Guam - Just because it's Christmas doesn't mean the looming fiscal cliff isn't on the minds of Americans throughout the nation. And just as island leaders try to our address our own fiscal cliff locally, if a plan isn't decided in our nation's capital it could have an impact on us here at home.

Barack Obama's first term as president is coming to an end, but before he heads into his second term, he along with congressional leaders must reach a deal in order to avert the fiscal cliff when the terms of the Budget Control Act of 2011 are scheduled to go into effect in January. Here at home, Bureau of Budget and Management Research director John Rios says the Calvo Administration has been trying to address our own fiscal cliff for the past two years with tightening its belts and trying to hold the line.

"So we're pretty much ahead of what the federal government is trying to do," Rios stated.

Rios adds the federal government is addressing the fiscal cliff in three areas - spending cuts, increase in revenues and entitlement reform. Rios explains how such plans would impact Guam. "Now, the increase in revenues is a result of the sunset of President Bush's tax cuts, that would be sun setting at the end of this year. So if that happens, the tax rates would basically go up to the same level prior to him making those tax cuts, so that would bring in more revenues. Now, that would affect us here too because then we would then see more tax revenues in our side," he explained.

"Going back to the spending cuts, the federal government spending cuts would be applied to both defense and non-defense programs. Now how that would affect Guam is there would be some federally funded programs or grants that may be reduced or basically not funded at all."

Rios adds entitlement reform relates to the Social Security and retirement system, which the Administration has tried to address with the governor's spending cuts bill. However provisions related to the unfunded liability to the Government of Guam Retirement Fund were removed by lawmakers. He says the fiscal cliff basically involves trying to address a deficit that has built up for so many years, something Guam is no stranger to as the Administration has spent the past two years addressing past due obligations such as paying tax refunds and most recently meritorious bonus payments dating back two decades.

"But that's only part of it, there's a lot more. There's a lot of promise compensation, overtime that we want to take care and tax refunds also," he said. Rios adds he's not sure if Congress and President Obama will reach an agreement in time but says the bottom line is that there will be spending cuts.

Economists have since warned if Congress doesn't reach a deal soon, the economy could fall back into a recession. President Obama meanwhile has sent lawmakers home for the Christmas holiday with an expectation for Congress to return on December 27 to figure out a solution before New Years Eve.