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The 2013 Fiscal Cliff: What would happen if we just fell off?

fiscalcliff100212_optBY BOB HOLT
NEWJERSEYNEWSROOM.COM

An analysis of the impending fiscal cliff finds that falling off would lower the budget deficit by $503 billion through next September, but the economy would shrink by 0.5 percent next year and millions of jobs would be lost. The impacts could lead to a second round recession.

That infamous fiscal cliff is a combination of budget cuts worth $500 billion, along with a number of tax breaks that are set to expire on December 31.

According to The Washington Post, those expiring tax breaks account for nearly four-fifths of the $500 billion the cliff figures to take from the economy between January and September. The Congressional Budget Office, which conducted the analysis, said automatic budget cuts add up to $65 billion in the fiscal year ending in September, divided between the Pentagon and domestic programs.

The Palm Beach Post reported that without legislation, middle-income families would see tax increases on the average of $2,000, according to the Tax Policy Center. Also, the alternative minimum tax wants to require the wealthy to pay a minimum amount of tax, without overtaxing the middle class. Without Congressional action, 26 million families are expected to see average tax increases of $3,700.

A number of Democrats are looking to President Barack Obama to try to force Republicans to accept increased tax rates on income exceeding $250,000 for couples, according to an Associated Press report in the Palm Beach Post. Republicans have vowed to stand against the move, and the lack of movement on both sides has created the fiscal cliff.

House Speaker John Boehner said, according to the Associated Press, “A 'balanced' approach isn't balanced if it means higher tax rates on the small businesses that are key to getting our economy moving again.”

“Raising tax rates is unacceptable.”

 

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