"Fiscal cliff" averted -- now what?

Unless Congress and the president reach a budget deal by December 31, tax experts say 90 percent of American families will be faced with what they call "unprecedented tax increases." Wyatt Andrews reports on the penalties of going over the fiscal cliff.

Congress didn't completely fall off the "fiscal cliff," but they're still hanging onto the edge.

By waiting until the last minute to scrape together a limited bill (which extends the Bush-era tax rates for most Americans and extends long-term unemployment insurance, among other things), Congress sidelined some major fiscal issues they initially sought to resolve before the new year.

Leaders in Washington deferred for two months the $1.2 trillion in across-the-board spending cuts (known as "sequestration") set to hit the Pentagon and domestic programs this week. Additionally, the bill passed this week failed to raise the debt ceiling, even though the Treasury technically hit the $16.4 trillion limit Monday. Both of these issues will come to a head just as Congress is expected to vote on a new federal budget. The convergence of these issues practically guarantees that within a matter of weeks, Washington will once again find itself embroiled in another fiscal crisis.

Lawmakers on both sides of the aisle in recent days have decried the state of uncertainty that's lingered over Washington for months: "We all know uncertainty is the enemy of prosperity," Rep. David Dreier, R-Calif., said on the House floor Tuesday evening. Congress this week did manage to erase fears that the middle class would face an income tax increase. Still, the next "fiscal cliff" not only keeps the threat of a government shutdown on the horizon, but it is also sure to revive seemingly intractable fights over government spending and programs like Social Security and Medicare.

In remarks Tuesday night, President Obama said Washington should strive to address these remaining fiscal issues "with a little bit less drama, a little less brinksmanship, [so as to] not scare the heck out of folks quite as much."

How'd we get here?

Congress enacted the $1.2 trillion "sequester" cuts because of the 2011 Budget Control Act. That bill, passed as a result of the last fiscal showdown, required Congress to enact the across-the-board cuts (half hitting the Pentagon and half hitting non-defense spending) if it failed to reach some other deficit reduction plan by late 2011. Not surprisingly, Congress failed. There's near-unanimous agreement in Washington, however, that making mindless, across-the-board cuts to the budget would do more harm than good to the economy.

The "sequester" cuts were slated for enactment over 10 years, with about $110 billion going into effect this year. The deal passed this week allocates $24 billion in spending cuts and new revenues to defer the "sequester" cuts for two months.

Meanwhile, Washington also left negotiations over the "debt ceiling" -- the nation's legal borrowing limit -- for another day. Treasury Secretary Tim Geithner announced last week that the government was expected to hit its $16.4 trillion borrowing limit this past Monday and that Treasury Department is already resorting to accounting gimmicks to skirt the limit, buying Congress a couple more months to raise the ceiling.

Raising the debt ceiling was a relatively routine procedure on Capitol Hill until 2011, when tea party-inspired Republicans demanded spending cuts in exchange for allowing the government to go further into the red. The 2011 showdown over the debt limit prompted Standard & Poor's to downgrade the Treasury's debt.

In a speech before the Business Roundtable on Dec. 5, 2012, Mr. Obama warned, "We are not going to play that game next year."