What Is the Fiscal Cliff and Why Should We Care?

The “fiscal cliff” is what Federal Reserve Board Chairman Ben Bernanke has called the many major fiscal events that could happen simultaneously at the close of 2012 and the dawning of 2013. The events include the expiration of the Bush era tax cuts, the payroll tax cut and other important tax-relief provisions. They also include the first installment of the $1.2 trillion across-the-board cuts of domestic and defense programs required under last summer’s bipartisan deficit reduction agreement. At the same time, lawmakers may have to raise the debt ceiling once again, potentially triggering another standoff in Congress.