The Fiscal Cliff – Washington’s biggest challenge - NEWS10 ABC: Albany, New York News, Weather, Sports

The Fiscal Cliff – Washington’s biggest challenge

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ALBANY, N.Y. (NEWS10/AP) – With a January deadline looming, local leaders and advocates, including congressman Paul Tonko, came together in Albany Thursday, calling for Washington to work towards developing the best possible plan to tackle the fiscal cliff.

Today's event was one of half a dozen events held across New York and many others around the country, all with the goal of raising awareness about what the fiscal cliff is and how it can be prevented.

It's the next big challenge facing our elected leaders in Washington - the fiscal cliff - which would mean spending cuts across the board and tax increases for all Americans.

The "fiscal cliff" is a combination of expiring Bush-era tax cuts and major across-the-board spending cuts to the Pentagon and domestic programs that could total $800 billion next year, that has the financial markets rattled and economists and policymakers alike in a tizzy over the potential for a second economic downturn.

Many consider the cliff punishment for previous failures of a bitterly-divided Congress and White House to deal with the government's spiraling debt or overhaul its unwieldy tax code.

The main punch of the cliff comes with the expiration of tax cuts enacted in 2001 and 2003 and extended two years ago in the wake of President Barack Obama's encouragement in the 2010 midterm elections.

Also included are sharp spending cuts imposed as a consequence of the failure of last year's deficit-reduction "supercommittee" to reach agreement. There are other elements, mainly a 2 percentage point cut in payroll taxes orchestrated by Obama and unemployment benefits for the long-term jobless that would disappear.

Specifically, the fiscal cliff includes:

-The expiration of Bush-era tax cuts on income, investments, married couples and families with children and inheritances.

-A $55 billion, 9 percent cut in defense spending next year and another $55 billion in cuts to domestic programs, including a 2 percent cut to Medicare providers.

-The expiration of unemployment benefits for the long-term jobless and a sharp cut in reimbursements for doctors participating in Medicare.

-The expiration of Obama's temporary 2 percentage point cut in payroll taxes.

-The imposition of the alternative minimum tax on some 26 million households, which would raise their taxes by an average of $3,700.

-A variety of smaller taxes cuts for both businesses and individuals collectively known as tax "extenders" in Washington-speak. They include a tax credit for research and development and a deduction for sales taxes in states that don't have an income tax.

Many economists say that combination could be a catastrophe for the nation's already weak economy.

Seniors may be some of the hardest hit if the country were to go over the fiscal cliff.  Many senior programs across our area are already bracing for it.

The executive director of the Colonie Senior Services Center Edward Neary told NEWS10 that  federal money first goes to the state, then is divvied up to local groups. With his group, it's mostly used for meals and transportation - vital services seniors rely on.

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