The Fiscal Cliff is a date in 2013 where the expiration of both budget cuts and Bush tax cuts meet a critical point for the U.S. economy. Economists warn that a recession in 2013 is imminent if both issues are not properly addressed by the legislative branch. With an increased U.S. deficit and the financial debt ceiling of 2011, The Budget Control Act of 2011 was enacted to postpone a financial recession. Now two years later, the debt crisis has reached its limit and something must be done.

Political Stalemate

On the two sides of this debate are Republicans and Democrats. Republicans are calling to keep the middle class tax cuts while decreasing the national deficit through increased budget cuts. Democrats support the idea of raising taxes (thus increasing revenue) to reduce the deficit while returning the budget to previous levels before the cuts. While both sides’ positions have merit, neither will work efficiently unless implemented drastically.

A Potential Moderator

President Barack Obama has stated that in order to combat the financial recessions posed on the U.S., both sides must be willing to compromise. While both party members have respectively held to their beliefs and neither shows sign of giving in, many Americans call for such a compromise. Simultaneously raising taxes and cutting budgets of expensive government programs would help increase revenue and decrease the drain on the U.S. national deficit. The increased revenue from higher taxes would allow America to start paying off debt and increase their chances of avoiding another recession.

Potential Backlash

Realistically another stop-gap will be enacted to delay the onset of another financial recession after neither party compromises enough. Both sides are set to politically posture their position over that of the others. With how each party and the President handled the last financial « meltdown », it is highly likely a compromise will be reached though temporary and not enough to stop the current crisis. More than likely it will only delay the impact for another two years. If the matters surrounding the Fiscal Cliff are not addressed, what do you think will happen? Do you think both sides will be able to compromise?

image via www.cbo.gov