In the United States, the fiscal cliff refers to the economic effects that could result from tax increases, spending cuts and a corresponding reduction in the US budget deficit beginning in 2013 if existing laws remain unchanged.
The deficit—the difference between what the government takes in and what it spends—is projected to be reduced by roughly half in 2013. The Congressional Budget Office estimates that this sharp decrease in the deficit (the fiscal cliff) will likely lead to a mild recession in early 2013.