In 54 days, $7 trillion in tax hikes and spending cuts over the next decade will automatically go into effect. If America goes over this “fiscal cliff,” experts say the already rickety U.S. economy could implode.
To avert the economic calamity, on Wednesday Speaker Rep. John Boehner (R-OH) offered President Barack Obama a “bridge” to help the nation safely cross the fiscal cliff.
“Mr. President, this is your moment. We’re ready to be led–not as Democrats or Republicans, but as Americans,” said Mr. Boehner. “We want you to lead, not as a liberal or a conservative, but as president of the United States of America.”
Mr. Boehner said he sought “common ground” with Mr. Obama and was open to “new revenues.”:
“In order to garner Republican support for new revenues, the president must be willing to reduce spending and shore up the entitlement programs that are the primary drivers of our debt.”
Whether Republicans, Democrats, and Mr. Obama can reach a “grand bargain” remains to be seen. But the fiscal cliff is real. As Andrew Taylor of the Associated Press explains, on January 1, 2013, the following will occur:
The expiration of Bush-era tax cuts on income, investments, married couples and families with children and inheritances.
A $55 billion, 9 percent cut in defense spending next year and another $55 billion in cuts to domestic programs, including a 2 percent cut to Medicare providers.
The expiration of unemployment benefits for the long-term jobless and a sharp cut in reimbursements for doctors participating in Medicare.
The expiration of Obama’s temporary 2 percentage point cut in payroll taxes.
The imposition of the alternative minimum tax on some 26 million households, which would raise their taxes by an average of $3,700.
A variety of smaller taxes cuts for both businesses and individuals collectively known as tax ”extenders” in Washington-speak. They include a tax credit for research and development and a deduction for sales taxes in states that don’t have an income tax.
In short, were the U.S. to go over the fiscal cliff, virtually every tax cut since 2001 would expire, raising taxes on the average American household by $3,500.
U.S. stock markets have already telegraphed anxiety over whether the federal government can solve the fiscal impasse. On Wednesday, the Dow Jones Industrial Average dropped 312 points.