TODAY   |  November 19, 2012

What if? Cramer explains fiscal cliff scenario

CNBC’s Jim Cramer explains the impact of the so-called fiscal cliff, automatic tax increases and spending cuts set to hit on January 1 that threaten to pull the country back into a recession if  Democrats and Republicans can’t work their way to a compromise.

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This content comes from Closed Captioning that was broadcast along with this program.

>> the president is traveling overseas to start the week, but he's hoping democrats and republicans back in washington are hard at work on a compromise to avoid the looming fiscal cliff. so what's at stake if they can't? krim cramer is the host of " mad money " on cnbc . jim, good morning to you.

>> good morning.

>> nice to see you.

>> " usa today " put it very well graphically in their newspaper.

>> right.

>> so we've created and copied it and put it here. these are the parts of the cliff, what make up the cliff. talk me through it.

>> this is by far the biggest part. this is the repeal almost everything. you basically are going to pay much higher taxes, everybody in the country. $600 billion at stake. this is the toughest one. here, this is a compilation, catches people by surprise.

>> alternative minimum tax, if not adjusted for inflation, costs the economy $59 billion.

>> social security , this was the sticking point. the wealthiest peel, got to pay more according to democrats. republicans hate this j this will cost the economy $40 billion.

>> right.

>> this is where compromise has to occur. do you see it happening?

>> no. this has to be -- this figure will not stand. somebody has to give. the president has to give or the republicans because this is -- this is what's going to cause a recession if we have recession.

>> by the way, we should all mention here. this didn't happen by accident.

>> no.

>> this thing was created because of failures to compromise and strike deals in the past on the part of congress.

>> except this was so onerous, particularly the defense cuts, this was supposed to be so bad there's no way the parties would ever disagree about it.

>> you say you're not optimistic. we heard lawmakers over the weekend speaking out and they are saying, you know what, they do think that compromise is in the air and they can strike a deal before we go over the fiscal cliff. why do you disagree?

>> i just feel like there's got to be some give here. the republicans are saying this is a deal-breaker. the democrats are saying it's a deal-breaker. look at all the other things. how can that be the reason we have to go into recession? all these job cuts, tens of thousands, 600 billion and that?

>> the reason we could have to go into recession, there's some people who say let's look at the dramatic side of this. let's say we go over the fiscal cliff. some people say that might not be the worst thing that ever happened to us. you disagree?

>> you lose tens of thousands of jobs. make it so that it's unlikely they get good unemployment benefits and the next thing you know you have people cutting back all the recession.

>> what warren buffett said last week, the famed investor. fact that they, referring to congress and the president, can't get along for the month of january, so he's looking short term here, is not going to torpedo the economy.

>> well, that's great. a very wealthy person feels that it's not going to torpedo the economy. you're in this group, going to cut back spending, you're in this group, don't know what's going to happen, you're in this group, they are supposed to be hiring people. this group, i know they won't be hurt. that's warren buffett 's group.

>> you've got a pin on. cnbc has a network rise initiative called rise above . what's the thought behind it?

>> there's got to be some common ground, not a left wing , republican, democrat, about avoiding recession, throwing people out of work, raising money in a very fast fashion instead of steadily over time . that's what politics is about. we don't want politics on this issue.

>> need to get you props more often gets you all wound up.

>>> catch a special edition of " mad money " tonight on cnbc