The “fiscal cliff” was the combination of tax increases and automatic spending reductions that hit between January 1 and March 1, 2013. The tax increases refer to both the expiration of the George W. Bush-era tax cuts and to the expiration of the Social Security payroll tax cut, also known as the "payroll tax holiday."
The automatic spending reductions, in regards to Medicare, involved the threat 27-percent cut to physician payments required by the Sustainable Growth Rate that Congress pushed off for another year.
The looming 2 percent across-the-board cut, known as sequestration, mandated by the Budget Control Act of 2011 hit March 1, 2013. The cuts will decrease spending by $1.2 trillion from fiscal year 2013 to fiscal year 2021; half comes from the defense budget and the other half from others departments’ budgets.
According to the CBO, the “fiscal cliff” will cause economic conditions that would probably be considered a recession, with gross domestic product declining by 0.5 percent between the fourth quarter of 2012 and the fourth quarter of 2013. The unemployment rate will rise to about 9 percent in the second half of calendar year 2013.
Related FAQs
What is Sequestration?
How Did We Arrive at Sequestration?
What Does Sequestration Mean to Medicare?
How Will the Sequestration Cuts Affect the Health Care Industry?
What Part Did Medicare Play in the Fiscal Cliff Discussions?
What Does Medicare Have to Do With the Federal Budget Deficit?
