BOSTON (FOX 25 / MyFoxBoston.com) One of the first orders of business Congress will have to deal with following the elections is the impending fiscal cliff.
In the most basic terms the fiscal cliff is the spending cuts and tax hikes that are set to automatically kick in at the end of the year. It was crafted to be so distasteful that officials would do any and everything to avoid it. So far that hasn't worked and if not averted it could have a major impact on your paycheck.
Only hours after President Obama celebrated re-election in Chicago he was on the phone with leaders in Congress. They have 49 days to tackle a looming financial crisis that could send the economy back into free-fall.
FOX 25 spoke with economist Matt Jensen who explained the potential impact. He says the fiscal cliff would actually decrease the size of the economy and could send the country into a recession next year.
The fiscal cliff is the nuclear option, a one-two punch of tax increases and spending cuts created when lawmakers failed to reach a budget compromise. It would eliminate Bush era tax cuts, Obama's payroll taxes, and extended unemployment benefits. The only way to avoid it is for Democrats and Republicans to work together. If they don't come to a compromise, the average American could have to pay $2,000 more a year in taxes.
President Obama has said he is looking forward to "reaching out and working together with leaders of both parties" to meet challenges including reducing the deficit and reforming the tax code.
The biggest stumbling block to a compromise is tax increases. Everyone wants to extend the Bush tax for those making less than $250,000 a year. President Obama, however, wants to raise taxes on those making more.
"There was a message sent to us by the American people based on the campaign, and that is people making all this money have to contribute a little bit more," says Senate Majority Leader Harry Reid.
House Speaker John Boehner says there are better options.
"The question we should be asking is not 'which taxes should I raise to get more revenue,'" says Boehner, "But rather: 'which reforms can we agree on that will get our economy moving again?"
The clock is ticking. Both sides say they are willing to find middle ground, but the concern is we have heard it all before.