December 30, 2012
Political gamesmanship, bitter ideological divisions and repeated miscalculations by both parties over the past two years all helped to put the country on the road to the fiscal cliff.
Absent passage of some last-minute deal between the White House and congressional leaders tomorrow, the fiscal crisis will be upon us. It's an economic fiasco designed entirely by our own lawmakers-the same ones now feuding over a deal to avert their creation.
Beginning with President Obama's reluctant decision in December 2010 to extend Bush era tax cuts for all Americans as part of a larger stimulus package, partisan squabbling has led to a series of near disasters – including a close brush with the first-ever default on U.S. debt and another government shutdown.
The near-death political experience of that 2011 debt-ceiling crisis led to the enactment of new budget legislation that matched increased government borrowing authority with $1 trillion of immediate savings. The resulting compromise also mandated an additional $1.2 trillion of automatic savings in the coming decade if lawmakers couldn't find the political courage to specify the cuts to reduce the deficit.
When Congress couldn't find that courage, the clock started ticking towards a January 2, 2013, deadline for the massive spending cuts in defense and domestic programs to begin taking effect – just as all the Bush era tax cuts and other tax measures were once again set to expire.
This looming tsunami of nearly $600 billion of spending cuts and tax increases threatens to leave virtually every American with a higher tax bill and jolt the economy in a way that's almost certain to trigger another recession.
Repairing the nation's finances starts with overcoming four years of distrust and backbiting between Obama and the House Republicans led by Speaker John Boehner.
Lawmakers have only a day left to somehow push through a deal to avoid this fiscal calamity, or at least blunt its worst effects. With massive spending cuts and tax hikes on the horizon, and the government scheduled to technically reach its $16.4 trillion borrowing limit this week, some may wonder how we got into this mess in the first place. Here is a timeline of the government's path to this historic and potentially devastating choice.