As for the Budget Control Act, it's a $1.2 trillion machete chop to government spending. But that's a 10-year figure. Only 5% of that cut -- about $65 billion -- would actually take place in 2013, according to the Committee for a Responsible Federal Budget. That's a big deal for defense contractors and doctors and federal government employees.

EXTENDED UNEMPLOYMENT BENEFITS. The eligibility to begin receiving federal unemployment benefits, last extended in February, will expire at year's end.

MEDICARE "DOC FIX": The rates at which Medicare pays physicians will decrease nearly 30 percent on December 31. But most Americans wouldn't feel it. They'd just feel the tax hike. If all that happened, taxes would increase an average of $3,466 per household, according to the TPC. Middle-income households — those earning nearly $40,000 to about $64,500 a year — would see an average increase of $1,984.

DEBT CEILING The debt limit is currently capped at $16.39 trillion. Treasury is expected to hit this borrowing capacity again sometime in early 2013. Analysts fear another protracted debate over the debt ceiling could bring repercussions similar to those that followed the debt battle in summer of 2011.

REVENUE INCREASES

SPENDING CUTS

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PROJECTED IMPACT ON DEFICIT AND GDP

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THE 2012 FISCAL CLIFF DEBATE

In dealing with the fiscal cliff, U.S. lawmakers had a choice among three options, none of which were particularly attractive:

They could have let the policies scheduled for the beginning of 2013 – which featured a number of tax increases and spending cuts that were expected to weigh heavily on growth and possibly drive the economy back into a recession – go into effect. The plus side: the deficit would have fallen significantly under the new set of laws.

They could have cancelled some or all of the scheduled tax increases and spending cuts, which would have added to the deficit and increased the odds that the United States would face a crisis similar to that which is occurring in Europe. The flip side of this, of course, is that the United States' debt would have continued to grow.

They could have taken a middle course, opting for an approach that would address the budget issues to a limited extent, but that would have a more modest impact on growth. This is ultimately the course lawmakers choose in the agreement reached on December 31, 2012.

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WHAT IS THE WORST THAT COULD HAPPEN?

There have also been more serious consequences. The shadow of the fiscal cliff has depressed corporate investment. American consumer confidence has started to wobble. Growth is slowing, perhaps to as little as 1% in the fourth quarter. Policymakers around the world are fretting: Australia’s central bank has just cut rates, citing the cliff as a worry. In the short term the risk of economic catastrophe is minimal. The real threat—and the real opportunity for Barack Obama—lies in the medium and long term. IF NO FURTHER ACTION IS TAKEN:

If Congress is incapable of finding a solution, dramatic tax increases and spending cuts could send the economy into a ‘double-dip’ recession. Should the fiscal cliff be reached and the spending and tax cuts occur, the Congressional Budget Office warned of a 1.3 per cent contraction, a 0.5 per cent drop in economic growth, and a significant reduction in the deficit, reducing it to 6.5 percent of GDP in 2013, with spending and revenues equal to 22.8 percent and 16.3 percent, respectively. According to a report issued by the National Association of Manufacturers (NAT), the fiscal shock would result in dramatic job losses of over 5 million by 2014, catapulting the rate of unemployment from the current rate of 7.8 per cent to 11 per cent by 2015.

Naturally, mass job losses and higher federal taxes would have severe effects on consumption. The report predicts that average disposable income is likely to fall annually by 8-10%, hitting the poorest hardest due to cuts in child tax credit and earned income tax credit.

The NAT has reported that the approaching “fiscal cliff” has already shaved up to 0.6 per cent from US GDP this year alone, with the tense climate deterring businesses from investing and hiring.

More pressingly, if Congress fails to raise the debt ceiling before the US hits its $16.4tn statutory debt limit – expected sometime between the election and the end of 2012 – the US would face default – a truly grim prospect. Protracted gridlock in Congress would stall the U.S. recovery "with deleterious spillovers to the rest of the world," the report says. In addition, "delays in raising the federal debt ceiling could increase risks of financial market disruptions and a loss in consumer and business confidence."

Alternative Fiscal Scenario- IF CURRENT POLICIES ARE EXTENDED: Conversely, if current policies are simply extended, the United States would slip even deeper into debt, and risk facing a crisis similar to that of Europe, pushing the deficit to 6.5 percent of GDP in 2013, with spending and revenues equal to 22.8 percent and 16.3 percent, respectively. If the cuts do not occur, the CBO predicts a 1.7% increase in economic growth, a slight drop in unemployment, but much less deficit reduction.

IF NO FURTHER ACTION IS TAKEN

Alternative Fiscal Scenario – IF CURRENT POLICIES ARE EXTENDED

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HOW IS CONGRESS REACTING TO THE FISCAL CLIFF?

Republicans control the House of Representatives in Congress and enjoy a blocking minority in the Democrat-controlled Senate, while President Obama, a Democrat, wields a veto, so any deal had to be backed by both political parties

But the prospect of this has so far looked bleak; both sides seek different solutions and both sides brook no argument over their staunch positions. This philosophical rift is on display in the debate over the fiscal cliff. In particular, the two parties are divided over how to extend the Bush-era tax cuts, the largest single component of the fiscal cliff. Taxes and the role of government lie at the heart of the debate. Generally speaking,

REPUBICANS favor spending cuts as a primary means to achieve deficit reduction. Most have also publicly pledged to oppose all tax hikes, suggesting, rather, that tax cuts boost economic growth and, in turn, government revenue.

President Obama’s stand – “We can't simply cut our way to prosperity...we're going to have to continue to move

forward in deficit reduction, but we have to do it in a balanced way, making sure that we are growing even as we get a handle on our spending.”

DEMOCRATS, led by President Obama, typically believe tax increases should be part of any bargain to reduce long-term entitlement spending, particularly in healthcare and pension schemes for the old, and have generally supported greater reductions in the defense budget. They have also agreed to extend all cuts except for the wealthiest 2 percent of taxpayers.

OTHER VIEWS

Even the current political stalemate is conquered, extended tax cuts and deferred sequestration would hold their own economic perils. As insecurity gathers momentum, an anti-debt lobby group “Campaign to Fix the Debt” has garnered the support of more than 80 CEOs – including figureheads from GE, Microsoft, UPS and JP Morgan – to pressure Congress into overcoming partisan deadlock to hammer out a solution. In an op-ed piece, Warren Buffett, the chairman and chief executive of Berkshire Hathaway, wrote that the government should aim to raise revenues to 18.5 percent of GDP while keeping spending to around 21 percent. Acknowledging that this wouldn’t eliminate deficits, he wrote that “this ratio of revenue to spending will keep America’s debt stable in relation to the country’s economic output.” Federal Reserve Chair Ben Bernanke emphasized the importance of balancing long-term deficit reduction with actions that would not slow the economy in the short-run. Therein lies the trade-off: foster the recovery or confront the debt head-on. Most likely, following

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pleas from such prominent economists, Congress will pursue a medium-term plan that privileges the recovery whilst tackling the debt. Overall though, inaction is most certainly not an option. The sudden jolt of the “fiscal cliff” could shock the economy into freefall, dragging the global economy down with it. Thus is the exigency of the times!

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WHAT IS THE DEAL? American Taxpayer Relief Act, 2012

“Change will not come if we wait for some other person or some other time. We are the ones we've been waiting for. We are the change that we seek.” –OBAMA

The tax side of the “Fiscal Cliff” has been averted. The US Senate overwhelmingly passed legislation to avert the so-called Fiscal Cliff on January 1, 2013 by a vote of 89 to 8, sending the American Taxpayer Relief Act of 2012 to House, where it was similarly approved on the same date by a vote of 257 to 167. President Obama signed the bill into law on January 2, 2013. The deal is a patchwork of short-term and permanent measures. As a compromise measure, the Act avoids draconian automatic sunset provisions that were scheduled to take effect after 2012 under the Bush-era tax cuts and Obama’s 2010 Act. With the ATRA Act, individual tax rates on all income groups would have increased, taxpayer-friendly treatment of capital gains and dividends would have completely disappeared, the child tax credit would have plummeted to $500, enhancements to education tax incentives would have ended, the federal estate tax would have reverted to a maximum rate of 55 percent, and many other popular but temporary incentives would no longer be available.

KEY PROVISIONS OF THE AMERICAN TAXPAYER RELIEF ACT, 2012:

TAX PROVISIONS:

INDIVIDUAL INCOME TAX RATES

Bush era tax rates were made permanent for everyone but the richest 2% of Americans.

There is a new 39.6 percent rate that will apply to earners based on income thresholds and filing status: $400,000 (single); $425,000 (head of household); $450,000 (joint or qualifying widow); and $225,000 (married filing separately). These thresholds will be indexed for inflation after 2013. The rest stay at what they are now, starting at 10% for those earning under $9,000.

CAPITAL GAINS AND DIVIDEND RATES

ATRA raises the top rate for capital gains and dividends to 20 per cent up from the Bush-era maximum 15 per cent rate. The top rate will apply to the extent that a tax-payer’s income exceeds the thresholds set for the 39.6 per cent rate ($400,000 for single filers; $450,000 for joint filers and $425,000 for heads of households).

All other taxpayers will continue to enjoy a capital gains and dividends tax at a maximum rate of 15 per cent. A zero per cent

TAX PROVISIONS

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rate will also continue to apply to capital gains and dividends to the extent income falls below the top of the 15 per cent income tax bracket.

MARRIAGE PENALTY RELIEF

ATRA extends all existing marriage penalty relief.

ESTATE AND GIFT TAX

Estate taxes and Gift Tax were set at 40% of the value above $5,000,000, indexed for inflation, an increase from the 2012 rate of 35% of the value over $5,120,000.

‘AMT’ RELIEF

Changes were made to the Alternative Minimum Tax to permanently index it to inflation and thus to avoid the annual "patch" that was previously required. It means that many middle-class earners will now not be taxed. The measure was designed to tax the wealthiest.

PAYROLL TAX The two-year old cut to payroll taxes was not extended, rising back to 6.2%.

OTHER RELIEFS Tax cuts from 2009 - such as a child credit and credit for attending university - are extended for five more years.

SEQUESTRATION

The budget sequestration created by the Budget Control Act of 2011 was delayed by two months, to give time for further negotiations on deficit reduction.

UNEMPLOYMENT BENEFITS

Federal unemployment benefits were extended for a year without a budget offset elsewhere, affecting two million people and costing $30 billion.

MEDICARE DOC FIX The Medicare "doc fix", suspending reductions in physician payments, was extended for one year.

PAY FREEZE FOR CONGRESS

A pay freeze for members of Congress was extended, but a general pay freeze for government workers was not.

SPENDING PROVISIONS

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Source: BBC

NOT IN THE FISCAL CLIFF DEAL, BUT LIKELY ON THE HORIZON:

ENTITLEMENT PROGRAMS

THE ISSUE: Some lawmakers sought reductions in Social Security benefits and a higher eligibility age for the Medicare program as part of fiscal cliff negotiations. WHAT HAPPENED: No changes were made to Social Security or Medicare benefits.

WHAT IT MEANS: Eligible Americans will continue to receive Social Security and Medicare benefits as normal. WHAT’S NEXT: Lawmakers are likely to take up these issues in 2013.

NOT IN THE FISCAL CLIFF DEAL, BUT LIKELY ON THE HORIZON

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SPENDING CUTS

THE ISSUE: Due to legislation passed in August 2011, automatic spending cuts were scheduled to cut $55 billion from domestic programs, like infrastructure and education, and another $55 billion from military funding beginning in Jan 2013.

WHAT HAPPENED: Cuts were postponed until March 1. Lawmakers intend to offset the delay in these cuts by taxing transfers between traditional Individual Retirement Accounts (IRAs) and Roth IRAs, and through discretionary spending cuts.

WHAT IT MEANS: Programs ranging from Head Start to weapons programs will not see immediate budget cuts.

BUDGET DEAL THE ISSUE: Congress has yet to enact a budget for fiscal year 2013, which began on Oct. 1, 2012. In September Congress enacted a stop-gap spending measure, known as a continuing resolution, which will keep the government operating until March 27.

WHAT HAPPENED: The fiscal cliff legislation did not deal with a budget for the current fiscal year.

WHAT IT MEANS: Funding for all federal agencies expires in March. Lawmakers must pass additional legislation to keep the government running.

DEBT CEILING THE ISSUE: The debt ceiling is the legal limit on the level of debt the federal government can hold, and the debt is expected to reach that limit early in 2013. Congress has the authority to raise the debt ceiling as needed. WHAT HAPPENED: The fiscal cliff deal did not address the debt ceiling.

WHAT IT MEANS: So March is the new December.

Debt ceiling was not part of the conversation over fiscal cliff, probably because politicians knew they would never be able to agree on that. No matter what happens, US will have to raise debt ceiling again in coming months, otherwise the government will shut down and default on existing loans. The question is by how much, and what the Republicans demand in return of agreeing to the raised ceiling.

FISCAL CLIFF – AHEAD IN EARLY 2013

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Hence,

The American Taxpayer Relief Act 2012 allows the Bush-era tax rates to sunset after 2012 for individuals with incomes over $400,000 and families with incomes over $450,000: gives permanence to the lower rate of much of the other Bush tax cuts. The Act also permanently patches the Alternative Minimum Tax (AMT), establishes caps on tax deductions and credits for those at upper income levels. The bill also delays the sequestration. It does not tackle federal spending levels or debt control to any great extent, instead leaving that for further negotiations and legislation.

DESIRED IMPACT

“Under this law, more than 98 percent of Americans and 97 percent of small businesses will not see their income taxes go up,” noted President Obama. “Companies will continue to receive tax credits for the research they do, the investments they make, and the clean energy jobs they create.” Finally, US Congress has passed a deal to stave off the fiscal cliff, which will raise taxes for the wealthiest Americans, and delay spending cuts. Barack Obama said the deal was "just one step in the broader effort to strengthen the economy".

In all, the bill included $600 billion over ten years in new tax revenue, about one-fifth of the revenue, that would have been raised had no legislation been passed. For the tax year 2013, some taxpayers will experience the first year-to-year income-tax rate increase since 1993.

By passing that bill, policymakers avoided most of the near-term drag on the economy that would have occurred in the absence of an agreement. In the process, the fiscal belt-tightening is expected to slash the projected budget deficit over the next decade by 7 percent from $10 trillion to $9.3 trillion- its steepest since 1968.

ACTUAL IMPACT

Did The Deal Accomplish Anything?

The fiscal cliff agreement is good news to some extent, although it shouldn't be ignored that the solution is somewhere an unnecessary, self-inflicted burden on the economy and financial markets. What's more, the agreement addressed only the revenue side (taxes) but postponed any discussion of spending cuts - the so-called "sequester" - until March 1.

Also, it's important to keep in mind that higher taxes were the most important element of the cliff, and taxes are in fact going up as part of the deal. While the problem is therefore "solved" in the sense that the deadline has passed, a portion of the concerns related to the cliff indeed came to fruition. And on a longer-term basis, the cliff deal did little to address the country's debt load - which currently stands at $16.4 trillion and counting.

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Here, we analyze the projected impacts of the American Taxpayer Relief Act on economic growth and discusses the challenges still ahead with regard to the nation’s long-run deficit.

The American Taxpayer Relief Act And The Deficit Outlook

“I think we all recognize this law is just one step in the broader effort to strengthen our economy and broaden opportunity for everybody,” said the President, adding, “The fact is the deficit is still too high, and we’re still investing too little in the things that we need for the economy to grow as fast as it should.” The immediate budgetary impact of the American Taxpayer Relief Act is an approximately 7 percent reduction in the 10-year deficit, comparing the new legislation with the CBO’s alternative fiscal scenario. Under the latter, the nation faced a 10-year budget deficit of about $10 trillion, whereas ATRA will reduce the budget deficit by a little more than $700 billion. Economic growth would be slower in the short-run due to lower deficits but faster in the long-run due to lower debt levels. The figure below plots budget deficits under the alternative fiscal scenario before and after the American Taxpayer Relief Act for the coming decade. Despite the modest reduction in deficits under the new law, the debt-to-GDP level is still projected to increase for the foreseeable future.

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The American Taxpayer Relief Act And The Debt Outlook

The ATRA did very little to improve our long-term budget outlook. While the ATRA prevented some economically damaging effects of the fiscal cliff, it did not make meaningful progress toward the primary goal of a sustainable fiscal policy — stabilizing debt as a share of the economy and putting it on a downward path. As per Peter G. Peterson Foundation Analysis,

ATRA improved our long-term budget outlook by only about one year. Before the enactment of ATRA, federal debt was projected to climb to 200 percent of GDP within 26 years under current policies. After ATRA, debt is projected to climb to 200 percent of GDP in about 27 years.

Sequestration under the BCA will also not improve the outlook significantly. Even if the budget sequester (under the BCA) is fully implemented, federal debt would still reach 200 percent of GDP within about 28 years.

Including the cumulative effects of the 2011 BCA, ATRA, and the sequestration, debt is now on track to reach 200 percent of GDP by 2040, just five years later than was projected prior to the passage of these reforms.

Debt is now projected to grow from 72 percent of GDP in 2012 to 87 percent of GDP in 2022, down only slightly from the 90 percent of GDP in 2022 projected before ATRA was passed.

The nation's current unsustainable debt trajectory would be damaging to economic growth. Many economists suggest keeping debt at or below 60% of GDP, and empirical research indicates that economic growth slows for countries which have debt levels exceeding 90% of GDP.

The American Taxpayer Relief Act And The Global Economy

Analysts say the old adage still rings true - that when the US sneezes, the rest of the world catches a cold. Without the fiscal cliff deal, Europe’s recovery could have been completely derailed. With the announcement of ATRA 2012, Asian and European stocks post strong gains, while government bonds in weaker eurozone economies rally as investor appetite for riskier assets rise on the diminished threat of an immediate hit to growth in the world's largest economy. Australia's ASX All Ordinaries index added 1.3%. South Korea's KOSPI gained 1.7% and the Hang Seng in Hong Kong advanced 2.2%. On Wednesday morning, the FTSE-100 broke through 6,000 points for the first time since July 2011, adding 1.8%. Other major European

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indices posted similar gains. Meanwhile, yields on Spanish and Italian government bonds fell sharply. IF THE U.S. FALLS OFF THIS FISCAL CLIFF INTO RECESSION, the outlook for the world economy, already gloomy, will darken further. The task of keeping the eurozone afloat, amid scared investors and depression-level unemployment in Spain and Greece will become even harder. The risk of a renewed global banking crisis triggered by sovereign defaults in Europe would escalate sharply. Nor could the U.S. or Europe deploy the policy arsenal they possessed in 2008 to right the ship -- their fiscal and monetary bullets have been spent. The likely effect will be that the recovery will remain sluggish, and the world's growth locomotives will again have to be found, if anywhere, in China and other emerging markets. Resources for international aid will remain scarce and may be cut along with other programs. With the Europeans and the Japanese also retrenching, international organizations will increasingly look to China and other emerging markets for additional funds and new initiatives, buttressing the influence of the rising powers in their deliberations.

IMPACT ON INDIA

In that case, the impact on India is likely to be both positive and negative. The good news is that commodity prices will ease off and oil prices will stay significantly lower than in the recent past. In fact, fear of the fiscal cliff has already drove down commodity prices, starting in October. The World Bank estimates that energy and non-energy prices fell by 2.4% and 1.6%, respectively, during October. This will mean that India’s inflation rate may come down fast enough for the central bank to cut interest rates more quickly than anticipated to stimulate growth. The bad news, however, is the potentially adverse impact on the Indian economy from reduced trade and investment. India’s merchandise exports now account for nearly 16% of Gross Domestic Product, while total exports account for approximately 24% of GDP. With India’s major trading partners in trouble, exports are expected to take a hit. The outlook for India’s exports during 2013 certainly doesn’t look good. Capital flows in India will also be affected as the global recession that may result, even if the fiscal cliff is avoided, will lead investors to safe havens.

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Other Impact

SMALL BUSINESS: While the fiscal cliff deal has many merits (which have been described elsewhere by others), three of its major components discourage small-business job creation: the end of the payroll-tax holiday, higher marginal tax rates on the wealthy and the increase in capital-gains tax rates.

Such tax increase will affect small-business owners’ willingness to employ others. Research by economist Robert Carroll and colleagues showed that a one-percent decline in small-business owners’ “net of tax” fraction of income lowers their probability of hiring by 1.2 percent. Therefore, the tax increases that wealthy small-business owners now face should translate into a 6.6 percent decline in their probability of hiring. MIDDLE CLASS: Taxes will rise on the middle class because it doesn’t include an extension of the payroll tax holiday. That means that the paychecks for more than 160 million Americans will be 2 percent smaller starting in January, as the payroll tax will jump from 4.2 percent to 6.2 percent. And a huge number of those hit will be middle class or working poor. The resetting of the payroll tax cut amounts to a $113 billion fiscal contraction—one that falls more heavily on low-income and middle-class working families than it does on the wealthy. The burden falls mainly on these workers because payroll taxes are capped, which means that the tax is not paid on an individual’s income higher than $113,700—or about the 90th percentile of income distribution.

US ECONOMIC GROWTH RATE: The combined effect of these fiscal contractions via taxes and revenue is expected to cut 1.5 percentage points from the U.S. economic growth rate in 2013. It also reauthorized the extension of temporary unemployment benefits for the long-term unemployed—the now 39 percent of workers who have been out of a job for 27 weeks or more. This extension, along with other spending, helped to offset the fiscal contractions that the act caused, and, in doing so, is expected to put 0.2 percentage points back onto the U.S. growth rate. US DEFENSE: Sequestration and such changing policies have a considerable impact on US Defense. “It makes it difficult to effectively plan, because you don’t want to waste a lot of resources on this detailed planning when you’re not sure you’re going to get the money to go in and do the work,” So the main problem is with long-term management and the possibility of cuts in funds due to sequestration.

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CONCLUSION

Author’s Say

“The fiscal cliff is a danger zone,

It’s where grown men go when budgets are blown.” - Merle Hazard, a satirical singer

‘Fiscal Cliff’- the new metaphor for the US economic disaster, describes the tax increases and spending cuts that will hit America’s Economy at the start of 2013, which further risks it to enter the abyss of double-dip recession and Economic Catastrophe. Talking in terms of the actual impact, it is not exactly a ‘cliff’; instead it is more like a slope – a downward slope. Expiration of Bush tax cuts and sequester would have ruinous but gradual impact on the United States economy. The Government’s increasing and inevitable spending, decreasing revenue and the policies under the various presidencies since 1981 led US to the current situation, with high deficit of $1.1 trillion and huge debt of $16.369 trillion or 104% of GDP, in 2012. A complete stand-off between Republicans and Democrats in the Congress, forced many Presidents to come up with solutions that satisfied their needs and demands, rather than acting according to the needs of the economic situation. The same could be seen in the month of December 2012, where the Congress kept postponing the final decision to handle the fiscal cliff till the last hour, only because the two parties seeked different solutions and were adamant about their stance. Moreover, the final deal tackling the fiscal cliff –American Taxpayer Relief Act 2012, simply delays major part of the cliff and does little to reduce the deficit. There is no balance of taxes and spending cuts in its provisions, which is ironically the ‘need of the hour’. In the short term the risk of economic catastrophe is minimal, but the real threat lies in the medium and long term. Though it saw the fulfillment of President Obama’s promise of raising taxes on the rich, but it does little to control spending. Looking at the current government spending, around 74% of its revenue is spent on three things: Defense, Social Security, and Medicare, and 8% is devoted to interest payments. While Defense spending can be seen reducing in the near years, foreseeing the end of wars in Iraq and Afghanistan, but Spending on health care entitlements, Social Security, and interest costs could skyrocket with increase in population and the ever increasing need of quality health care. These are still projected to rise faster than revenues, leading to widening deficits and growth in federal debt. As also said by George Osborne, “If we don't get a grip on government spending, there will be no growth”, until spending in those areas is reduced, tax revenues are increased, or policymakers implement a combination of both, the United States will continue to have a severe long-term debt problem.

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But it is to be noted that immediate tax increases or spending cuts could push the economy back into recession- significantly reducing the income, demand and ultimately leading to numerous layoffs. So it is better to pass a plan that phases in spending cuts or tax increases over time. The cuts should spare valuable investment spending. Also, certain spending cuts may also have small effects on long-run growth. Entitlement spending on Social Security and Medicare could probably be slowed without reducing the nation’s productive ability, and also protecting the most vulnerable Americans. So, the focus should shift from only ‘taxing and cutting’ to ‘reforming and investing’. The United States needs serious change in its fiscal, entitlement, infrastructure, immigration, and education policies, among others. These decisions should not be deferred into the future, which will only make them more difficult and expensive to solve. To preserve the recovery, a deal must be less draconian. It should focus on long-term entitlement reform rather than short-term cuts. The worst has passed, but the devastation remains. It took a lot of hard work to get to where US is today. Much hard work remains to be done.

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GLOSSARY

MEDICARE: A federal program that pays for certain health care expenses for people aged 65 or older. Enrolled individuals must pay deductibles and co-payments, but much of their medical costs are covered by the program. Medicare is divided into three parts. Part A covers hospital bills, Part B covers doctor bills, and Part C provides the option to choose from a package of health care plans. MEDICAID: Medicaid, a joint federal-state program, covers low-income people under age 65 as well as elderly or disabled individuals. It pays for hospital care, doctors' services, nursing-home care, home health services, family planning, and screening. SOCIAL SECURITY SCHEMES: The comprehensive federal program of benefits providing workers and their dependents with retirement income, disability income and other payments. The Social Security Tax is used to pay for the program. STAGFLATION: An economic phase marked by high inflation and high unemployment (stagnation) occurring simultaneously. PAYROLL TAXES: Tax an employer withholds and/or pays on behalf of their employees based on the wage or salary of the employee. In most countries, including the U.S., both state and federal authorities collect some form of payroll tax. ALTERNATIVE MINIMUM TAX (AMT): In order to make the tax system fairer, Alternative Minimum Tax was introduced in 1969 to ensure that high-income individuals, corporations, trusts and estates pay at least some minimum amount of tax, regardless of deductions, credits or exemptions. The idea behind the AMT tax was to prevent people with very high incomes from using special tax benefits to pay little or no tax. ESTATE TAX: Tax imposed on the transfer of property from a deceased to his/her heirs, legatees or devisees. MARRIAGE PENALTY: A consequence of the current tax system which results in most married people collectively paying more in taxes, whether they file jointly or separately, than they would if they weren't married, and were filing with single status. CHILD TAX CREDIT: A non-refundable credit given to taxpayers for each dependent child that is under the age of 17 at the end of the tax year, reducing the taxpayer’s liability. CONGRESSIONAL BUDGET OFFICE (CBO): A federal agency within the legislative branch of the United States government that provides economic data to Congress.

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REFERENCES

CONGRESSIONAL BUDGET OFFICE’S (CBO) Reports

An Update to the Budget and Economic Outlook: Fiscal Years 2012 to 2022, dated August 22, 2012

The 2012 Long-Term Budget Outlook, dated June 5, 2012

The Fiscal Cliff Deal- http://www.cbo.gov/publication/43835

Derek Thompson’s Article: http://www.theatlantic.com/business/archive/2012/11/the-fiscal-

cliff-explainer-what-it-is-where-its-from-who-will-pay-and-why-it-matters/264990/

BUDGET CONTROL ACT OF 2011: http://www.cfr.org/financial-crises/budget-control-act-

2011/p25570

AMERICAN TAXPAYER RELIEF ACT 2012: http://www.fas.org/sgp/crs/misc/R42884.pdf

BLOOMBERG BRIEF – Fiscal Cliff – A special Supplement of the Economics Brief dated 25.09.2012

CCH Tax Briefing –Special Reports

American Taxpayer Relief Act of 2012, January 3, 2013

2010 Tax Relief/Job Creation Act, dated December 21, 2010

COMMITTEE FOR A RESPONSIBLE FEDERAL BUDGET’S Report: Analysis of the American

Recovery and Reinvestment Act dated February 17, 2009

CONGRESSIONAL RESEARCH SERVICE: The “Fiscal Cliff” and the American Taxpayer Relief Act of

2012

THE ECONOMIST article, dated December 15, 2012 – Over the Cliff?

http://en.wikipedia.org/wiki/United_States_fiscal_cliff

http://en.wikipedia.org/wiki/Budget_Control_Act_of_2011

http://en.wikipedia.org/wiki/United_States_debt-ceiling_crisis#Recent_concern_about_budget_deficits_and_long-term_debt

http://en.wikipedia.org/wiki/American_Taxpayer_Relief_Act_of_2012

http://nationalpriorities.org/analysis/2013/fiscal-cliff-deal/

http://www.cfr.org/international-finance/us-debt-ceiling-costs-consequences/p24751

http://www.journalofaccountancy.com/News/20137097.htm

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http://bonds.about.com/od/Issues-in-the-News/a/What-Is-The-Fiscal-Cliff.htm

http://bonds.about.com/od/Issues-in-the-News/a/What-Is-The-Debt-Ceiling-A-Simple-

Explanation-Of-The-Debate-And-Crisis.htm

http://www.economist.com/news/united-states/21568395-what-cliff-means-and-why-americas-deficit-woes-are-so-intractable-edge

http://www.guardian.co.uk/business/2011/jul/14/us-debt-ceiling-deadlock-questions-and-answers

http://tax.cchgroup.com/downloads/files/pdfs/legislation/bush-taxcuts.pdf

http://www.jdsupra.com/legalnews/the-tax-relief-unemployment-insurance-r-28792/

http://www.thepoliticalguide.com/Issues/Budget_Control_Act_of_2011/

http://articles.latimes.com/2011/aug/01/nation/la-na-debt-talks-20110801

http://forbesindia.com/article/real-issue/how-us-needs-to-overcome-the-fiscal-cliff/34297/1

http://useconomy.about.com/od/candidatesandtheeconomy/a/Obama_Stimulus.htm

http://bipartisanpolicy.org/blog/2011/08/economic-effects-budget-control-act-and-need-growth

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/01/wonkbook-everything-you-need-to-know-about-the-fiscal-cliff-deal/

http://www.pgpf.org/Issues/Fiscal-Outlook/2013/01/fiscal-cliff-atra-2012-long-term-analysis.aspx

http://blogs.wsj.com/indiarealtime/2012/11/22/what-the-fiscal-cliff-means-for-india/