The end of the election means the most important story in politics is the fiscal cliff -- a sudden rise in taxes combined with spending cuts scheduled to begin in January 2013.
But before we get to the policy -- and the graphs -- let's talk about the term. "Cliff" is an imperfect analogy. It's really more a long, rolling hill. A fiscal slope.
In January, family income won't plunge into the watery depths and government spending won't collapse. Instead, higher tax rates would reduce family income throughout the year, and mandatory spending cuts would shrink the deficit. The federal government would have to cut programs, fire some people and cancel some company contracts. It would be bad. It might turn out to be awful. But it wouldn't be sudden.
Whether you prefer cliffs or loping hillsides for your metaphor, topography is a good analogy for this crisis. It has been forming, as if tectonically, for many years. One could trace its origins all the way back to the 1960s and the creation of the perennially troublesome Alternative Minimum Tax. But the best place to begin is 2001, when President George W. Bush signed the first of two tax cuts which were scheduled to expire under the next president. That next president, Barack Obama, twice extended the tax cuts and added his own, including a huge break on payroll taxes. Then, in 2011, after Republicans insisted on trillions in spending cuts in exchange for raising the debt ceiling, the Budget Control Act. This law scheduled $1.2 trillion in cuts divided between defense and other parts of government.
Now all of these things -- the Alternative Minimum Tax, the undoing of Bush/Obama tax cuts, and the Budget Control Act -- are about to hit in seven weeks. What will that look like? How will it feel? How could we avoid it?
To the graphs, my friends. Click here.