- AARP - https://blog.aarp.org -

How the Fiscal Cliff Could Affect You

You’ve probably been hearing a lot about the “fiscal cliff” – the mammoth confluence of tax increases and spending cuts that will take effect after Jan. 1 unless President Obama and Republicans agree on a new deficit-reduction deal. It’s complicated stuff, and you might be wondering what it’s all about.

Here’s a breakdown and a look at some of the ways it could affect you.

Spending cuts


Tax increases


Economic slowdown

Some predict a fall from a fiscal cliff, others a softer tumble down a fiscal slope. In any case, if the government is spending less and taxing more, there’s less to stimulate the economy. The nonpartisan Congressional Budget Office warns of a return to recession. Here’s the CBO’s projected toll for 2013:

Gridlock is by no means unprecedented in Washington. One thing Republicans and Democrats can agree on: If they can’t get their act together and find common ground for a better plan to cut the budget deficit, there will be serious consequences for the economy.