WASHINGTON (CNNMoney) - Lawmakers and the president are still at odds over a deal to avoid the Fiscal
That means steep spending cuts and automatic tax hikes are set to go
into effect in just a matter of days. Economists have warned the move could
send the economy into a another recession.
It started more than a decade ago when then-President George W. Bush initiated a series of tax cuts for all Americans. Those cuts, which were politically expedient, were also costly to the government.
When it came time for the cuts to expire, the U.S. was just emerging from the worst recession since the Great Depression so President Obama agreed to extend the tax cuts for two more years in exchange for Congress extending federal emergency unemployment benefits.
Those cuts are expensive. If they're extended, by 2020, the Bush-era tax cuts will be responsible for more than half the national debt.
Democrats insist that taxes go up for the wealthy but stay in place permanently for those earning less than $250,000 a year. Republicans say hikes on anyone, based on an ideology that calls for government to be as small as possible.
That ideology is as old as American politics but today, the philosophy's main spokesperson is Grover Norquist, president of Americans for Tax Reform. Norquist's pledge, signed by almost all Republicans in Congress, forbids signatories from raising taxes - ever.
The debate came to a head in the summer of 2011. Republicans demanded the government reduce its deficit as a condition for raising the nation's debt ceiling. Without the deal, the U.S. would lose its ability to borrow money. Both Democrats and Republicans deployed tactics that nearly shut down the government and, ultimately, cost America its AAA credit rating for the first time in history.
In a last minute compromise, both sides agreed to $1 trillion in spending cuts up front and another 1.2 trillion to be decided by a special congressional "super-committee." A poison pill was attached, though. If the supercommittee couldn't reach a deal, automatic across-the-board cuts, known as the "Sequester," would go into effect starting January 2013.
President Obama and congressional leaders were scheduled to meet
Friday afternoon to discuss the looming Fiscal Cliff impasse.
President Barack Obama will renew his call to reduce the world's nuclear stockpiles during a speech in Berlin Wednesday.More >>
Issuing an appeal for a new citizen activism in the free world, President Barack Obama renewed his call Wednesday to reduce U.S. and Russian nuclear stockpiles and to confront climate change, a danger he called "the global...More >>
Syrian state television says an accidental explosion at a military depot outside the northwestern coastal city of Latakia has left six people lightly injured.More >>
Syrian troops backed by Lebanese Hezbollah fighters clashed Wednesday with rebel forces south of a Damascus suburb that is home to a major Shiite Muslim shrine, in an attempt to secure the area surrounding the revered site,...More >>
China's new leader Xi Jinping is commanding wayward Communist Party cadres to purify themselves of corruption, and he's summed it up in a pithy slogan as Mao Zedong might have done: Look in the mirror, take a...More >>
China's new leader Xi Jinping is commanding wayward Communist Party cadres to purify themselves of corruption, and he's summed it up in a pithy slogan as Mao Zedong might have done: Look in the mirror, take a bath.More >>
President Barack Obama's 26-hour whirlwind visit to Berlin caps three days of international summitry for the president, and marks his return to a place where he once summoned a throng of 200,000 to share his...More >>
Trying to tamp down concerns about government over-reach, President Barack Obama on Wednesday defended U.S. Internet and phone surveillance programs as narrowly targeted efforts that have saved lives and thwarted at least 50...More >>
An influential Republican senator says the Internal Revenue Service is about to pay $70 million in employee bonuses despite an Obama administration directive to cancel discretionary bonuses because of automatic...More >>
The Internal Revenue Service is about to pay $70 million in employee bonuses despite an Obama administration directive to cancel discretionary bonuses because of automatic spending cuts enacted this year, according to a GOP...More >>