By
updated 11/14/2012 4:20:53 PM ET 2012-11-14T21:20:53

President Barack Obama's victory last night over Republican Mitt Romney comes with a sense of relief that the long, expensive and bitter campaign is over. But there's growing anxiety on both sides about the so-called "fiscal cliff" that is quickly looming on the horizon.

In just 49 days, if nothing is done by Congress and the President, $500 billion of spending cuts and tax increases will automatically be triggered that most experts say will plunge the United States back into recession.

"If you remove that much money from an economy, there's going to be some effect," said Ron Haskins, senior fellow in economic policy at the Brookings Institution.

PHOTOS: Shockingly Close Presidential Elections

Here's the deal on the fiscal cliff, how we got here, and what the solutions may be:

-- What is the fiscal cliff? Under an agreement reached by the two parties in 2011 to raise the debt ceiling, spending cuts would be triggered automatically if Congress could not come up with a plan to balance the budget. Congress hasn't, so the law will come into effect on Jan. 1, 2013.

-- Who will pay more taxes? The bipartisan Tax Policy Center estimates the average American family will have to fork over an extra $3,500 in taxes by April 15, 2013.


WATCH VIDEO: Find out how we'll be voting in the future.

-- Nearly 90 percent of Americans would pay more in taxes, either from expiring provisions of the Bush tax cuts, expiration of tax credits from the 2009 stimulus for low-income families, and higher rates for wealthier families by a variety of provisions.

-- What about the spending cuts? The federal government will enact a 10 percent across-the-board spending cut, forcing it to lay off workers and cancel contracts to meet the "sequestration" targets that are set in law. Everything from federal meat-inspectors to NASA rocket scientists would face the budget axe. So too, would federal aid to states, as well as money used to hire teachers and boost police and fire departments.

NEWS: Move to Canada? It's Not That Easy

-- What about federal benefits? Social Security, Medicare and Medicaid benefits will not be affected. However, Medicaid reimbursement rates to doctors will go down. That could force doctors to require Medicaid patients to pay more money out of their own pocket, or doctors could refuse to provide services.

-- What's the answer? In the short-term, Congress needs time to figure out a solution. The bipartisan Simpson-Bowles panel came up with a deficit reduction plan in 2010 that included both cuts and new taxes, as well as reforms to benefits. But the plan fell short of the votes needed to recommend it to Congress. The current, lame-duck Congress could buy time with a six-month "bridge" to delay the cliff, something proposed by House Speaker John Boehner.

HOWSTUFFWORKS: Is the U.S. about to go over a fiscal cliff?

-- What about long-term? Economists say a balanced approach of some new taxes and some spending cuts is the fairest solution. But Republicans in the House of Representatives have, until now, resisted any kind talk of tax increases.

-- What if nothing is done? Just heading over the cliff is a dangerous game, according to Ross Levine, professor of finance and business at the University of California, Berkeley.

"Most economists would agree that implementing these policies in the current law would slow or reverse the (economic) recovery," Levine said. "Immediately."

© 2012 Discovery Channel

Discuss:

Discussion comments

,

Most active discussions

  1. votes comments
  2. votes comments
  3. votes comments
  4. votes comments