Dewonkify - Fiscal Cliff

The Word: Fiscal Cliff

Definition: "Fiscal cliff" is the term used to describe the situation that the U.S. will face at the end of this year, when provisions of the Budget Control Act of 2011 are scheduled to go into effect. (Some use the word "austerity cliff".) If no action is taken by Congress and the President, $500 billion of spending cuts and tax increases will automatically occur. For more on the specifics of the Fiscal Cliff, read our blog post.

Used in a Sentence: "[Congressional Budget Office]: 'Fiscal Cliff' Could Trigger Recession"

History: In 2011, legislators reached a bipartisan agreement to raise the debt ceiling. However, in exchange for raising the debt ceiling, the agreement mandated that Congress put forward a plan to balance the budget – by December 31, 2012- or automatic spending cuts of 10% across the board would go into effect. These automatic cuts are also known as "sequestration."