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Christmas Cheer Giving Way to Fiscal Cliff Fears

The U.S. Capitol Christmas Tree is pictured against a backdrop of the U.S. Capitol Building in Washington, December 4, 2012.

The U.S. Capitol Christmas Tree is pictured against a backdrop of the U.S. Capitol Building in Washington, December 4, 2012.

Most of the Christmas holiday celebrations are over. So, for many Americans, thoughts are turning from joy and good cheer to gloom and doom as President Barack Obama and lawmakers approach the looming fiscal cliff - a combination of tax hikes and federal spending cuts that could push the country back into recession.

Economic fears have been on the mind of holiday shoppers, like Holly Hill in Atlanta, who had thought about spending more this Christmas.

"We have cut back assuming that Congress and the president and the country are going to go over the fiscal cliff. And we're hopeful, though, that they can work together and figure something out and do what's best for this country," Hill said.

What is the U.S. Fiscal Cliff?

  • An agreement intended to force politicians to compromise and make deals.
  • Without a deal by January 1, 2013, sharp spending cuts would hit military and social programs.
  • Tax hikes also would go into effect.
  • The combination would reduce economic activity, and could boost unemployment and push the nation back into recession.
Time to reach a deal, however, is quickly running out. Across-the-board tax hikes and deep spending cuts take effect on January 1 unless the president and lawmakers reach some sort of agreement. The latest polling from the Gallup Organization shows only 50 percent of Americans still think a deal is possible - almost 10 percentage points fewer than one month ago.

Gallup Editor-in-Chief Frank Newport said, "One thing that really comes through in the data, in our Gallup polling and in other polls, is how much Americans think that their elected representatives in the nation's capital should compromise. The public out there strongly says compromise. Figure out a way to give in some on your principles so you reach an agreement."

In an environment where politicians are so often led by public opinion, however, Gallup said the public has not been able to offer up any solutions.

Still, Marc Goldwein with the Committee for a Responsible Federal Budget is somewhat optimistic. He said, "If you look at where the president was and where the speaker [Republican House Speaker John Boehner] was just a week or so ago, they were so close. There's definitely differences to be hammered out and it's not clear we can do that in a week but they're so close that I do hold out some hope that we can get back to that go-big mentality."

Some analysts worry anything less than a comprehensive solution on taxes and spending - any deal that just delays the most difficult budget choices - will make the problems more difficult to solve.

And Don Kettl, dean of the School of Public Policy at the University of Maryland, said the ramifications go beyond America's borders - with the rest of the world looking in.

"They're looking at us not only in terms of why can't we get our budget act together, but also there's a more fundamental question of whether the U.S. can lead and govern any longer," he said.

Kettl puts the odds of getting a deal by the New Year's deadline at 50-50. He said in some ways it gets back to high-stakes politics - neither the president nor Republican lawmakers wanting to look like they were the one who gave in first.