Ian Benson
News Editor
With the 2012 elections over, President Obama and Republican leaders will finally begin to start negotiations concerning the “fiscal cliff,” a group of tax hikes and spending cuts, the by-product of a series of laws expiring.
The Congressional Budget Office estimates that if the fiscal cliff is not addressed as many as 3.4 million jobs could be lost, raising the unemployment rate from 7.9 percent to 9.1. In addition, middle-income families could pay up to $2,000 more in taxes a year. The cliff’s effect on the economy would be so severe that the country would fall back into recession during the first half of 2013.
The uncertainty of a deal being reached in time has caused some companies to reduce spending and delay hiring. A full-blown recession would devastate the job market for recent and soon-to-be college graduates.
In addition to the tax cuts, the fiscal cliff would also feature across-the-board spending cuts, totaling around $85 billion. Last year, Congress and the White House agreed that these cuts would kick in if a congressional panel could not reach an agreement on a deficit-reduction plan, hoping to force the panel to come to an understanding. The plan backfired when the panel was unable to do so.
The spending cuts would affect a variety of programs. Defense spending would be cut by 10 percent, causing job loss among Pentagon employees and defense contractors. Domestic programs such as federal aid to state and local governments and health research would drop by eight percent, with education grants, law enforcement and environmental protection also affected. Other effects include ending extended unemployment benefits for nearly two million people and an $11 billion cut to Medicare payments that could force job cuts in hospitals and doctors’ offices.
Both the President and Speaker of the House John Boehner (R-OH) have pledged to work with one another to avoid this potential catastrophe, though they have offered radically divergent plans. President Obama reiterated a promise from his campaign, pledging that students, middle-income families and seniors would not have to pay more in taxes. He asked Congress to extend the middle class tax cuts. Boehner’s plan consisted of shoring up entitlement programs and closing tax loopholes, instead of increasing taxes on the upper class, saying up to 700,000 jobs could be lost in such a tax hike.
Obama has invited party leaders from both sides of the aisle to the White House to build a consensus around the problems regarding the impending cliff.