The "Fiscal Cliff" is a popular shorthand term used to describe the conundrum the U.S. government will face at the end of 2012, when the terms of the Budget Control Act of 2011 will go into effect.
The laws set to change at midnight on December 31, 2012 are the end of last year's temporary payroll tax cuts, the end of certain tax breaks for businesses, the end of the tax cuts from 2001-2003, and the beginning of taxes related to President Obama's health care reform. Also, the spending cuts agreed upon as part of the debt ceiling deal of 2011 will begin to go into effect. Over 1,000 government programs -including the defense budget and Medicare - are in for deep cuts.
The clock is ticking for Democrats and Republicans to come to an agreement. One major sticking point with both parties is taxes. In his weekly address, President Obama said there is still some wiggle room on what Democrats are willing to give in negotiations over how to avert the so-called "fiscal cliff" at year's end. But increasing taxes on the wealthiest Americans, he stressed, is "one principle I won't compromise on."
Delivering the Republican response, Senator Marco Rubio (Republican - Florida), tried to make a case that tax hikes, even on the wealthiest Americans, are not the answer to reining in the deficit. "Our goal should be to generate new revenue by creating new taxpayers, not new taxes," he said, arguing that closing loopholes in the tax code would free up revenue.
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