How Will the Fiscal Cliff Affect You?

The President and Speaker Boehner failed to reach a deal on the impending fiscal cliff...what does it mean for you?

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Though it was probably on many lawmakers' wish lists this holiday season, Santa did not bring compromise to Washington.

President Obama and Speaker John Boehner failed to reach a deal regarding the impending fiscal cliff -- what will happen at the end of this year when the provisions of the Budget Control Act of 2011 are scheduled to go into effect.
At midnight on Dec. 31, 2012, last year’s temporary payroll tax cuts will go end, resulting in a 2 percent tax increase for working Americans.  Tax cuts for certain businesses will also coincide with the end of tax cuts established between 2001 and 2003, as well as the beginning of new taxes associated with the health care reform act.  Automatic cuts are also scheduled for over 1,000 government programs, including the defense budget and Medicare.  Such drastic cuts put the nation in renewed economic jeopardy as the likelihood of an even worse recession is expected to result from these automatic provisions.
Lawmakers have had over a year to address the fiscal cliff deadline, but strict partisanship in Washington has prevent any forward progress on the topic.  Following failed negotiations this week between Obama and Boehner, during which Obama agreed to push the minimum income level up to $400,000 annually before seeing tax increases (up from the $250,000 benchmark he campaigned on), House Republicans have scheduled a vote on their “Plan B” option that would raise taxes on people earning over $1 million annually.
Mid-week, before negotiations stalled, President Obama seemed optimistic that a deal could be reached, saying he and the Speaker were just a few billion dollars apart on a ten-year pact that would reduce the deficit by $2 trillion.  Obama called on House Republicans to accept his deal, saying that his re-election signals the public’s support for higher taxes on the wealthy.  
White House Spokesman Jay Carney said, "Instead of taking the opportunity that was presented to them, to continue to negotiate what could be a very helpful large deal for the American people, the Republicans in the House have decided to run down an alley that has no exit while we all watch," Carney said. "And again it's something we've seen in the past."
Speaker Boehner, on the other hand, said Obama’s offer does not do enough to alleviate federal spending.  "What the president has offered so far simply won't do anything to solve our spending problem and begin to address our nation's crippling debt," Boehner said in his recorded weekly address.  
With President Obama spending the holiday in Hawaii, and Speaker Boehner spending the holiday in his home state of Ohio, there was no hope of a deal being reached before Christmas, as previously hoped for.
Reports now say that Obama is attempting to reach a smaller deal, calling for an extension of unemployment benefits, which he says is “achievable.” Boehner may be less optimistic, saying, “God only knows” how the two sides will reach an agreement.
As of Christmas, it looks as though working Americans will be paying higher taxes next year, while seeing government services shrink.
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