The "fiscal cliff" has been avoided after last-minute negotiations between the White House and Congress. President Obama is expected to sign the bill that House members approved late Tuesday night. Details of the bill are:
- The Bush-Era tax cuts will be extended for 98% of Americans.
- Income taxes will rise from 35% to 39.6% for individuals making $400,000 a year or $450,000 for households.
- Middle class Americans will be immune to paying the Alternative Minimum Tax.
- Long-term unemployment benefits will be extended for 2 million Americans for another year.
While the "cliff" has been avoided for now, the budget fight will resume in a few weeks over details that were excluded from the New Year's negotiations.
"We are going to be having a fight in a lot worse way in three months," says Ben White, chief economic correspondent for Politico. "We have not only the debt ceiling coming up but we'll have the expiration of the punt that they pulled off on the sequester…. And in March we have the expiration the continuing resolution funding the government."
Left in Limbo and Up for Further Debate:
- The Debt Ceiling: The U.S. officially hit its $16.4 trillion debt ceiling Monday, according to the U.S. Treasury Department. Treasury Secretary Timothy Geithner issued a letter to Congress saying he has started a "debt issuance suspension period" through the end of February, which means Treasury will undergo "extraordinary measures" to prevent hitting the debt limit until then. In 2011, the debate to raise America's borrowing limit caused the country to lose its top credit rating by ratings agency Standard & Poor's.
- The Sequester: The fiscal deal postponed the $110 billion in spending cuts to domestic and military programs for two months. Under the sequester, many federal agencies' budgets would be cut by 8%-10%.
- Continuing Budget Resolution: It has been years since the government has passed a bill on time and in a normal fashion. Instead, Congress has passed a series of continuing resolutions to keep the government funded and open for business. The current budget resolution is set to expire at the end of March.
According to the Congressional Budget Office, the deal will add $4 trillion to the deficit over the next 10 years.
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