Council of Councils
Think Global Health
Online Store
Introduction
Over the last several decades, governments have collectively pledged to slow global warming. But despite intensified diplomacy, the world is already facing the consequences of climate…
What is the Fiscal Cliff?
August 1, 2012 1:57 pm (EST)
- Post
- Blog posts represent the views of CFR fellows and staff and not those of CFR, which takes no institutional positions.
Without timely action from Congress, the United States is set to undergo a drastic set of tax hikes and spending cuts at year's end that could derail the nation's fragile economic recovery. The budget measures, known collectively as the "fiscal cliff," would automatically slash the federal deficit by $607 billion or approximately 4 percent of GDP between FY 2012 and FY 2013, according to the Congressional Budget Office. In addition, Treasury is likely to reach its ability to borrow—the federal debt ceiling—around the same period.
Analysts say the coming months offer Republicans and Democrats yet another opportunity to strike a balance between the short-term measures needed to feed the recovery and the medium to long-term policies that will stabilize and eventually lower the debt. But few see good chances for a political compromise before the November election.
This Backgrounder examines the domestic and global implications of the coming fiscal showdown.