Fiscal Cliff 101: What it is, what's next

8:25 PM, Nov 9, 2012   |    comments
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MINNEAPOLIS - With the latest election barely in the books, President Barack Obama began the difficult task of trying to tie up the financial loose ends of this current presidency and congressional session.

Loose ends refers to the so-called fiscal cliff, described as $700 billion in automatic tax increases and massive cuts to military and domestic programs.

"Our work is made that much more urgent," the President told the nation from the East Room of the White House on Friday. "Right now, if Congress doesn't come to an overall agreement on an overall deficit reduction package by the end of the year, everybody's taxes will automatically go up on Jan. 1. Everybody's," he warned.

You may remember a super committee did not find a solution. The American public wonders if leaders in Washington can find one in the next 49 days.

"I'm proposing that we avert the fiscal cliff together in a manner that ensures that 2013 is finally the year that our government comes to grips with the major problems that are facing us," Republican House Speaker John Boehner said.

University of Minnesota Economics Professor Chris Phelan says there are certainly major problems ahead.

"We've been running over trillion dollar deficits every year for four years. This is something that sooner or later has to stop. The federal government spends a dollar for every 60 cents it takes in. You know your family can't operate like that for very long. They need to seriously raise taxes or seriously cut spending or some combination of both," he warned.

Phelan hopes the so-called fiscal cliff will spur some serious, long-term change.

"We have to do something and it has to be big. And maybe this upcoming fiscal cliff on Jan. 1 is a chance for them to finally get serious. The real fiscal cliff is what's happening in the long run," the professor concluded.

Finding compromise between political parties might prove to be difficult.

The President has invited leaders from both sides of the aisle to the White House next week to begin to work out a way to fix the budget.

(Copyright 2012 by KARE. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

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