“Fiscal cliff” is the popular shorthand term used to describe the conundrum that the U.S. government will face at the end of 2012, when the terms of the Budget Control Act of 2011 are scheduled to go into effect. In the United States, the fiscal cliff is the sharp decline in the budget deficit that could have occurred beginning in 2013 due to increased taxes and reduced spending as required by previously enacted laws. Those laws included the expiration of the 2010 Tax Relief Act and planned spending cuts under the Budget Control Act of 2011. The former extended the Bush Tax Cuts for two years, while the latter was enacted as a compromise to resolve a dispute concerning the public debt ceiling and address the failure of the 111th Congress to pass a Federal Budget. Under the fiscal cliff scenario, some major programs like Social Security, Medicaid, federal pay (including military pay and pensions), and veterans' benefits, would have been exempted from the spending cuts. Spending for federal agencies and cabinet departments would have been reduced through broad, shallow cuts referred to as budget sequestration. The American Taxpayer Relief Act of 2012 was signed into law by the President on January 2, 2013 and eliminated much of the tax side of the fiscal cliff.
The term fiscal cliff has been used in the past to refer to various fiscal issues. The term started being used in the context of the expiration of the Bush tax cuts in 2010. In 2011, the term started to