The Fiscal Cliff

The fiscal cliff is an automatic $500 billion tax increase and spending cut "crisis" that was produced by past presidents and Congresses in order to force leaders to come up with a tax and spending budget. In order to avoid the $500 billion in tax increases and spending cuts, President Obama and Republicans must reach an agreement on how to reduce the deficit. Some of the reasons why leaders can't come up with a plan are their differences on the Debt Ceiling, the AMT (Alternative Minimum Tax), the other tax related programs, such as the Payroll Tax Holiday.

The Debt Ceiling and the the AMT are all a matter of whether or not they should be adjusted. Leaders are debating if the Debt Ceiling should be raised or kept as is to prevent more debt from accumulating, but, they say. where will all the money for spending on programs and the military come from? The AMT is not selective to only the wealthy, but can effect those with low income. It depends on what your tax returns say and that can cause many to fork over additional money to the regular income tax amount. Leaders are debating on whether or not to alter it so it affects the wealthy and not low income families in order to prevent them from being victimized by the AMT.

Additionally to the AMT, the payroll tax holiday is on the chopping block.This helped the economy to rise to where it currently is. Without it, families won't be able to splurge or invest extra money into the economy. Many fear that'll have to be cut since it costs $95 billion each year. Despite that being a small loss for Americans, there are definitely other larger and higher tax rates potentially coming our way. The loss of the payroll tax holiday compared to the other tax increases appears to only be a small loss.

Overall, the U.S. will fall over the fiscal cliff if the President and Republicans don't agree on a way to reduce the nation's deficit.