What is the definition of Fiscal Cliff?

The word fiscal cliff has been used frequently on the news.  What is the definition of fiscal cliff?  The term “fiscal cliff” refers to the simultaneous spending cuts and tax increases that are slated to take place at the end of 2012.  As we begin to approach the cliff, there have been many discussions centered on Medicare.

At the time Medicare began in 1966, approximately 19 million people age 65 and older enrolled.  The cost to fund the program was about $1.8 billion.  However, Medicare now covers close to 50 million Americans with a price tag projected to reach $922 billion by 2020.

The GOP’s new fiscal cliff plan targets Medicare.  This month, House Republicans have offered a $2.2 trillion counteroffer on the fiscal cliff to President Barack Obama.  The plans calls for increasing the eligibility age for Medicare, lowering cost-of living raises for Social Security benefits, instead of raising tax rates for wealthy Americans.

As year-end 2012 approaches, the country creeps closer to the edge of the cliff.  Many economists believe if there is no deal between Congress and Obama on the expiring Bush-era tax cuts and automatic across-the-board spending; hitting the ground may become a reality.


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