Despite actually passing the so-called fiscal cliff deadline, the Senate and House of Representatives passed a bill that President Barack Obama signed, preventing the country from actually going over the cliff, for now.
The fiscal cliff essentially would have resulted in tax rates on all income levels reverting to where they were under President Bill Clinton along with cuts to the federal government’s discretionary spending. Spending on entitlements such as Medicare, Medicaid and Social Security would not have been touched.
Some economist and politicians argued that the double whammy of increased taxes and reduced government spending could have crippled the economy’s fragile recovery from the 2008 recession.
According to the New York Times, the deal allows for a tax increase on wealthy Americans, extends jobless benefits and keeps an alternative-energy tax credit.
The deal may have just kicked the can down the road, leading to another showdown between Obama and his Democratic allies in the Senate and Republicans in the House of Representatives.
According to Time Magazine’s Swampland blog: "The automatic cuts to military and domestic programs that the cliff deal averted, known as ‘sequestration,’ now come due at the end of February. Around the same time, the Treasury Department will deplete the stock of accounting gimmicks it can use to stretch the $16.4 trillion debt limit, which the U.S. reached once again on New Year’s Eve. So the pact postpones the pain for a mere two months. A month after that, the U.S. will run out of money to fund the government."
Tell us in comments: What do you think of the fiscal cliff deal? What should the federal government do to address this situation once and for all?