What Will It Mean To Go Over The Fiscal Cliff?
PITTSBURGH (KDKA) — A serious split Thursday night among House Republicans in Congress meant no deal yet to avoid the fiscal cliff.
Members of Congress returned home for Christmas, raising the chances of going over that cliff.
But what exactly does that mean?
Unable to cut a compromise, members of Congress are taking a holiday break, leaving the nation and the public at greater risk than ever.
“If all of the tax increases and spending cuts that are supposed to take effect on Jan. 1 do take effect, then the economy is likely to fall back into recession,” senior PNC economist Gus Faucher told KDKA money editor Jon Delano.
That recession would be triggered, said Faucher, because everybody’s taxes will go up at the same time as many government programs are automatically cut by nearly 10 percent through something called sequestration.
First, on the tax side.
“Everyone will see their social security taxes go up starting on Jan. 1. And then, there’s personal income taxes. Essentially, everyone who pays personal income taxes will face a higher personal income tax rate.”
And some popular tax credits will expire, too.
“Some of the child tax credits that were passed under President Bush, there were fixes to the alternative minimum tax that would expire, they’re various tax credits that were enacted under President Obama’s stimulus package that would expire,” noted Faucher.
At the same time as taxes go up, sequestration will reduce Pentagon spending, along with funding for most domestic programs.
In Pennsylvania, millions will be cut from programs, including education grants ($43.1 million), Head Start ($20.5 million), the Low Income Home Energy Assistance Program ($18.3 million), the child care block grant ($5.4 million), substance abuse treatment ($4.6 million), senior nutrition ($3.0 million), and emergency preparedness ($1.9 million).
“Given the severity of the spending cuts that we’re talking about , given the big income tax increases that we’re talking about, the incentive is there to cut a deal on both sides,” added Faucher.
But no one in Congress is predicting that will happen.