Obama wins, driving toward fiscal cliff

President Obama faces a significant challenge once the celebrations of his reelection come to an end. Faced with a divided Congress and a history of gridlock, Obama must reckon with a looming financial crisis. Referred to as the "fiscal cliff" the crisis involves tax increases and deep cuts to important programs that he accepted in order to raise the national debt ceiling almost two years ago.

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WASHINGTON, DC (Catholic Online) - just as the nation is showing signs of economic recovery, a series of tax increases and spending cuts are due to arrive in January. Barring any agreement in Congress, the tax increases as well as cuts, are automatic.

The fiscal cliff as it is called involves some $600 billion which will be removed from the economy if a deal cannot be reached. The economic impact of the fiscal cliff is so significant that leaders in other countries are already working on what steps they can take to insulate their economies.

Naturally, most people around the world, and most Americans in particular, hope that a deal can be struck.

Tax increases are certainly in the offing, no matter what. President Obama has pledged new taxes of Americans earning more than $250,000 per year. In addition to new taxes, which always have a chilling effect on any economy, a number of entitlement programs, including Medicare, will see cuts.

Experts in Washington have warned the President that going over the fiscal cliff could cost 2 million American jobs.

Already, investors are pessimistic, taking steps to protect their investments should the President fail. They have reason to be pessimistic too. Despite the elections, Congress remains politically divided with Republicans controlling the House and pledging to block tax increases.

Within days, President Obama is expected to start work on the issue, meeting with key officials. Between now and January, the world will watch with bated breath as party leaders try to hammer out a solution to the debt crisis that threatens to set back the U.S. economy.

If they fail, the Great Recession could become much deeper and longer than many ever thought possible.

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