fiscal cliff

a combination of planned government spending cuts and tax increases which must take place in the future because a temporary financial law has ended

If you don't have much of a head for heights, then the expression fiscal cliff might conjure up unsettling images of precarious mountain and coastal paths. However if you've seen this term splashed across the media recently, then you may already know that it doesn't have anything to do with geographical features. It does on the other hand represent a situation which is equally 'hazardous', having the potential to tip things over the edge financially rather than physically.

the fiscal cliff refers to a double-whammy of both tax increases and spending cuts, which are due to coincide at the beginning of 2013

Fiscal cliff is the expression currently being used to describe an imminent financial scenario in the USA which potentially has very serious consequences for the country's economy and could possibly push it back into recession. Specifically, the fiscal cliff refers to a double whammy of both tax increases and spending cuts, which are due to coincide at the beginning of 2013. As well as planned reductions in welfare and defence budgets, personal and federal incomes will take a heavy blow because of the cessation of a raft of tax cuts, which were introduced under former president Bush's administration back in 2001. Unable to secure the required majority in Congress, the tax cuts were pushed through on a temporary basis under a ruling that expired in 2011. This deadline was subsequently extended for two years under President Obama, but those two years are up on December 31st, meaning that the tax break will be over – just at the very time that public spending is to be significantly decreased.

Though fiscal cliff is mainly used to describe the impending situation in the USA, the expression has also been used in reference to other world economies, in particular Japan.

Some financial analysts have argued however that expressions such as fiscal slope or fiscal hill might be more appropriate metaphors in the US context because, though impact on the economy is predicted to be substantial during 2013, it's more likely to be cumulative rather than immediate, building up gradually as the weeks and months progress. The US population are nevertheless bracing themselves for the impact of these measures, anxious about a possible double hit of loss of income coupled with a reduction in welfare. Such anxieties have already led to related coinages such as household cliff in reference to the financial predicament of the man on the street.

Background – fiscal cliff

As a reference to the impending financial issues in the USA, fiscal cliff was first used in late 2010, when the tax cuts implemented by President Bush were originally due to expire. Popular use of the expression was galvanized by Ben Bernanke, Chairman of the US Federal Reserve, who in February 2012 said that "Under current law, on January 1, 2013, there's going to be a massive fiscal cliff of large spending cuts and tax increases". However, though only recently brought into the spotlight, the expression fiscal cliff is not particularly new and in fact dates back to 1957, when it first appeared in an article about home ownership in the New York Times. It took a couple of decades before it was to be used with a wider reference though, becoming popular as a metaphor for the precarious condition of state and federal budgets in the early eighties.

With its use of adjective fiscal, an adjective mainly confined to the vocabularies of economists, fiscal cliff represents a striking combination of metaphorical and specialist words. Fiscal dates back to the mid-sixteenth century, and has its origins in the Latin word fiscus, meaning 'purse' or 'treasury'.