United States fiscal cliff facts for kids

The United States fiscal cliff was an economic situation in the United States in 2012. Several tax increases and spending cuts happened at about the same time, causing a sudden fall in the US budget deficit. A compromise was reached which delayed the economic impact.

Images for kids

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  Budget deficits, projected through 2022. The "CBO Baseline" (in red) shows the expected effects of the fiscal cliff under then-current law, i.e., if Congress took no action in 2012. The "Alternative Scenario" (in blue) represents what was expected to happen if Congress were to extend the Bush tax cuts and repeal the Budget Control Act-mandated spending reductions.

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  U.S. Federal budget deficit as % of GDP assuming continuation of certain policies for 2012–2022. The baseline deficit indicates the scenario with the fiscal cliff, meaning tax cuts expiring and spending cuts applied. Avoiding the "fiscal cliff" increased the projected deficit.

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  Three CBO deficit scenarios related to the American Taxpayer Relief Act of 2012 (ATRA) and the Fiscal Cliff. The blue line (August 2012 baseline) at bottom was the "current law" baseline, with tax increases and spending cuts that would take effect if laws were not changed. The grey line (March 2012 alternative baseline) was the "current policy" baseline, which represented the avoidance of the tax increases and spending cuts. The orange line (February 2013 baseline) was the post-ATRA result.

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  U.S. federal debt from 1940 to 2022. The right side of the diagram projects what would happen to the debt if Congress (a) allowed the "cliff" laws to take effect and reduce the deficit (the baseline) or (b) extended the existing policies, such as keeping tax cuts in place (the alternative).

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  Overall effects of the fiscal cliff.

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  Democratic and Republican leaders meet in late November as part of the fiscal cliff debate.

See also

In Spanish: Precipicio fiscal de Estados Unidos para niños