How Much Do You Know About the Fiscal Cliff?

December 28, 2012 Updated Dec 28, 2012 at 12:50 AM EDT

By Kendra Eaglin

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December 28, 2012 Updated Dec 28, 2012 at 12:50 AM EDT

Buffalo, NY
(WKBW)

It seems like it showed up on the scene right after the presidential election, the catch phrase fiscal cliff. But does the average american know what it really means? We hit the streets of the Queen City to find out.

"What is the fiscal cliff?"we asked.
"It is on January 1st when they are going to raise taxes and cut government spending," responded Andy Calos of Buffalo.

"Do you know what a fiscal cliff is?" we asked.
"We know when it comes to January 1st if they don't do something about it we're going to be paying more taxes," stated Kathy Marks of Buffalo.

"What is the fiscal cliff?" we asked.
"Uuuh, I don't know right now," laughed Suzanne Bonifacio.

"What is the fiscal cliff and what does it mean to you?" we asked.

"I know it has to deal with the government and the finances and I know it affects the taxes and I know it affects everybody especially anybody with a government job. It just affects everybody," said Sarah Holland of Cheektowaga.

Everybody will be affected by the fiscal cliff. By midnight December 31st the terms of the Budget Control Act of 2011 are scheduled to go into effect.

That act was a temporary fix to the nation's debt ceiling crisis and politicians in Washington were supposed to work on a permanent plan over the past year and a half.

But now days away from the deadline there is no deal.

That means last year's temporary payroll tax cuts will expire, hiking taxes on all workers by two percent.

The Bush era tax cuts will end and there will be massive spending cuts to major government programs including the defense budget and medicare.
Unemployment benefits for two million people looking for work will also end.

Experts say that's enough to plunge the country into a recession.

Some experts say the term fiscal cliff is misleading because if a vote on a deal comes after December 31st Congress does have the power to make those laws retroactive to January 1st.