The Fiscal Cliff [Infographic]

Money falling off of a cliffToday’s financial infographic deals with a VERY important issue facing the nation this year – the fiscal cliff. By the end of 2012, several tax cuts are set to expire while other tax increases are set to begin.

The temporary payroll tax cut will end (2% reduction in take home pay), certain breaks for businesses will cease along with a shift in the minimum alternative tax, the Bush tax cuts will expire and finally, taxes related to the Affordable Healthcare Act (Obamacare) will be implemented. OUCH!

The result will be less money in the pockets of Americans, which will slow the economic growth of the nation to a point even lower than it is today. If this wasn’t enough, government spending cuts that became mandatory last year will diminish government spending on top of the reduced consumer spending. Welcome to the fiscal cliff.

fiscal cliff infographic

Current Law

The effect of everything I stated above can be seen graphically on this infographic.  If all of the tax cuts where to expire and government spending is cut at the same time, option number one occurs. As you can see, the tax revenue ramps up at the cost of every individual and family in the US in the form of higher taxes. The result – decreased spending.

Current Policy

Extending the same policies we have in place today would only add to the deficit each year. Currently, our government is spending about $1 trillion more than we bring in each year. To make up for the deficit, we have to borrow from countries like China. Personally, I think we need to keep the tax cuts in place and control government spending.  As a result, a lot of government programs will be cut, but it’s the responsible thing to do.  If you can’t afford something without borrowing, you should not pay for it.


Option three involves the Simpson-Bowles plan that has been under discussion in Congress. On paper, the plan seems great as it will fuel growth and lower the unemployment numbers. That being said, over the next eight years, it calls for higher taxes on things like gasoline. Many positives and negatives of a policy this complex cannot be known until it is placed into law.

READERS: What do you think about the state of economy? Does the looming fiscal cliff worry you? Do you thing the government will be able to compromise and come to a mutual agreement by December?



  1. JW, glad to see you blogging again! I’m a big fan of your infographics. This ones def going in our weekly round-up.

    Before reading your article I was familiar with the Bush Tax Cuts and Obamacare but not about Simpson-Bowles. This one seems to be the best option though. We need change and progress. I am concerned with our governments spending and I feel like not enough Americans are paying attention to it too. I won’t get into my political views though. haha!

  2. That’s great John, thank you.

    I wasn’t too familiar with Simpson-Bowles either, but from what I’ve read, it would be a step in the right direction. Whatever the government chooses to do, it needs to work together. We can’t have four more years of gridlocks and “kick the can” type of policies that only delay the tough decisions that need to be made.

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