TIMELINE - America's long stumble toward the "fiscal cliff"

WASHINGTON Wed Nov 7, 2012 1:33pm IST

United States money printing plates are seen at the Museum of American Finance in New York October 15, 2010. REUTERS/Shannon Stapleton

United States money printing plates are seen at the Museum of American Finance in New York October 15, 2010.

Credit: Reuters/Shannon Stapleton

WASHINGTON (Reuters) - The long, bumpy road to America's "fiscal cliff" has been traveled over many years by Congress and a series of U.S. presidents, including Barack Obama, who won a re-election on Tuesday, and who may turn quickly to the issue.

Some of the steps along the way had good intentions. Some had no intention at all other than to avoid hard decisions.

After Tuesday's election, with Congress still divided between Democrats and Republicans, crucial deadlines loom at year-end.

Major budget and tax decisions are converging in a challenge Federal Reserve Chairman Ben Bernanke has dubbed a "fiscal cliff." Will lawmakers rise to the occasion? Or will they delay again?

Here is a time line of how the country got where it is today.

* 1998-2001. Long economic expansion of 1990s peaks. U.S. government budget in surplus under President Bill Clinton.

* 2001. Stock market tech bubble bursts. President George W. Bush, Congress enact deep "temporary" tax cuts. Some Republicans predict cuts will spur economy, pay for themselves. September 11 attacks occur. United States and its allies invade Afghanistan.

* 2002. After four years of surpluses, U.S. budget slips into deficit of $158 billion. Bear market in stocks.

* 2003. United States and allies invade Iraq. Bush and Congress cut taxes further. Deficit grows to $378 billion.

* 2004-2006. Stock market recovers. Deficit shrinks.

* 2007-2008. Housing market bubble bursts. World financial crisis. Stock market crashes. Worst U.S. recession since Great Depression. Unemployment, home foreclosures soar. Bush, Congress bail out big banks. Deficit jumps to $459 billion in 2008.

* 2009. Obama, Congress enact $787 billion stimulus, including expanded "temporary" tax breaks for children, education. Auto industry bailed out. Recession ends midyear. Stock market bounces back. Deficit hits $1.4 trillion.

* 2010. Obama signs healthcare overhaul into law. Obama creates Simpson-Bowles deficit reduction panel. Its plan for drastic fiscal reform is largely ignored. Led by Tea Party conservatives, Republicans win control of House of Representatives in midterm elections. Obama agrees to extend Bush tax cuts for two years. Def i c it shrinks to $1.3 trillion.

* 2011. Treasury Department request for increase in U.S. debt ceiling becomes focus of fight in Congress. Republicans, Democrats settle dispute by forming "super committee" to examine fiscal reform. Debt ceiling raised. U.S. credit rating downgraded. Super committee collapses in discord. Deep, mandatory budget cuts triggered for 2013. Stock market makes choppy advance. Deficit estimated at $1.6 trillion.

* Spring 2012. Bernanke warns lawmakers of "massive fiscal cliff" at year-end. Main elements of approaching crisis include the expiration of Bush tax cuts and other tax measures that Congress has allowed to slip, along with budget cuts due to super committee flop.

* Summer 2012. Presidential, congressional election campaigns in high gear. Stock market advances.

* Autumn 2012. Congressional Budget Office warns that the fiscal cliff, left unaddressed, could trigger recession. Mitt Romney named Republican presidential nominee. Obama reiterates support for keeping Bush tax cuts for all except high-income earners. Republicans support extension of Bush tax cuts for everyone. Deficit for 2012 estimated to shrink to $1.1 trillion.

* November 6, 2012. Obama re-elected, Democrats retain control of Senate, Republicans retain control of House, according to network projections.

* November 13, 2012. Congress scheduled to return for "lame-duck" session to deal with Obama on fiscal cliff issues.

* December 31, 2012. If Congress takes no action, Bush tax cuts expire, other "fiscal cliff" elements kick in.

* Early 2013. If no action from Congress, automatic budget cuts set to kick in. Debt ceiling expected to be hit again. (Additional reporting by Kim Dixon; Editing by Tim Dobbyn and Peter Cooney)

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