As the daily headlines attest, President Barack Obama has some crucial business with this “lame-duck” session of Congress before he begins his second term. Because of temporary tax cuts, previous budget deals and procrastination in dealing with the debt, the country now faces a “fiscal cliff” on New Year’s Day 2013.
The stakes are high. All working households are scheduled to pay more taxes. And a feeble labor market and a macro economy are bracing for the impact of much higher taxes and, perhaps, reduced government spending.
The key factors are the Budget Control Act of 2011 and the scheduled end of a handful of tax cuts. The act lays out automatic budget cuts to be split between military and domestic spending: $55 billion in both categories. This would result in a 9 percent cut to the Pentagon and an 8 percent cut in domestic programs — but only when compared with their regularly scheduled increases.
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