There is much fear and trepidation that the nation may topple over the “fiscal cliff” come January 1, 2013. Many elements come together, forming this cliff:
- Sequestration, mandated by the Budget Control Act (8/2/11), goes into effect
- 8.9% across the board cuts to all areas (including Pentagon spending)
- Preservation of Medicaid, Medicare, SNAP and a few other safety net programs; not protecting safety net programs such as WIC, job training services, etc.
- Tax incentives evaporate, causing personal and business taxes to increase
- The twice-extended, temporary Bush Tax Cuts are scheduled to phase out
- Annually renewable tax incentives (tax extenders)
- Payroll tax holiday, twice extended, is eliminated
- Refundable tax benefits  for low and middle income households (CTC, EITC,…)
Is it REALLY a “cliff”?
Or is it a “fiscal slope”?
Political figures are divided on this. Some say that it will be an immediate tragedy, throwing the nation into a recession. Others, and most economists, remind us that the impacts will take place over ten years.There would be little noticeable effect until late in 2013. Contracts that are already signed for FY2013 would be honored. Safety net providers WILL NOT lose funding on January 1. Economists and analysts refer to this as a “fiscal slope.” The slope allows time during 2013 to readjust funding and to provide new legislation to mediate the effects of sequestration.
Yes, it is likely that some tax breaks will expire on January 1. This would not be all bad. Yes, your payroll taxes will rise to what they were before the two-year holiday. There will be considerable controversy about which will be extended and which will be allowed to expire.
For more information:
The Inter-Religious Working Group on Domestic Human Needs, of which NETWORK is an active partner, has developed “Faithful Alternatives to Sequestration