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What's the 'Fiscal Cliff'?

We've got the definition — for this and 6 other terms you need to know about the looming budget debate

4. MEDICARE DOC FIX

Basically, this is an annual game of chicken played by Capitol Hill lawmakers. Over the past decade, fees for doctors have faced major cuts because of an intricate formula that sets limits on how much Medicare can spend.

But every time these cuts were imminent, doctors complained and lawmakers then suspended them in an annual ritual nicknamed the doc fix. Most agree that a permanent solution would be better, but that's pretty much where the agreement ends.

A crucial question: how much to spend on Medicare, which accounts for nearly 13 percent of the federal budget.

5. CHAINED CPI 

The acronym is easy: It stands for consumer price index, a formula that looks at how the prices of stuff we need (food, for example) change over time. It's used to make cost-of-living adjustments in programs like Social Security, Medicare and food stamps.

The chained CPI is a twist on that: It measures living costs differently because it assumes that when prices for one thing go up, people sometimes settle for cheaper substitutes (if beef prices go up, for example, they'll buy more chicken and less beef).

Bottom line: Cost-of-living adjustments would be lower with the chained CPI than with the plain old CPI. So depending on which formula is used, the amount of your Social Security or Medicare payments could change, perhaps significantly.

6. PAYROLL TAX HOLIDAY

Essentially, this refers to a payroll tax cut that we all got in 2009 when our share of Social Security taxes was reduced from 6.2 percent to 4.2 percent. The idea was — ka-ching — to put money in people's pockets so they'd have more to spend, thus giving the economy a much-needed boost.

The problem is that the deal required the government to pony up the lost contributions to the Social Security fund. It's a shell game, pure — well, not so pure — and simple.

7. DEBT CEILING

With Congress' approval, the federal government can borrow money to pay for programs that Americans want. But there's a limit on how much Uncle Sam can borrow, and this is known as the debt ceiling.

As the national debt has grown, we've repeatedly bumped up against this limit — and raised it. (Remember that habit of putting off difficult decisions?)

We are now about to reach our limit again — and if we don't raise it (or cut the amount of money we spend), we may be — uh-oh — headed over the fiscal cliff.

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