“Fiscal cliff” is the popular shorthand term used to describe the conundrum that the U.S. government will face at the end of 2012, when the terms of the Budget Control Act of 2011 are scheduled to go into effect.

Among the laws set to change at midnight on December 31, 2012, are the end of last year’s temporary payroll tax cuts (resulting in a 2% tax increase for workers), the end of certain tax breaks for businesses, shifts in the alternative minimum tax. 

In dealing with the fiscal cliff, U.S. lawmakers have a choice among three options, none of which are particularly attractive:

• They can let the current policy scheduled for the beginning of 2013 go into effect. Which means a a number of tax increases and spending cuts that are expected to weigh heavily on growth and possibly drive the economy back into a recession (Remember that 2k you'd be paying)
  
• They can cancel some or all of the scheduled tax increases and spending cuts, which would add to the deficit and increase the odds that the United States could face a crisis similar to that which is occurring in Europe. 
  
• They could take a middle course, opting for an approach that would address the budget issues to a limited extent, but that would have a more modest impact on growth. This means prevent the tax increase on the first $250k earned for everyone. Pretty much this would be for 98% of Americans
  

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