by Cameron Hill ’15

For the past year, U.S. media has been inundated by news surrounding the so-called “fiscal cliff.” On January 1, if substantive action is not taken to prevent it, a series of tax increases and governmental spending cuts totaling over $500 billion will go into effect for the 2013 fiscal year.

The United States could potentially be plunged into another recession. Congress has agreed upon these dangerous fiscal policies as an entirely unfavorable compromise that would force the two parties to work together. Because such a threat was looming, they reasoned, the severely partisan Congress have no choice but to compromise to prevent disaster. Unfortunately, there is little certainty that they will pull through even with this tremendous incentive.

Numerous tax cuts passed during the past decade are due to expire on December 31. Taxes paid by most taxpayers and many business will rise and many middle and upper income earning taxpayers will further have to pay a higher minimum tax rate, the alternative minimum tax. Tax credits, such as the Child tax credit, will be reduced. Billions of dollars of funding granted to federal programs including public education and defensive programs not specifically exempted will be slashed.

With less than a month until the New Year, the Republican and Democratic parties in the House and Senate have both proposed plans to resolve the challenges faced by the fiscal cliff. The Democratic plan centers on tax increases for the wealthy. Republicans favor a plan extending all tax rates while limiting breaks and lessening funding to healthcare programs. However, neither party has agreed to the plan of the other and a deal has not yet passed both the Republican House and Democratic Senate.

Both parties have been consistently unwilling to adapt a plan including requirements presented by the other. It remains unclear whether or not a sufficiently bipartisan plan will be submitted and approved before January 1. If consensus is not reached and the nation is pushed over the fiscal cliff short-term effects may not be immediately apparent. In the long term, however, a significant decrease in governmental spending and a potential decrease in spending by consumers could likely lead to the nation’s unemployment rate beginning to rise again and perhaps another recession.