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What in the world is a fiscal cliff?

Published On: Nov 08 2012 06:00:00 PM CST
Updated On: Nov 09 2012 09:43:07 AM CST

Some local economists say the United States could be headed down the same financial path as Greece.

Some local economists say the United States could be headed down the same financial path as Greece.

They're talking about the looming fiscal cliff, but what exactly is the fiscal cliff?

“The genesis of the fiscal cliff was that we were trying to figure out ways to reduce the long term deficit going forward over 10 years," said Chris Duelfer, a professor at Cedar Crest College.

The problem: instead of reducing the debt, we've been adding to it with tax cuts and spending.

"First of all, there's the Bush tax cuts that were originally set to expire in 2011 and then under President Obama they were extended," said Donald Dale, an associate professor at Muhlenberg College. "There is the payroll tax holiday that was enacted under President Obama and there is a change in the alternative minimum tax which is set to go away."

Now. combine all of that with spending cuts in defense and social programs, all ending December 31, 2012, and we have a fiscal cliff.

“I believe we're looking at something that is bad with the policies that are in place," added Duelfer. "But I think it's not going to be like a cliff like we are walking along everything is fine and all of a sudden the economic world ends.”

"So what would taking away some of that stimulus do?" asked Dale. "Well that is anybody's guess and I really don't know what it's going to do. It can't help but hurt."

President Obama and many elected to serve in the nation's capitol say both parties need to compromise and come up with a plan.

The president will take up the issue in his first post-election news conference on Friday.

Many believe both sides will agree on a plan.

Economists said it needs to include some cuts because some say if Congress extends all the cuts it could mean financial ruin for the U.S.

"There's no way people will continue to lend us money with that kind of a plan," added Dale. "That's Greece."