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What the 'fiscal cliff' actually means for you

BY Stephanie Klein  on November 16, 2012 @ 8:05 am (Updated: 8:38 am - 11/16/12 )

You may have heard of the "fiscal cliff" and know the U.S. is headed toward it. You might know Dec. 31 is the deadline, but what does that actually mean?

John Curley found out from Jill Schlesinger, of CBS Moneywatch, on Seattle's Morning News.

Q: What does it mean to the average person?

A: If taxes go up for a lot of people and government spending drops substantially, then we are likely to see economic growth take a hit. So what economists are saying is that the combination of those tax increases and spending cuts would push the economy back into a recession.

Schlesinger said some people are cavalier about the situation, except that "probably a million more people are going to lose their jobs and it won't be fun for anyone. There will be real human suffering."

Q: You might have accepted that taxes could go up, but exactly by how much?

A: If we go over the cliff and there is no deal, we see that middle income Americans are likely to pay about another $2000 in taxes, average for everyone is $3700.

Schlesinger said The Wall Street Journal broke it down Friday morning: If you make $75,000 and $100,000 annually, that's $3,200 in additional taxes or $270 out of your paycheck every month.

Q: But you have a job and some savings; can't you just ride this thing out?

A: Even those in a stable situation get nervous because "everyone knows someone who is out of work." They think there's a chance they could be in the same situation soon. "It could be you next, by the way, if the economy does fall further," said Schlesinger.

Q: Why can't we blame President Obama?

A: This was in the works. Corporate earnings have not been as good in the last quarter. Why? Because the easy money has already been made. It's really easy to make money when the economy starts to recover and you're working on a skeleton staff. Now it's getting harder to earn a dollar.

It's interesting because we knew that earning season was going to be weak in this quarter. We know that growth is only 2 percent in the US. We know that Europe is a mess and is now back in recession. We know that China is shrinking. We know Japan is probably in recession. We know that India exports are down. The globe has slowed down.

Is there a silver lining?

A: It's going to be OK. Everybody has so much to lose. My guess is they will make a deal. Bernanke is going to keep the printing presses open. The economy is going to be OK, Europe probably won't let Greece exit. We'll be in a slow growth recovery, which is where we should be after having a boom and bust.

"No more Ho-Ho's, my friend."

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Stephanie Klein, MyNorthwest.com Editor
Stephanie joined the MyNorthwest.com team in February 2008. She has built the site into a two-time National Edward R. Murrow Award winner (Best Radio Website 2010, 2012).
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Comments (13)


  • Add A Comment

  • Fuego wrote...
    Bottom line..
    November 16, 2012 8:25 am
    I'm not spending anywhere near what I used to. Every dollar is being stretched as far as I can make it go. I don't trust anyone in D.C. to do the right thing.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • HLC wrote...
    This didn't sneek up on them.
    November 16, 2012 8:53 am
    It has been known since the committee Patty Murray chaired failed to come up with a plan. Why have they waited until the last minute to come up with cure. It could explain why Obozo hasn't even tried to come up with a balanced budget in his first term. What a total failure.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • flipper wrote...
    If we follow current election logic..
    November 16, 2012 9:28 am
    ...we should be praising Patty Murray and lining up to vote for her because she's trying to clean up for George Bush. Get ready to bend over and kiss your money goodbye. By the way, has a black market been established for Twinkies yet?
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • Fuego wrote...
    Flipper
    November 16, 2012 10:02 am
    Check ebay...they have some listed for $500 for a box of 10.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • mnpat wrote...
    It's all about the debt and entitlements
    November 16, 2012 9:35 am
    Anything else is just one more fricken band aid to appease the masses.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • Forrest wrote...
    Let the Bush tax cuts expire for everyone
    November 16, 2012 12:13 pm
    and cut government spending across the board including defense. That is the only way to balance the budget. To say otherwise is disingenuous.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • SeattleNative wrote...
    The definition of insanity...
    November 16, 2012 2:28 pm
    ...is doing the same thing over again

    and expecting the next four years to be different.

    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • Saltchucker wrote...
    Bernake will keep the printing presses open.
    November 16, 2012 2:37 pm
    Great. Remember that as you're pushing a wheelbarrow of worthless cash down the street to buy a loaf of bread. Endlessly printing more worthless cash is what led up to Hitler taking over Germany.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • Regularjoe44 wrote...
    The US is headed toward it?
    November 16, 2012 6:16 pm
    ...the US has already gone over it. Instead of Thelma and Louise....I picture Harry and Nancy at the wheel as our car drove full speed off the edge. We're just floating through the air right now... the sheeple being told all is well, while others close their eyes and wait for the crash.. We can argue till the cows come home...and we will....about who's responsible for placing us on this road. I think for the answer to that we can all go look in the mirror....but none of that will change the direction of the car now. Just hang on and prepare for impact.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • roomtemp wrote...
    Bwahahaha! What a crock... The 'fiscal cliff' is a talking point. We're already in fiscal freefall!
    November 16, 2012 6:52 pm
    "It's going to be OK."

    No, it's not going to be OK. The math says so. History says so.

    "Everybody has so much to lose."

    The bankers have so much to gain.

    "My guess is they will make a deal."

    The observant among us might notice that congress only has immediate control of 'discretionary' spending. You could cut discretionary spending 100%, all of it, and we will still have to borrow money to pay for mandatory spending and interest on the debt. What deal are they going to make again? Does it involve magic? Do tell...

    "The economy is going to be OK"

    There's no place like home, there's no place like home, there's no pl...

    "Europe probably won't let Greece exit."

    Have you seen Greece lately? Riots are great fun, let's party! Who's got the molotov cocktails? It's probably just a coincidence that Germany is repatriating their gold from the federal reserve and the bank of England. I'm sure they don't see any trouble coming. nahhh... 6 out of 7 clueless experts agree, Europe is fine.

    "We'll be in a slow growth recovery,_"

    When you're spending trillions more than you take in and interest payments on the debt will soon be the biggest single expense of government. How is that a recovery?

    "which is where we should be after having a boom and bust."

    Never mind that the very institution that is supposed to stop these cycles of boom and bust, creates them. History again. Expand the economy, crash the economy, buy all tangible assets for pennies on the the dollar. Wash, rinse, repeat. Didn't I read something about the fed buying mortgages lately? hmmmm.

    "Bernanke is going to keep the printing presses open."

    And for every dollar created the one in your pocket loses value. Good ol' Ben has been giving you regular pay cuts, cool eh? The dollar is worth 3 cents of it's 1913 value. Losing about a penny a year since the inception of the federal reserve. At that rate, the dollar will be completely worthless sooner rather than later.

    "There will be real human suffering."

    You have no idea...

    { "Thumbs Up":"1","Thumbs Down":"-1" }
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