What is the 'fiscal cliff'?
Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery. Mr Micawber in Charles Dickens David Copperfield (1850) The ' fiscal cliff ' is the phrase used by Federal Reserve Chairman Ben Bernanke to describe the situation US economy will face in January 2013 if political agreement is not reached in Washington. At that time a series of tax rises (the expiration of the 'Bush tax cuts') and spending cuts (part of a previous agreement) will take effect. As things stand the Democrats - including the freshly re-elected President - are refusing to cut expenditure on programs like Medicare. They insist on tax rises for 'the super rich' or 'millionaires and billionaires' as it expressed in electoral rhetoric. Both sides are hemmed in by the 'debt ceiling' - a legal limit to the amount that can be borrowed - and the a previous agr