Without an agreement from Congress, the “fiscal cliff” looms ahead as January inches closer.
The fiscal cliff was coined to describe the effect current laws will have on the people and the economy, if left unchanged. This includes scheduled spending cuts and the end of the Bush-era tax cuts.
Temporary payroll tax cuts are set to increase midnight Dec. 31, which could cause individual worker’s taxes to rise by 2 percent.
Economists have forecasted that, if left unchanged, this combination of rising taxes and cuts to spending could push the country into another recession.
President Barack Obama is insisting that tax rates go up for the top 2 percent of incomes, but that the tax cuts for the middle class should remain in effect.
The president told Bloomberg TV that a tax increase for those making more than $250,000 would be required. He rejected House of Representatives Speaker John Boehner’s proposal to close loopholes and limiting deductions, saying it cannot be done in two weeks and a “down payment” would be required.
However, Obama did say he is open to broader tax reform, to include closing loopholes and limiting deductions.
House Minority Leader Nancy Pelosi has threatened to Discharge Petition to end the stalemate in the House. The petition would force a Senate approved bill to a vote in the House. The bill in question approved ending the Bush-era tax cuts for the wealthy, but extending them for the middle class.
This petition would require 218 signatures, which would require some Republicans to sign as well.
While House members have not been able to agree on measures to stall the fiscal cliff, another problem looms on the horizon.
According to a Congressional Budget Office report, the U.S. Treasury Department is expected to reach it’s statutory limit for debt, which is legally placed at $13.394 trillion. Currently the department is $115 billion away from its limit.
The CBO report said the Treasury has certain “extraordinary measures” it can take, and with these measures, that the limit will likely not be reached until February or March.
However, once the limit is reached, the Treasury will not be authorized to issue additional debt, and it will be up to the Administration to decide which of the government’s financial obligations are met.
However, this can be averted if the debt limit is raised.
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