Insurance Program Is Cut to Help Reach an Accord |

WASHINGTON — The fiscal deal approved on Tuesday put off the question of broad spending cuts, but it included an array of provisions added at the behest of members of one party or the other to pick up votes or generate savings.

One such sweetener repeals a long-term-care insurance program that had been championed by Senator Edward M. Kennedy. Other provisions would help companies that produce biofuels with algae; cut Medicare payments to hospitals and radiologists; protect tax breaks for motor sports complexes and certain film and television productions; and cancel a scheduled pay raise for members of Congress.

The bill, the American Taxpayer Relief Act, also freezes Medicare payments to doctors, which otherwise would have been cut by at least 26.5 percent in 2013.

The Congressional Budget Office said the freeze would cost $25 billion over 10 years, with most of that coming in 2013-14.

Congress offset the cost with changes in Medicare and other federal health programs. For example, it reduced Medicare payments to hospitals by $10.5 billion over 10 years after finding that many hospitals had increased their Medicare revenue by describing the severity of patients’ illnesses in more detail.

Charles N. Kahn III, president of the Federation of American Hospitals, which represents investor-owned companies, objected to the cut.

“We understand the necessity for Congressional action to avoid a dive off the fiscal cliff,” Mr. Kahn said. “But we are disappointed that scarce hospital finances would be used to offset the Medicare physician payment fix.”

The tax and spending legislation steers clear of the most contentious proposals for Medicare savings, which would, for example, have increased the age of eligibility for the program. The bill does squeeze savings from health care providers. It cuts Medicare payments for nonemergency ambulance transportation of kidney dialysis patients, gives the government more time to recover overpayments and trims payments to health maintenance organizations serving Medicare beneficiaries.

Under the long-term care insurance program, cherished by some Democrats, workers would have paid monthly premiums during their careers and could have received cash benefits if they became disabled later in life. The program was part of President Obama’s health care law.

Obama administration officials suspended the program in October 2011, saying they could not find a way to make it financially sustainable. Many Democrats wanted to keep it on the books, in the hope that it could be revived someday. But Republicans wanted to repeal it, and they got their way.

The Senate Republican leader, Mitch McConnell of Kentucky, who was an architect of this week’s budget deal, had criticized the long-term care program, known as Community Living Assistance Services and Supports, or Class, saying it was “destined to fail in the real world.”

Senator John Thune of South Dakota, chairman of the Senate Republican Conference, who led opposition to the long-term care insurance program, welcomed the prospect of its repeal. He said the administration had “ignored repeated warnings about the financial solvency of this massive new entitlement.”

However, a separate section of the fiscal legislation establishes a commission to study the need for long-term care and recommend legislation in about six months.

The 15-member panel is supposed to examine demographic trends, as well as the potential for new technologies to improve “long-term services and supports.”

The legislation also reduces Medicare payments for physical therapy and other therapy services when they are provided more than once on the same day to the same patient.

In addition, the bill would reduce Medicare payments for one particular radiology service when performed in hospital outpatient departments. Lawmakers specified the service in detail: “stereotactic radiosurgery, complete course of treatment of cranial lesion(s) consisting of one session that is multi-source Cobalt 60 based.” The cutback is expected to save $400 million over 10 years.

In the future, lawmakers said, they may also cut payments to hospital clinics for services that can be done at lower cost in doctors’ offices.

The bill would save $4 billion in 2022 by extending cuts in Medicaid payments to states for hospitals that serve large numbers of low-income people. Republicans had sought bigger savings in Medicare and Medicaid and said they would continue their efforts to rein in the growth of the health care programs, which together account for nearly one-fourth of federal spending.

“What I’ve seen does not include significant spending cuts,” said Representative Phil Gingrey, Republican of Georgia.

Democrats said they would resist any changes that reduced benefits or access to care for Medicare or Medicaid beneficiaries.

Again Biden Gets the Call From the Other Team |

Another year, another fourth-quarter summons off the fiscal bench for Vice President Joseph R. Biden Jr.

The late entry of Mr. Biden into the tax and spending talks that have consumed the capital over the last two months recalls his role in the debt crisis of 2011 and again seems to have been critical toward cutting through the deadlock.

Mr. Biden, below, was handed the ball not by President Obama but by Senator Mitch McConnell of Kentucky, the Republican minority leader, who called the vice president after growing frustrated by negotiations with the Democratic majority leader, Senator Harry Reid of Nevada. Mr. McConnell and Mr. Biden have had good relations going back to their years together in the Senate.

As soon as the talks boiled down to Mr. Biden and Mr. McConnell, the path to a tentative agreement on taxes became relatively short. The two talked late into the night on Sunday, with their last call around 12:45 a.m.

Mr. Biden and Mr. McConnell were back on the phone at 6:30 a.m. on Monday, and by the afternoon Mr. Obama and Mr. McConnell were reporting a near deal. The vice president and the senator had agreed on a compromise to raise some tax rates, renew a variety of tax credits, increase the estate tax on the wealthy and extend unemployment insurance. But the two remained in talks about how long to postpone automatic spending cuts due to take effect this week.

It was not as if Mr. Biden had not been part of the jockeying over the two months before the call from Mr. McConnell. He sat in on the meetings and advised the president on what to do. But he was largely a secondary figure as long as the action was centered on the House, with Speaker John A. Boehner as the main Republican negotiator. Once Mr. Boehner gave up and handed off the issue to Mr. McConnell, the vice president’s long history in the Senate put him back on the field.

Last year, Mr. Obama gave Mr. Biden the task of negotiating with Representative Eric Cantor of Virginia, the House majority leader, for a way out of a confrontation over the nation’s debt ceiling, but they failed to come up with a resolution, and Mr. Obama and Mr. Boehner stepped in. After the two of them failed to reach a grand bargain, Mr. Biden and Mr. McConnell came up with an agreement that resolved the issue for the moment but set up the automatic spending cuts that take effect this week unless the two sides come up with an agreement to stop them.

The tandem of Mr. Biden and Mr. McConnell is not a result of any ideological affinity. But Mr. McConnell has a strained relationship at best with the other two main Democratic players, Mr. Obama and Mr. Reid, leaving the vice president as his best “dancing partner.”

“They have a good relationship,” said a senior White House official who asked not to be identified discussing continuing talks. “It’s borne fruit before.”

Both sides are hoping it does again.

Debt Limit Officially Reached |

The United States officially hit its debt ceiling Monday, starting a countdown that ends in a cash management crisis in a matter of weeks.

Of late, Republicans have refused to raise the ceiling, a statutory limit on the amount the country can borrow, unless Democrats agree to commensurate spending cuts. In 2011, that led to the heated and ultimately fruitless debt negotiations between the White House and the House speaker, John A. Boehner, as well as the passage of the spending cuts that Congress now faces.

This time around, Republicans want to extract cuts, most likely from entitlement programs like Social Security, in exchange for their help in lifting the ceiling. But Democrats have said Congress should go back to raising the debt limit as a matter of course, as generally happened up until last year.

Specifically, the White House has said it will not negotiate with Congressional Republicans over the ceiling. At a meeting with the Business Roundtable in December, President Obama said: “If Congress in any way suggests that they’re going to tie negotiations to debt ceiling votes and take us to the brink of default once again as part of a budget negotiation — which, by the way, we had never done in our history until we did it last year — I will not play that game, because we’ve got to break that habit before it starts.”

Democratic aides have indicated that they will refuse to discuss the ceiling as any kind of bargaining chip in the current debt negotiations, but Republicans continue to see the debt limit as a potent piece of leverage over the White House. That has set up another major debt confrontation for early in 2013.

The Treasury is undertaking “extraordinary measures” to give the government enough breathing room to pay its bills. But such measures buy Washington only so much time. In February or March, the Treasury secretary would need to decide which payments to delay or default on.

Estate Tax Gets Lost in the Fiscal Shuffle |

Like so many other provisions of the tax code, estate taxes are caught up in the tangle of competing proposals in the rush to a year-end resolution of the nation’s fiscal crisis.

Absent an agreement before the end of the year, inheritance taxes are scheduled to jump significantly in 2013, potentially drawing in tens of thousands of estates that would otherwise escape taxation.

Starting Jan. 1, estates would be allowed to pass on to heirs only $1 million free of taxation, and the top effective tax rate on inheritance would rise to as much as 60 percent. This year, in contrast, the exemption from taxation is a bit more than $5 million per decedent, and the top rate on taxable estates is just 35 percent.

Such a big tax increase may be unlikely, as most Republicans and many Democrats staunchly oppose the taxation of family wealth as it passes between generations and would most likely seek at the least to temporarily extend the current, relatively generous provisions pending a broader review of tax policies.

If there is a compromise, it is impossible to know its terms yet.

President Obama has suggested taking the estate tax back to where it was in 2009. That represents a middle ground, exempting inheritances up to $3.5 million ($7 million from a couple) and taxing the remainder at up to 45 percent.

The Senate passed legislation in July that would extend Bush-era tax cuts for incomes under $250,000, and Democrats, as well as some Republicans, are pressing the House to simply take up that bill, pass it and send it to Mr. Obama. But the Senate bill is silent on the estate tax.

So even if the House passes the Senate tax bill, the estate tax issue would remain unresolved.

On Tuesday, a group of wealthy individuals, liberal policy experts and advocates of a progressive tax system called for something considerably stiffer than the Obama plan, but not as tough as what is scheduled to happen after the first of the year.

The group, called the Responsible Wealth Project, proposed that the exemption be set at $4 million per couple ($2 million per decedent), with steadily escalating taxes starting at 45 percent, raising even more money from the extraordinarily wealthy.

Taxes on estates have varied widely for more than a decade.

In 2001, Congress voted to phase out the estate tax and repeal it entirely in 2010. Ultimately, the tax was reinstated in the 2010 tax act, with an exemption starting at $5 million that could be doubled by a couple to pass on $10 million without taxation. The top rate was set at 35 percent.

But that was a temporary fix, and its time is about to run out, exposing thousands to the prospect of higher taxes.

Under differing formulas, the amount of estate taxes collected over the next decade could swing by tens of billions or even hundreds of billions of dollars.

Whether the biggest benefits of estate tax relief go to the very wealthiest or to relatively modest estates depends on whether any new formula focuses on expanding exemptions or lowering tax rates.

Higher exemptions focus the benefits on people inheriting relatively smaller estates, many of whom would owe no tax at all, while saving relatively little for people with the largest estates, which would pay tax on most of their wealth. Cuts in the top marginal tax rates, by contrast, could save the wealthiest heirs many millions of dollars.

So the fight, like the rest of the argument over a fiscal solution, is on two battlegrounds — how much revenue does the federal government need to collect, and from whom should it be collected?

Dec 9, 2012 Dec 9, 2012

Obama and Boehner Talk Deficits at the White House

WASHINGTON — With just three weeks left for lawmakers to avert a fiscal crisis, President Obama and Speaker John A. Boehner met privately at the White House on Sunday as a top Republican senator suggested that his party should perhaps accede to Mr. Obama’s demand to raise the top tax rates so that the attention can shift to making serious cuts in benefit programs like Medicare and Medicaid.

Administration officials would not offer details of the discussion between Mr. Obama and Mr. Boehner. But the disclosure of the meeting indicated that private discussions continue in the face of Republican leaders’ public statements deploring the lack of progress and the president’s refusal so far to specify the sort of deep, long-term reductions in spending for social programs that they insist upon as a condition of their support for raising taxes on high earners.

The White House and Mr. Boehner’s office issued identical statements afterward that said “the lines of communication remain open.”

The meeting was the first face-to-face negotiation between the president and the speaker since a session three weeks ago, when they were joined by the House Democratic leader, Nancy Pelosi of California; the Senate Democratic leader, Harry Reid of Nevada; and the Senate Republican leader, Mitch McConnell of Kentucky. They were the first one-on-one deficit talks between Mr. Obama and Mr. Boehner since the summer of 2011, when the search for a “grand bargain” on taxes and spending ultimately failed. Read more

How a Fiscal Impasse, in 1990, Was Broken |

WASHINGTON — Back when leaders led, followers followed and the news media made less noise, the commanding figures of American government retreated to Andrews Air Force Base to forge a bipartisan budget compromise.

That 11-day summit meeting failed — despite the threat of deep automatic spending cuts, and despite the top Republican’s acknowledgment that taxes had to go up.

A smaller group of negotiators later struck a deal inside the Capitol. That failed, too — defeated on the House floor by a coalition of liberal and conservative rebels.

History now recalls those events in the fall of 1990, and the agreement Congress eventually enacted, as the opening chapter of Washington’s long, successful climb out of the deficit hole of the 1980s. And they offer a perspective on the current stalemate between a White House and a Congress struggling to repeat that achievement.

“There is a flow to these things,” said William Hoagland, who was a top Senate Republican aide during the earlier negotiations. The bigger the deal, the greater the turbulence.

“There always seems to be little cooperation for a long time,” said Robert Reischauer, a Democrat who led the Congressional Budget Office then. “And then things come together relatively rapidly.”

That does not mean President Obama, Speaker John A. Boehner and other main players will succeed in achieving a consensus to avoid the so-called fiscal cliff. Neither Mr. Hoagland nor Mr. Reischauer voice much optimism.

But the 1990 experience provides a reminder that high-stakes budget negotiations can sometimes include high-velocity shifts from despair to deliverance. The prospect of an across-the-board increase in tax rates and automatic spending cuts, which could tip the economy back into recession, and a potential showdown over the debt limit next year provide powerful incentives for a breakthrough.

Similar forces helped propel the deal in 1990. The talks began in spring as annual budget deficits, which had topped $200 billion before declining during the latter part of Ronald Reagan’s presidency, rose over that mark again under President George Bush.

A group of foreign central bankers visiting Washington warned Mr. Bush that he needed to strike a deal with the Democrats who controlled both houses of Congress. Without one, an earlier budget-reduction law was about to trigger automatic cuts even deeper than the so-called sequester looming now.

But the Republican president, long before Grover Norquist became famous, was hamstrung by his own unequivocal no-new-taxes pledge. Once Mr. Bush abandoned it — embracing higher revenues, though not higher rates, just as Mr. Boehner has — negotiations quickened.

Yet at the time the pace felt glacial. After talks in a Senate office building failed, participants moved to Andrews to escape the media spotlight.

Eventually, a smaller group of just eight negotiators, meeting in Speaker Thomas S. Foley’s office, produced a $500 billion deficit reduction package that included $134 billion in taxes and substantial cuts in Medicare. Then Republican conservatives, led by Representative Newt Gingrich, joined liberal Democrats in blowing it up.

After a six-month slog, the White House, offering fewer spending cuts and more tax increases, won over enough Democrats to enact it. “The final agreement was reached largely out of exhaustion and convenience,” former Senator Pete V. Domenici, Republican of New Mexico, said at a recent panel discussion.

By some measures, this White House and Congress ought to be able to move faster. Mr. Obama and Mr. Boehner began their postelection discussions having gone through all the labor of their near-miss “grand bargain” talks last year.

The president’s chief of staff, Jacob J. Lew, has experience in fiscal negotiations, including the 1983 deal between Speaker Tip O’Neill and President Reagan on Social Security and the 1997 budget-balancing agreement between President Bill Clinton and Republicans.

But those eras were different. The two major parties were more ideologically disparate and less polarized. That extended from legislative leaders through the ranks of their staffs, which could quietly explore potential solutions with higher levels of trust and discretion.

“It allowed you to test things without risk” that premature publicity would quash them, said Sheila Burke, then the chief of staff for the Senate Republican leader, Bob Dole.

As unwelcome as news coverage could be, it was a whisper compared with the nonstop 21st-century din on television and online. The talks took place as Mr. Bush prepared for war with Iraq after its invasion of Kuwait, substantially diverting public attention, whereas today the fiscal talks dominate the news.

The result: talks today combine louder public posturing with less-productive staff work behind the scenes.

“We’re facing a much tougher and more difficult challenge than we had in 1990,” Mr. Foley said at the panel discussion.

The Republican Party’s anti-tax wing is stronger now. No one has forgotten that President Bush lost his 1992 re-election bid after breaking his no-tax pledge.

Even two values that all parties should be able to agree on — transparency and accountability — represent new obstacles.

Staff members and interest groups alike have ready access to sophisticated analyses of tax and spending changes, which they can use to instantly mobilize opposition.

And memories of this fall’s campaign are still fresh. Though independent observers say a deal requires both Medicare cuts and higher taxes, Mr. Obama and Democrats ran as Medicare’s protectors, Republicans as unflinching foes of tax increases.

“The more details you have, the harder it is to reach agreement,” Mr. Reischauer said. And “we’ve just been through an election in which the members promised not to do what they have to do.”

If Deal Is Not Reached, Impact Wont Be Instant |

WASHINGTON — If Washington fails to reach a tax and spending deal by Jan. 1, paychecks will shrink as rates rise. But defense contractors will keep working. Parks and monuments will remain open. Financial markets will either slump or not.

America’s fiscal condition will be altered without a deal between President Obama and the Republicans in Congress. But not radically so, and in many cases not immediately.

This budget stalemate is unlike the many previous ones that threatened to cause a government shutdown. Agencies are not facing the immediate loss of authority to spend money. The danger of defaulting on the nation’s financial obligations is not at risk as it was during the 2011 impasse over raising the nation’s borrowing limit. And some of the tax and spending changes would not be felt for months.

The president and his Democratic allies are still deeply nervous about life on the other side of the fiscal deadline, and they continue to say they are eager to avoid that possibility. But Mr. Obama’s re-election victory and the few immediate implications from a breakdown in negotiations has emboldened them.

Democrats are betting that if Washington wakes up without a tax and spending deal on New Year’s Day, the country will heap blame on Congressional Republicans. In recent polls, more people said that it would be the fault of Republicans if a deal could not be reached.

Democrats in the House will seek to make that point again this week by trying to force Republicans to vote on a bill to extend tax cuts for the middle class but not the wealthy.

“Tax cuts for the rich, which do not create jobs, just increase the deficit, heaping mountains of debt onto future generations,” Nancy Pelosi, the Democratic leader in the House, told reporters on Friday. She added that the economy would benefit greatly if “we do not go over the cliff.”

But many Democrats also believe that failing to reach a deal for a brief period early next year would provide new leverage for Mr. Obama and a quick capitulation from Speaker John A. Boehner and his Republican colleagues on a package of tax cuts for the middle class and increased rates for the nation’s wealthiest citizens.

Mr. Obama pressed his case confidently on Friday at a toy manufacturer in Pennsylvania. He warned that the Republicans’ refusal to reach an acceptable deal by the end of the year would be “sort of like the lump of coal you get for Christmas.”

And in a message to the millions of people subscribed to the White House e-mail list, David Plouffe, a senior adviser to Mr. Obama, urged supporters to keep the pressure on lawmakers and warned of the dire consequences if the negotiators were unable to find common ground.

“Unless Congress acts, 114 million middle-class American families are staring down a tax increase starting January 1,” Mr. Plouffe wrote in the e-mail.

But the lack of immediate consequences could also serve to empower Republicans to hold firm for days or weeks against a deal with the president, believing that the public would not exert the kind of political pressure that Democrats expect.

Without concrete ramifications, Mr. Obama’s recent efforts to keep his campaign supporters energized about the tax and spending debate could fizzle.

Republicans could also conclude that people are more likely to blame Mr. Obama and his party for tax increases because it is Democrats who have been pushing for them.

In Washington at the end of last week, Republicans offered a defiant tone, scoffing at the president’s proposal for $1.6 trillion in tax increases on the wealthy combined with new stimulus spending and other Democratic priorities. On Saturday, Senator Orrin G. Hatch of Utah denounced what he called “radical” and “unserious” proposals by the president that he said represented an utter lack of leadership.

“Some on the other side of the aisle are advocating a disastrous ‘Thelma & Louise’ strategy,” Mr. Hatch said in the weekly Republican radio address, referring to the movie heroines who drove their car off a cliff.

The ability of Republicans to maintain their position may depend on what actually happens if no deal is reached by the end of the year. Government officials, tax specialists and business representatives said they did not expect major implications right away.

Pentagon officials and military contractors said that billions of dollars in automatic spending reductions would be delayed for weeks, if not months, as they figured out where they needed to cut and by how much. Defense Department hiring would be stopped temporarily, officials said. But no one would be fired immediately, and no programs would end.

“While a hiring freeze is likely to be implemented quickly, it will take time to implement further budget cuts and the number and types of personnel to be furloughed,” said Lt. Col. Elizabeth Robbins, a spokeswoman for the Defense Department.

Large companies that do business with the Pentagon are likely to wait for guidance before cutting back weapons programs or laying off civilian workers.

Parks, libraries and monuments would remain open in the new year, unaffected by the lack of a deal in the way that a budget stalemate threatens immediate closure. Government employees would show up for work whether or not they had been deemed “essential” to the operation of their agency.

Many workers would see their first paychecks in January shrink as employers adjust for higher payroll taxes. And the Internal Revenue Service would race to reprogram computers, possibly forcing an eventual delay in refunds. But tax preparation for 2012 would march forward as usual toward Jan. 22, when the I.R.S. is expected to begin processing electronic returns.

“There is this period in which Congress can continue to arm wrestle and wait for a settlement on this without affecting many people,” said Bob Meighan, a vice president of TurboTax, which makes tax preparation software.

At the I.R.S. the biggest concern is about the alternative minimum tax, which would eventually force higher tax payments from about 60 million Americans unless the president and Republicans agree to adjustments like the ones that have been made regularly since 1969.

“There would be serious repercussions for taxpayers,” Steven T. Miller, the acting commissioner of the I.R.S. wrote to lawmakers in November.

Among the murky uncertainties: what happens in the financial markets if a deal is not reached.

Some market watchers predict a huge sell-off of assets that would drain wealth from retirement plans and undermine consumer confidence. The Dow Jones industrial average has dropped almost 600 points since September, in part because of uncertainty about the presidential election and the ability of politicians to reach a deal on taxes and spending this year.

But the stock market has rebounded somewhat in the last two weeks. On Friday, investors shrugged off heightened partisan bickering in Washington a day earlier.

Explaining the Origin of the Fiscal Threat

The fiscal and economic threat created by the parties was part intentional, part coincidental.

The intentional: Since Ronald Reagan’s administration, with mixed results, presidents and Congresses have occasionally mandated a self-imposed future crisis to force themselves to agree on unpopular tax and spending actions. In that spirit, the idea behind the August 2011 deal was that Republicans would so greatly fear the military cuts, and Democrats the domestic spending cuts, that they would negotiate a deficit-reduction alternative by the Jan. 1 deadline.

The coincidental: The measures from the 2011 deal are set to take effect at the same time as the changes to jobless benefits, the alternative minimum tax adjustment and the Medicare “doc fix,” and the expiration of the Bush tax cuts — a confluence that the two parties did not fully expect back in August 2011. The nation will also reach its debt ceiling in January, creating additional uncertainty. Accounting maneuvers by the Treasury Department could push that deadline to March, but Mr. Obama wants a debt-limit increase as part of any deal, adding another item to the agenda.

What Spending Would be Cut if a Debt Deal is Not Reached?

An emergency unemployment-compensation program is expiring, which would save $26 billion but end payments to millions of Americans who remain jobless and have exhausted state benefits. Medicare payments to doctors would be reduced 27 percent, or $11 billion, because this year Congress has not passed the usual so-called “doc fix” to block the cuts, which otherwise are required by a 1990s cost-control law.

The biggest cut would be $65 billion, enacted across the board for most federal programs over the last nine months of fiscal year 2013, from January through September. This cut, known as the sequester, was mandated by an August 2011 budget deal between Mr. Obama and Congress that ended their standoff over raising the nation’s debt limit. In that deal, they agreed to reduce spending by $1 trillion over 10 years and to identify an additional $1.2 trillion in savings by January 2013. If they fail to agree on the second installment — as is the case so far — the automatic cuts will kick in.

What Tax Increases Are in Store at the End of 2012?

When a tax cut expires, the practical effect is a tax increase. And a slew of tax cuts — $400 billion for 2013 — expire on Dec. 31: All of the Bush-era rate reductions; smaller tax cuts that periodically expire for businesses and individuals; and the 2-percentage-point cut in payroll taxes that Mr. Obama pushed in 2010, which increased an average worker’s take-home pay by about $1,000 a year.

Also, 28 million taxpayers — about one in five, all middle- to upper-income — would have to pay the alternative minimum tax in 2012, raising their taxes more. That is because Congress has failed to pass an inflation adjustment, as it usually does, to restrict the number of taxpayers subject to the alternative minimum largely to the affluent.

What Happens if We Go Over the So-Called Fiscal Cliff?

Taxes would rise for nearly every taxpayer and many businesses. Financing for most federal programs, military and domestic, would be cut. Many economists say that while annual budget deficits are too high, these new taxes and spending cuts would be too much deficit reduction, too suddenly, for a weak economy. More than $500 billion equals roughly 3 percent to 4 percent of gross domestic product. The Congressional Budget Office has said the result would be a short recession, though some analysts say the measures could be managed so they do less damage. “Slope,” they argue, is a better metaphor than cliff.

Explaining the Fiscal Cliff

The term refers to more than $500 billion in tax increases and across-the-board spending cuts scheduled to take effect after Jan. 1 — for fiscal year 2013 alone — unless Mr. Obama and Republicans reach an alternative deficit-reduction deal. Ben Bernanke, the chairman of the Federal Reserve, who is not known for catchy phrases, coined the metaphor “fiscal cliff” last winter to warn of the dangerous yet avoidable drop-off ahead in the nation’s fiscal path. It stuck.

A version of this explainer was published on Nov. 15, 2012.

Nov 26, 2012 Nov 26, 2012

White House Sees Stunted Growth if Tax Cuts Expire

Americans could spend nearly $200 billion less next year on cars, clothes, furniture and other consumer products than they would otherwise if automatic tax increases take effect as currently scheduled, the White House warned in a report issued Monday morning.

The report focused entirely on the impact of Bush-era tax cuts expiring for middle-class taxpayers at the end of the year and a failure to adjust the Alternative Minimum Tax so that it does not suddenly apply to millions of taxpayers who have not paid it in the past. It made no effort to look at the economic impact of deep military and domestic spending cuts also due to take effect in the new year.

Nov 25, 2012 Nov 25, 2012

Debt Reckoning: The Fiscal Deadline in Washington