Understanding the ‘Fiscal Cliff’


Sophomore Francesca Glorioso said she is concerned about the impact of the national budget on finding a job and college tuition.

Freshman Liz Eichsteadt and senior Melissa Kroll said it is difficult to understand the national budget and the government’s impact on college students.

“I knew that Congress needed to make a decision about the budget for the upcoming year and if they didn’t, I remembered hearing how taxes were going to go up if a decision wasn’t made,” Kroll said.

“My main concern right now is trying to afford school,” Eichsteadt said.

Impact on College Students

The biggest affect of the national budget on college students is student loan availability.

Most loans are backed by the federal government. However, the larger sections of the budget are the entitlement programs: Social Security and Medicare. These do not affect most students yet, but could eventually.



Chair of the Department of Political Science Susan Johnson said media coverage has a large role of the fiscal cliff.

“Many people in the media are much more interested in talking about the cliff and that we were going to fall over and how the world was going to end, when in reality it wasn’t going to.” Johnson said.


The Fiscal Cliff

The fiscal cliff is a made-up term to describe the combination of three factors that were to take effect on Jan. 1, 2013.

This included the debt ceiling, expiring tax cuts and sequestration cuts.

During the summer of 2011, President Barack Obama and Speaker of the House John Boehner worked together to form a plan to address the debt ceiling.

The debt ceiling is a limit set by Congress on the amount of total debt the federal government can have.

Congress has the authority to raise the debt ceiling limit as needed, and has done so more than 70 times since 1962.

If the debt exceeds the ceiling limit, the government is unable to borrow additional funds; it would default on existing loans and would trigger a government shutdown.

The government did shut down for a period in 1995 and 1996 when President Bill Clinton and Speaker of the House Newt Gingrich could not agree on the national budget. Only essential services continued during the shutdown.

Obama and Boehner could not agree to terms for the debt ceiling, and Congress agreed to increase the debt ceiling. The bill to increase the ceiling also included sequestration cuts.

These are a series of automatic federal spending cuts that are triggered when the government fails to achieve a set of budgetary goals.

A bipartisan committee was created to ensure that $1.2 trillion was reduced in the deficit, or the same amount would be cut to defense spending and entitlements.

The national  budget is also a factor.

Formal Process

A president submits a formal budget every year to Congress.

Congress should divide out parts of it to different committees to vote on each item.

Before the fiscal year starts on Oct. 1, Congress would vote on 13 separate appropriations bills which become the blueprint for funding the federal government for that year.

This is the statutory approach, but recently the government has been operating on continuing resolutions. A continuing resolution is legislation that continues funding at the existing levels.

The debt ceiling and sequestration cuts have been extended for a few more months. This means that these two factors are not resolved and will return.

Congress could however pass something addressing the issues before their extension expires.

This year’s national budget has created lower consumer confidence.

“The biggest issue is that it creates uncertainty, which is not good for the financial markets, businesses or for individuals,” Johnson said. “Confidence is weaker when people are unsure about what cuts and tax increases are coming.”

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