All this would lead many consumers to spend less. Anticipating reduced sales and profits, businesses would likely cut jobs. Others would delay hiring.
Another part of the cliff is a package of across-the-board spending cuts to defense and domestic programs â¿¿ cuts the CBO says would total about $85 billion. Congress and the Obama administration agreed last year that these cuts would kick in if a congressional panel couldn't agree on a deficit-reduction plan. The magnitude of the cuts was intended to force agreement. It didn't.
Defense spending would shrink 10 percent. Defense Secretary Leon Panetta has said those cuts would cause temporary job losses among civilian Pentagon employees and major defense contractors. Spending on weapons programs would be cut.
For domestic programs, like highway funding, aid to state and local governments and health research, spending would drop about 8 percent. Education grants to states and localities; the FBI and other law enforcement; environmental protection; and air traffic controllers, among others, would also be affected, the White House says.Hospitals and doctors' offices could also cut jobs if an $11 billion cut in Medicare payments isn't reversed. Extended unemployment benefits for about 2 million people would end. The extra benefits provide up to 73 weeks of aid. "It would be nice if we could ... address these issues before the very last moment," said Donald Marron, the Tax Policy Center's director.