Publication

On December 31, 2012, an unprecedented change in U.S. policy is set to take effect. Without action, temporary spending and tax measures totaling $550 billion will expire. This "fiscal cliff" would reduce the deficit by nearly half but pushing the US economy into a new recession. Most analysts expect a "kick the can" deal, in which spending and tax measures are temporarily extended. This brief argues, however, that this consensus understates the risk that a deal will not be reached during the brief "lame duck" session following the election and that the country will go off the cliff.