The so-called "fiscal cliff" has dominated the news ever since the election ended, but it has hung over heads as a threat to the economy for much longer.
The "cliff" is a combination of tax increases (created by not extending tax cuts that currently exist) and several deep spending cuts (passed by the Congress and signed into law by President Obama last year).
The tax increases will be over $500 billion and the cuts in spending will be in the billions and will potentially affect every area of government. Most economists on the left and right believe they could be a cause of economic ruin, but both the president and Speaker Boehner, oddly, have their own reasons why they might like to see it happen.
During the debates, the president told the audience flatly that the "fiscal cliff would not happen." In the last few weeks, he has begun playing a bold game of chicken and has made it clear he is ready to jump. Meanwhile, House Speaker Boehner has consistently said such a thing cannot happen. He has offered several counter proposals, including one endorsed by moderate Democrat Erskine Bowles, the former Chief of Staff for Bill Clinton and best known recently as the co-chair (with former U.S. Senator Alan Simpson (R-WY)) of Barack Obama's National Commission on Fiscal Responsibility and Reform that was formed to provide a serious attack against the problem of government spending. That proposal by Boehner -- as well as all the others -- was rejected by President Obama. Obama is committed to making sure the most affluent have a tax increase and seems willing to do it regardless of the consequences.
So, Obama has shown his willingness to face the cliff, but why would Boehner want to do it? It is certainly contrarian for the GOP to acquiesce on such tax increases, but one of the biggest complaints Republicans have had in recent years and particularly in the last election is the huge number of voters who do not pay federal taxes directly (although they certainly do in the costs of goods and services they buy from companies that pay taxes). If the problem is a lack of "skin in the game" by many voters, what better way of accomplishing that than tax increases that not only will affect the most affluent, but even the middle class?
With the fiscal cliff, individuals making as little as $33,000 and couples making around $50,000 could find themselves subject to the Annual Minimum Tax, which has only been for the most affluent in recent years. Sure, this increase would also be on the wealthy and could, as Republicans have argued, have a negative impact on job creation and could lead to an exodus of revenue from the country.
But, it would also get the attention of all voters when it comes to taxes and might translate into electoral success.
If something is not done to avoid the fiscal cliff, the economic future of this country will likely be very gloomy.