Understanding the Fiscal Cliff

With both President Obama, the White House staff and House Speaker Boehner making sounds like progress is actually being made hopefully the following is redundant. But, just in case it all falls apart before January 1st. here are the following facts.

The Fiscal Cliff in Billions of Dollars

Mandatory Spending cuts to the following:
123 Billion dollars Medicare
294 Billion dollars infrastructure and Social Service
455 Billion Dollars Defense
47 Billion  dollars miscellaneous

These above spending cuts have already been voted upon and signed by the President  in 2011 as a last ditch practical move in case the executive and legislative branches could not come to agreement before January 1st 2013.

In 2011 a Supercommittee known now as the Simpson Bowles Commitee was formed to find an agreement that would be acceptable to both sides. Though the Democrats and Republicans within the committee agreed what had to be done, politically it would be like literally falling on their swords with no Republicans or Democrats who voted for it ever to be elected to anything ever again.

Chairman of the Fed Bernanke Coined the term in early 2012 while speaking to Congress about the problem and called it the Fiscal Cliff even though others think the terms "Fiscal Slope" or "fiscal hill"
might be more appropriate. Because it will take time for a real Fiscal Cliff to have marked effects upon the U.S. and Global economy even though many businesses are presently preparing for it by laying off employees before and after and even during the Christmas and New Year season. But no matter what we call it economists worry that the Fiscal Cliff unchecked by itself will throw the economy into another recession. It is expected that the Gross National Product would contract about .5 percent or 1/2 a percent in 2013.

However, there is an upside to actually going over the fiscal cliff. This would be reducing the deficit by increasing taxes and decreasing government spending which might be beneficial to the whole nation over time. The real problem is the mood of the country and whether the people of the U.S. and the world think the relatively short term pain is worth any benefits they might also receive. Because it might be difficult to make sense of a relatively intangible thing like deficits and spending on a governmental level. Most people only go by whether they have food to eat for themselves and their children and whether they can afford to pay a rent or mortgage. And for most people there will be less money (because of more going out for taxes) to pay for food and mortgages or rent as a result of going over the fiscal cliff (if that actually winds up happening).

I have been researching all this for some time myself just to stay informed so I know financially how it would affect both me, my family and friends and relatives for some time. So, here are the most useful results up to this moment in the here and now that I'm sharing.