Fiscal Cliff: How we got here
WASHINGTON (CNNMoney) - Lawmakers and the president are still at odds over a deal to avoid the Fiscal Cliff.
That means steep spending cuts and automatic tax hikes are set to go into effect in just a matter of days. Economists have warned the move could send the economy into a another recession.
It started more than a decade ago when then-President George W. Bush initiated a series of tax cuts for all Americans. Those cuts, which were politically expedient, were also costly to the government.
When it came time for the cuts to expire, the U.S. was just emerging from the worst recession since the Great Depression so President Obama agreed to extend the tax cuts for two more years in exchange for Congress extending federal emergency unemployment benefits.
Those cuts are expensive. If they're extended, by 2020, the Bush-era tax cuts will be responsible for more than half the national debt.
Democrats insist that taxes go up for the wealthy but stay in place permanently for those earning less than $250,000 a year. Republicans say hikes on anyone, based on an ideology that calls for government to be as small as possible.
That ideology is as old as American politics but today, the philosophy's main spokesperson is Grover Norquist, president of Americans for Tax Reform. Norquist's pledge, signed by almost all Republicans in Congress, forbids signatories from raising taxes - ever.
The debate came to a head in the summer of 2011. Republicans demanded the government reduce its deficit as a condition for raising the nation's debt ceiling. Without the deal, the U.S. would lose its ability to borrow money. Both Democrats and Republicans deployed tactics that nearly shut down the government and, ultimately, cost America its AAA credit rating for the first time in history.
In a last minute compromise, both sides agreed to $1 trillion in spending cuts up front and another 1.2 trillion to be decided by a special congressional "super-committee." A poison pill was attached, though. If the supercommittee couldn't reach a deal, automatic across-the-board cuts, known as the "Sequester," would go into effect starting January 2013.
President Obama and congressional leaders were scheduled to meet Friday afternoon to discuss the looming Fiscal Cliff impasse.