Fiscal Cliff

The looming fiscal cliff that will trigger higher tax rates for majority of the Americans and automatic spending cuts come January 1, 2013 has put an urgent pressure on the White House and House Republicans to come up with their versions of mitigation plan. Last week (November 25-December 1, 2012) White House presented its plan to the House Republicans, who poo-poohed it as nothing more than Obama's previous budget outline. The White House plan included:

* $960 billion in tax hike over the next decade (by letting Bush-era tax cuts for wealthy Americans expire)
* $600 billion in other tax revenue such as eliminating tax deductions over the next decade
* $350 billion in savings from Medicaid and Medicare over the next decade

However, White House also included in its plan $287 billion in new stimulus and other spending, on items such as extension of payroll tax cuts and unemployment insurance.

House Republicans unveiled their plan on December 3, 2012 that would raise new tax revenue by half of what Obama's proposal called for. The Republican plan didn't call for hike in tax rates, instead relied on limiting tax deductions, closing loopholes, thus aiming to raise $800 billion (as opposed to $1.6 trillion as per White House plan) in new revenue. The Republican plan aims to save $2.2 trillion over the next decade, and the breakdown is as follows:

* $800 billion in new revenue (by closing loopholes, limiting deductions)
* $600 billion from Healthcare savings by restructuring Medicare and Medicaid
* $800 billion from other spending cuts and savings such as COLA changes