It's tough to browse through a single news site without encountering the so-called fiscal cliff. Investors, politicians and American workers are anticipating the end of 2012, when tax relief measures and deep spending cuts will automatically go into effect. The fiscal cliff -- a name introduced by Federal Reserve Chairman Ben Bernanke -- isn't so much of a cliff as it is the potential fiscal drag that could gradually take effect with the end of the Bush tax cuts, payroll tax cut, Alternative Minimum Tax patches, and spending cuts from last summer's debt ceiling agreement.
The Congressional Budget Office, a nonpartisan group for the U.S. Congress, has projected that the country will fall into a recession if legislators allow all changes to go through. Some investment houses have suggested the United States' gross domestic product could shrink by as much as 4.5% in the event of a full cliff. Market and political analysts have said that a lame-duck Congress may succeed in temporarily pushing back the decision by a few months so that the newly-elected Congress could pass a viable budget plan. Onlookers have worried that negotiations in Washington D.C. could mimic the disastrous debt-ceiling discussions in 2011 that led to Standard & Poor's downgrade of the U.S. credit rating. Early negotiations have ebbed worries of a 2011 repeat as legislators won't need to worry about an election cycle in 2013.
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