Your Easy-to-Use Guide to the Fiscal Cliff

By JOSH BOAK, The Fiscal Times November 30, 2012

(Updated 12/4/12.)

It’s easy to get confused by where negotiations stand on the fiscal cliff.

House Speaker John Boehner says he’s “optimistic” one day, only to be “disappointed” the next by the lack of progress. President Obama talks about the need to act immediately, yet the federal government is still lurching toward a disastrous mishmash of tax hikes and slashed spending next year.

The fiscal cliff totals more than $600 billion and threatens to plunge the country into recession, according to the Congressional Budget Office. As of the last week of November, much of what we know about the talks comes from government officials speaking to reporters anonymously, past budget proposals, and press briefings. To help you sort out the difference between what politicians say and what they mean on this issue, The Fiscal Times has put together this simple guide.

Fiscal Cliff Guide (updated 12/4/12)
	President Obama	House Republicans
Income Taxes	1) Before the Bush-era tax rates expire next year, extend them for those earning less than $250,000. 2) Increase taxes by $1.6 trillion over 10 years. Additional revenue comes from the higher rates and capping deductions for the wealthy.	1)Approve all Bush-era rates for possibly another year to conduct tax reform. 2) Overhaul tax code to close deductions and lower rates to generate $800 billion in new revenues.
	Sticking Point: Republicans oppose higher tax rates.	Sticking Point: Dems say it's politically unrealistic because it might require ending popular expenditures like the mortgage interest deduction.
Budget Sequester	Avoid the $109 billion in automatic cuts for 2013 with a new agreement. Make the cuts targeted, rather than based on across-the-board percentages for defense and domestic programs.	Trim agency budgets by $300 billion over ten years. In September, passed a bill that required Obama to find an alternative to the sequester's $55 billion in defense cuts. The Democratic-majority Senate blocked it.
	Sticking Point: This possibly requires a complicated "grand bargain."	Sticking Point: Dems are against deeper cuts to education and other social spending, if rest of budget is untouched.
Medicare & Medicaid	Reduce entitlement spending by $400 billion over 10 years, according to POLITICO. White House budget proposal contained $364 billion in Medicare savings, 42 percent would come from paying less for drugs for low-income recipients. The Simpson-Bowles plan listed $330 billion in potential cuts, a third of which comes from greater out-of-pocket costs for beneficiaries.	Save $600 billion in health care expenditures, in part by raising the Medicare eligibility to 67 from 65.
	Sticking Point: Entitlements are sacred within Democratic circles.	Sticking Point: Cuts that substantial would struggle to clear a Democratic majority Senate.
Social Security	White House insists that's off the table in fiscal cliff discussions.	Cut future costs by basing Social Security and other government programs on a tighter inflation metric, saving $200 billion.
	Sticking Point: Potentially upsetting seniors before the 2014 campaign is a terrible election strategy.	Sticking Point: While Obama endorsed the tighter metric in previous closed door talks, there are many outsoken Dem opponents.
Debt Ceiling	Top Dems don't want to frantically negotiate on the fiscal cliff, only to then have to start bargaining again with the GOP over raising the $16.4 trillion debt ceiling. The White House wants Congress to relinquish its control over the borrowing limit as part of a package deal.	Boehner will extend the borrowing limit by a sum equal to long-term spending reductions. It's possible to keep Obama on a leash by raising the limit in monthly increments.
	Sticking Point: This is the GOP trump card.	Sticking Point: The country risks a catastrophic default that undermines any economic bounce from deficit reduction.
"Doc" Fix	No dispute! Both sides want to suspend the cuts in Medicare physician payments.	No dispute! Both sides want to suspend the cuts in Medicare physician payments.
	Sticking Point: Do they have to resolve everything else first?	Sticking Point: Do they have to resolve everything else first?
AMT & Other Tax Credits	No dispute! Both sides want to patch the Alternative Minimum Tax for inflation so it doesn't hit families making $74,450.	No dispute! Both sides want to patch the Alternative Minimum Tax for inflation so it doesn't hit families making $74,450.
	Sticking Point: Do they have to resolve everything else first?	Sticking Point: Do they have to resolve everything else first?
Defense	The military is about 20 percent of the $3.7 trillion budget. Obama wants to trim Pentagon spending by $487 billion during the next 10 years.	Hawkish about defense spending, the GOP budget by Rep. Paul Ryan, R-Wisc., would add about $300 billion to the military during that same period.
	Sticking Point: GOP claims cuts jeopardize national security.	Sticking Point: It's hard to whittle down the deficit and not touch the miliary or taxes. Dems know this.