What the fiscal cliff means for your wallet
President Barack Obama addressed the nation's financial crisis on Friday, showing just how serious the situation is.
So what happens if we don't come up with a solution by the first of the year?
On Jan. 1 a number of tax cuts will expire and spending cuts will take effect.
In January, a number of tax cuts will expire, including many of the Bush-era tax cuts, which means the average family would see a $2,000 to $3,000 tax increase.
Automatic spending cuts will also kick in, leading to nearly $55 billion being cut from the defense budget and an additional $55 billion from non-defense spending.
It's an option experts said will cause more than a dent in your wallet.
"We'll get a recession. The forecast is, if we don't do anything to avoid the cliff, it will be a large fiscal contraction and that will result in a recession in the first two quarters of the year," said UW-L economics professor Taggert Brooks.
It's a real possibility because of the number of different tax changes that could effect the middle class.
The child tax credit will be cut in half, the payroll tax goes up and federal unemployment insurance drops from 99 weeks, down to 26.
The problem is the power to prevent it lies in the hands of members of congress that don't have a record of getting along.
A problem that was on the forefront of congressman Ron Kind's mind the night of the election.
"We've got a fiscal house we've got to put back in order again and hopefully my colleagues will come to Washington with an idea that we've got to do this together and find common ground. Compromise should not be a four letter word otherwise the decisions will be deferred again," said U.S. Rep. Ron Kind, D-Wis.
There is a long list of tax cuts that will expire and areas the government will cut spending.
To more details on what will change, visit http://money.cnn.com/2012/11/08/news/economy/fiscal-cliff/
It's estimated that if Congress doesn't come up with a solution, the tax cut expiration's and spending cuts will cut more than $1 trillion from the deficit during the next 10 years.
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