Explaining the Fiscal Cliff

     The Fiscal Cliff is the impact that is predicted to occur when the AMT, Payroll Tax Holiday, Sequester, and Bush Tax Cuts expire, as well as the Budget Control Act of 2011 coming into regulation. It's a metaphor known as the increase of taxes to more than $500 billion, and across the board spending cuts starting January 1st. If we "fall off" the cliff, it will result in tax rises for every tax payer and business. Spending would be cut in the emergency unemployment compensation program, medicare payment, and a whooping budget cut of  65 billion dollars across the board for federal programs over the nine months between January through September.The fiscal cliff is occuring because all of our programs are expiring at one point of time: December 31st.
     The 2011 deal takes effect the same time as changes to the AMT adjustment occur. AMT stands for Alternative Minimum Tax. The AMT is a extra tax people have to pay on normal taxes, when it was first created it was targeting people with very high incomes who could use special tax benefits to pay little to no taxes. The problem with it now however is that the AMT is applying to civilians who don't have a very high income. People don't have to pay AMT taxes if their payment reaches regular income tax. But if the regular tax is below the minimum you have to also pay AMT. One tax that was DEDUCTED was the payroll tax holiday; its was a deduction of 2% of payroll tax. This expires on December 31st as well. It was helping the economy however the government is planning on letting it expire. Many citizens making 500,000 dollars a year were getting 80 dollars a month, This helped families pay for ridiculously expensive gas prices as well as purchasing food.
     This brings us to our last topic: The Sequester. It's a package of automatic spending cuts. The sequester begins in 2013 and ends in 2021. According to the White House Report the total cuts for 2013 will be $109 Billion. If the cuts do occur there could be unemployment and budget cuts from defense and health care. The sequester can be avoided but only if congress passes another budget deal with at least 1.2 trillion in deficit reductions. 
    All of these put together: Bush Era Tax Cuts, Payroll Tax Holiday, The AMT, Sequestration, and The Debt Calling create the Fiscal Cliff.