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Could 'fiscal cliff' push US into recession? Four questions answered

Congress’s most trusted budgetkeepers – the nonpartisan Congressional Budget Office (CBO) – warned in a report Tuesday that if Congress does not deal with a raft of fiscal measures by Dec. 31, some $560 billion in drastic budget cuts and tax hikes will result.

On one hand, that would cut the US federal deficit in half. On the other, it “probably” would send the US into recession, the report says. So what is the fiscal cliff and what is Congress doing about it? 

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In this file photo, President Obama signs the bill that extended the Bush-era tax cuts and other benefits two years – until Dec. 31, 2012. The tax cuts are one part of the 'fiscal cliff.'
Jim Young/REUTERS/File
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1. What is the fiscal cliff?

The fiscal cliff is Washington shorthand for the huge number of significant provisions that will either expire or take effect at midnight on Dec. 31 if Congress does nothing. The implications both for the US budget and for American taxpayers would be massive. They include:

If you’re counting, that all adds up to $607 billion, but the CBO estimates that the government will take in $47 billion less than projected due to the shock all these taxes and spending cuts will have on the economy.

Voilà, $560 billion.
 

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