United States fiscal cliff

The United States fiscal cliff was a situation that came into existence in January 2013 whereby a series of previously enacted laws would come into effect simultaneously, increasing taxes while decreasing spending.

The Bush tax cuts of 2001, which had been extended for two years by the 2010 Tax Relief Act, were due to expire on December 31, 2012. Planned spending cuts under the Budget Control Act of 2011 also came into play. That Act was passed as a compromise to resolve a dispute concerning the United States debt ceiling and address the failure of the 111th Congress to pass a federal budget. Discretionary spending for federal agencies and cabinet departments would have been reduced through broad cuts referred to as budget sequestration. Mandatory programs, such as Social Security, Medicaid, federal pay (including military pay and pensions) and veterans' benefits would have been exempted from the spending cuts.