At the end of the year, tax breaks such as the Bush-era tax cuts expire, while automatic spending cuts agreed to during the 2011 debt-ceiling deal kick in. The combination of the two on Jan. 1, 2013, known as a fiscal cliff, could siphon as much as $500 billion out of the economy next year alone, according to some estimates, and wipe out a total of $7 trillion over a decade.
Congress could step in and adjust the scope or timing of the tax breaks and spending cuts, but lawmakers appear unwilling to address the subject in an election year, leaving many to hope that a new government will return in early 2013 and deal with the problem retroactively.
But in the meantime, worries about fiscal inaction are starting to show up in lackluster corporate hiring as well as tepid consumer demand and spending figures, experts say.
“The biggest fear at the moment is that Europe will unravel, but concern that policymakers may let the nation go over the fiscal cliff is mounting,” says Mark Zandi, chief economist of Moody's Analytics, according to CNNMoney.
“The job market isn’t going to kick into high gear until Europe’s problems and our fiscal issues are [better] nailed down.”
Read more: Inaction on 'Fiscal Cliff' Starting to Weigh on Economy
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