page_title: United States fiscal cliff
section_title: Democratic proposals
hierarchical_section_title: United States fiscal cliff / Negotiations / Democratic proposals
caption_attribution_description: English: Democrat and Republican leaders meet in late November as part of the fiscal cliff debate
context_page_description: The United States fiscal cliff was a situation that took place in January 2013 when several previously-enacted laws came into effect simultaneously, increasing taxes and decreasing spending.
  The Bush tax cuts of 2001 and 2003, which had been extended for two years by the 2010 Tax Relief Act, were scheduled to expire on December 31, 2012. Planned spending cuts under the Budget Control Act of 2011 also came into play. That Act was passed as a compromise to resolve a dispute concerning the US debt ceiling and address the failure of the 111th Congress to pass a federal budget. Discretionary spending for federal agencies and cabinet departments would have been reduced through broad cuts referred to as budget sequestration. Mandatory programs, such as Social Security, Medicaid, federal pay and veterans' benefits would have been exempted from the spending cuts.
  The fiscal cliff would have increased tax rates and decreased government spending through sequestration. This would lead to an operating deficit that was projected to be reduced by roughly half in 2013.
context_section_description: On July 25, 2012, the Democratic-controlled U.S. Senate voted 51–48 to pass a bill supporting the President's tax proposal which extended the Bush tax cuts for 98% of taxpayers, while allowing them to lapse for the top 2%. The Senate also rejected the Republican proposal of extending the tax cuts for all by 45–54. The U.S. House of Representatives rejected, 170–257, the President's tax proposal on August 1, 2012.
  During November 2012, President Obama expressed a preference for replacing the more blunt cuts of the sequester with more targeted cuts, while raising income tax rates on the top 2% of earners. Senior White House officials recommended a veto of any bill that: 1) averts defense cuts while leaving intact non-defense cuts; or 2) excludes an increase in tax rates for top earners. Obama wants to continue to extend the Bush tax cuts for American couples earning less than $250,000 and individuals earning less than $200,000.
  As of November 30, 2012, Obama was calling for an undeclared amount of spending cuts, $1.6 trillion in higher taxes over ten years, and cuts of $400 billion from Medicare and other benefit programs over a decade. Obama also wanted "an extension of the 2 percentage point payroll tax cut" and spending of "at least $50 billion" in 2013 "to boost the economy." Although Democratic Congresspersons have in general supported President Obama's proposal, its November version was based on the President's 2013 budget proposal, which Republicans say was rejected unanimously in both the House and the Senate earlier in 2012. In March, House Minority Leader Nancy Pelosi said that the bill proposed by House Republicans for a vote "was a caricature of the President's budget, so we voted against it."
caption: Democratic and Republican leaders meet in late November as part of the fiscal cliff debate.
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