A dreadful combination of tax hikes and spending cuts, capable of throwing our country back into a recession.
But, the cliff can be avoided by the end of the year if Congress can compromise — the keyword being if.
“What’s going to happen here, if the Congress does not reach a deal in about a month, by the end of the year we’re going to have considerable tax increases,” says Arthur Schiller Casimir, an economics professor at Western New England University.
Economist speculate it will force consumers to slow down spending and eliminate job opportunities in an economy that’s just getting back on it’s feet.
“We just came out of a recession,” says Casimir. “To go back into another one would be devastating, especially for people who are looking for jobs.”
There are a number of online calculators that can show you exactly how the fiscal cliff will impact your bottom line.
Creditcards.com has a simple tool that will quickly calculate your new tax liability.
If you’re in tune with the ins and outs of tax law and you’ve been following budget negotiations closely, then the Tax Policy Center’s calculator can help you get more specific.
The Tax Foundation’s calculator also offers advanced calculations for a more precise estimate.
“The average American family will see an increase of $2000 in their tax liabilities,” says Casimir.
In addition to a tax rate increase, deep spending cuts will also take effect at the beginning of the year in an effort to reduce the federal deficit. That means funding for things like medical research and natural disaster relief could dry up.
A host of social welfare programs will also likely lose money, meaning many Americans — who will soon be paying more in taxes — will get less of the help they need.
But with 28 days left, economists are still hopeful that won’t happen.
“Hopefully there will be an agreement, there will be a deal between the people in the US Senate and the people in Congress, in order to avoid this particular cliff,” says Casimir.