‘Fiscal Cliff’: CBO Predicts Recession in 2013 Unless Serious Action Taken
- Posted on May 23, 2012 at 5:11pm by
Becket Adams
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A new government study released Tuesday says that allowing Bush-era tax cuts to expire and a scheduled round of automatic spending cuts to take effect would probably throw the economy into a recession by 2013.
The Congressional Budget Office (CBO), a nonpartisan agency of Congress that produces economic analysis and estimates of the cost of legislation, report says that the economy will shrink by 1.3 percent in the first half of next year if the government is allowed to fall off this so-called “fiscal cliff” on Jan. 1 — and that the higher tax rates and more than $100 billion in automatic cuts to the Pentagon and domestic agencies are kept in place.
There‘s common agreement that lawmakers will act either late this year or early next year to head off the dramatic shift in the government’s financial situation. But if they were left in place, CBO says it would wring hundreds of billions of dollars from the budget deficit that would “represent an additional drag on the weak economic expansion.”
CBO projected that the economy would contract by 1.3 percent in the first half of 2013, which would meet the traditional definition of a recession, which is when the economy shrinks for two consecutive quarters.
“Given the pattern of past recessions as identified by the National Bureau of Economic Research, such a contraction in output in the first half of 2013 would probably be judged to be a recession,” the report states.
As most Blaze readers know, a recession is technically defined as “two economic quarters of negative economic growth,” as The Hill puts it.
The economy would rebound at a 2.3 percent growth rate in the second half of the year, however, under CBO projections.
At issue is the full expiration of two rounds of major tax cuts enacted during the Bush administration and automatic spending cuts on the Pentagon and domestic programs that are scheduled to take effect as punishment for the failure of last year’s deficit “supercommittee” [remember that?] to produce a deficit-cutting agreement last year.
Speaker of the House John Boehner (R-OH)
Last summer’s debt and budget agreement imposed almost $1 trillion in cuts to agency budgets over the coming decade and required automatic cuts — dubbed a sequester in Washington-speak — of another $1 trillion or so over the coming decade.
The CBO study came as Capitol Hill is hopelessly gridlocked over spending and taxes with one side accusing the other of economic sabotage. The White House and top Democrats like Senate Majority Leader Harry Reid of Nevada say they will refuse to act on the expiring tax cuts and automatic spending cuts unless Republicans show greater flexibility on raising taxes.
“If Republicans want to walk away from the bipartisan spending cuts agreed to last August, they will have to work with Democrats to replace them with a balanced deficit reduction package that asks millionaires to pay their fair share,” Sen. Reid said in a statement.
Republicans are pressing to deal with the problem now. But they’re not showing any more flexibility on tax increases.
Speaker of the House John Boehner (R-OH) criticized President Obama for failing to focus on long-term economic solutions.
“The president lost his courage, and the country lost its gold-plated triple-A credit rating for the first time,” Boehner wrote. “Since then, the president has been in campaign mode — playing small ball at a time when we need to address big challenges.”
Meanwhile, the White House defends its decision to focus more on things like gay marriage and free contraception and says Congress should simply adopt the president’s budget.
Senate Majority Leader Harry Reid (D-NV)
“You can call this a fiscal cliff. You can call it Taxmageddon as others have done,” said Sen. Orrin Hatch, R-Utah. “Whatever you call it, it will be a disaster for the middle class. And it will be a disaster for the small businesses that will be the engine of our economic recovery.”
The results of the elections will have a lot to do with the ultimate solution, but several top lawmakers predict the current Congress will punt the issue into 2013 for the newly-elected Congress and whoever occupies the White House to deal with.
“CBO observes that simply extending all of our current tax and spending policies will produce unsustainable deficits and debt, which will also send the economy into decline,” said Rep. Chris Van Hollen, D-Md., the top Democrat on the Budget Committee. “We need to act and we must do so in a balanced way.”
The Associated Press contributed to this report.
Front page photo source: CS Monitor
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Comments (69)
dmerwin
Posted on May 23, 2012 at 7:56pmSurprise, Surprise, Surprise. Well it appears as if Harry and Barry may fall on their swords.
Report Post »AmericanFightingMan1
Posted on May 23, 2012 at 8:54pmCarole King sang
“And it’s too late, baby now it’s too late, though we really did try to make it. Something inside has died and I can’t hide it, And I just can’t fake it, Oh no, no …”
Our ship of state has been run aground by seditionists. Trials and a short piece of rope. Then maybe, just maybe, it is finally time to break with these libs/progressives/marxists/bolsheviks.
Report Post »MCDAVE
Posted on May 24, 2012 at 12:19amBarry destroyed the economy and we are already in a depression…You won’t here about it until after NOV and a Republican is in office,then the lame stream media will blame the whole mess on the republicans, however this does not excuse this congress ,both parties who did nothing but help themselves to the spoils while Barry destroyed us
Report Post »Leadthemtothelight
Posted on May 24, 2012 at 2:44pmI think it’s very appropriate that Harry dumbsh*t Reid has his hand out in the picture. It is a popular pose for he and his group of failures in the senate. We are gonna have to embrace a smaller government with less entitlements across the board. Perhaps change will come in 2012 when Romney get’s elected. If Obama wins again we are up sh*t creek and Biden will have lost the paddle or given it to a more needy person.
Report Post »A Doctors Labor Is Not My Right
Posted on May 24, 2012 at 3:40pmPeter Schiff has already called the coming bond market crash.
See here.
Don’t believe the hype — the U.S economy is not recovering, it’s getting sicker.
http://www.youtube.com/watch?v=Vcd5IO_LMBs
And here.
Peter Schiff: Ben Bernanke is Public Enemy No. 1
Report Post »http://www.youtube.com/watch?v=0LC1RIljtp8
freedomisasfreedomdoes
Posted on May 23, 2012 at 7:53pmSo what does Harry have against the middle class?
Report Post »MCDAVE
Posted on May 24, 2012 at 12:24amHarry is a communist and see’s himself as an elite…the middle class are to be peasants …there is no middle class in a communist country
Report Post »soybomb315
Posted on May 23, 2012 at 7:46pmNeed to make some serious financial reforms. Part of the deal is biting the inevitable bullet
2012….time to grow a pair
Report Post »dmerwin
Posted on May 23, 2012 at 7:57pmSoybomb
Report Post »For the second time in two days I will have to agree with you.
KC1
Posted on May 23, 2012 at 10:33pmIts too bad that neither party believes in a truly free market. I know the general consensus is we are doomed and in a way that is true but I believe there is hope. We will have to go through a painful market correction and at that point we can either rely on the invisible hand to set interest rates and allocate capitol or we can consolidate the Fed and Govt control over the economy. I believe both candidates will choose the latter “except for the obvious invisible candidate”. When it comes time to allow a correction and both the population and politicians lack the gaul to do what is necessary, that is when we will beyond repair. But dont under estimate the free markets ability to lift economies out of the ruble of statist policies. I hope I am right anyhow.
Report Post »dublinthewagons
Posted on May 24, 2012 at 5:31amThis ship has to hit bottom to recover. I believe nothing that comes from Washington. CBO is part of the problem. They report on the false numbers they are given. Everybody in Washington needs to be replaced. We should start with doing away with their retirement benefits. One side wants to destroy the nation the other side wants to do it quicker. Two year terms two term limits with no retirement.
Report Post »dmerwin
Posted on May 23, 2012 at 7:45pmThe hell you say.
Report Post »lukerw
Posted on May 23, 2012 at 8:12pmSince… WHEN… was the CBO… chartered to become Economists and Predict Recessions?
The CBO are Accountants!
Report Post »TangLaoYa
Posted on May 23, 2012 at 8:22pmWere you responding to me? Sorry, but I don’t know what your comment means. American colloquialisms confuse me. Can you explain?
Report Post »TangLaoYa
Posted on May 23, 2012 at 7:41pmThe most dangerous man in America is Ben Bernanke. He assured the election of Obama by engineering the timing of the housing bust just before the election. Now watch while he uses a burst of monetary manipulation to enable a sudden upswing just before the next. The Fed can do nothing but damage in the long run but it can do amazing things short term (I just read Paul Krugman’s book. He should know.)
Report Post »Mit said he will get rid of Ben, so our economic dictator-for-life is fighting for –well– his life.
soybomb315
Posted on May 23, 2012 at 9:29pmThats interesting. Initially in the campaign, Romney said Bernake has done an OK job and would keep him. More recently, he said he would replace Bernake (can you say flip-flop?).
Looks like Romney has a banker friend who would love to become the next bernake. What kind of person do you think Romney would put in charge of the FED??? Same old garbage – afterall, Romney said the bank bailouts were good and were the correct thing to do. Give me a break willard
Report Post »ALL4FREEDOM
Posted on May 23, 2012 at 7:33pmI’d like to punt Congress into an alternate universe.
Report Post »Leadthemtothelight
Posted on May 24, 2012 at 2:46pmSweety they are already there!
Report Post »AmazingGrace8
Posted on May 23, 2012 at 7:26pmLooks like a “dart-board-circle” hanging on the wall. Have to refer to the movie “Young Frankenstein” and the dart board scene. Democrates did the “all-the-darts-bulls-eye-with-one-sneaky-manuver”, when our backs were turned. We innocent taxpayers are being distracted by the Democrates & neighborhood cats down by one and we can’t drive our cars anywhere because we have 4 (yrs) flat-tires! LOL
Report Post »ThePostman
Posted on May 23, 2012 at 6:42pm3T$ divided by 300M Americans is 10K for every man woman and child, or about 40K per family. If the government gave everyone this figure, the economic turmoil would be over for good. But they refuse. instead, they give it to Solyndra, the Bankers, Wall Street, GM, and every other corporation holding it’s hat out.
There’s a reason for that. It is the fleecing of America. This is how they steal from you.
Report Post »subic
Posted on May 23, 2012 at 7:29pmAmen POST!
Report Post »wianno94
Posted on May 23, 2012 at 6:42pmJrook says:”. Instead, letting tax cuts for the rich expire would have a negligible impact on growth.”
JRook: Do you have the cajones to call for expiration of the Bush tax cuts? ALL OF THEM?
Report Post »oohisis
Posted on May 23, 2012 at 6:23pmraising taxes + drastic spending cuts = austerity. which is failing miserably in Europe. Need to have tax cuts with spending cuts…why is that such a freakin’ hard concept to grasp. Gov‘t lets the people keep their money and let them live off it and not the gov’t..let them spend it and stimulate the economy or save it for when the s**t really hits the fan. I so hope those of conservative and limited gov’t ideals unite and take over the senate and keep the house…Romney can win this if he goes on offense. Can’t stand Reed..creepy.
Report Post »dmerwin
Posted on May 23, 2012 at 8:07pmTotal tax reform to include giving the 47% who do not pay income tax the “opportunity” to participate and take away the loopholes and deductions that benefit a small portion of the population who happen to usually be in the congressional class (Reed, Obama and Kerry come to mind). I would like the Fair Tax or perhaps a 3 tier flat tax, 10, 20 and 25 percent with NO deductions or loopholes. Then tailor government to fit the revenue. As the economy grows you could have more one time capital spending or a weapons procurement surge. Right now TELL THE COUNTRY that entitlements must change and give people the opportunity to opt out of SS and let pensioners stay on their previous policies rather than force them into medicare. By the time entitlements run out most of the population would be off of entitlements. I’ll take my chances with my IRA over my government (with it’s revolving cast of characters) ANY day. The free market works. As you phase out SS you could convert coverage to those left on SS to funding from the general budget.
Report Post »Stoic one
Posted on May 23, 2012 at 9:18pmDMERWIN
Report Post »Just a flat tax, a standard deduction for the number of people claimed (and verified) and that is it.
3monkeysmomma
Posted on May 23, 2012 at 6:12pmBalanced budget amendment anyone?
Report Post »soybomb315
Posted on May 23, 2012 at 7:56pmyour premise is that the government will obey the constitution….
Report Post »dmerwin
Posted on May 23, 2012 at 8:13pmSoybomb is right again before we have another change to the constitution we MUST insist on penalties for gov’t officials who neglect their jobs, i.e. the Senate has not voted on a budget in over two years much less passed one in three. I would submit that the next amendment would be to recall the entire federal elected government including the Potus in any year a budget is not passed and force them to re-run for election.
Report Post »marcus_arealius
Posted on May 23, 2012 at 6:07pmCourage? What the hell is Bonejob talking about? Ovomit is incapable of any positive human emotion or thought process. ‘Serious Action’ is to get rid of the little dickless commie bastard.
Report Post »Leadthemtothelight
Posted on May 24, 2012 at 2:48pmRofl ….seriously…… tears…..you are hilarious!
Report Post »justangry
Posted on May 23, 2012 at 5:59pmThis is getting old watching these clowns try and shore up a sinking ship with chewing gum every couple of months. STOP spending money you don’t have, you idiots!
Report Post »Snowleopard {gallery of cat folks}
Posted on May 23, 2012 at 6:08pmAll too true; and just as I said a few weeks ago, the closer the elections come, so will the debt ceiling battle and the fiasco and farce tactics of the leftists. If the CBO is saying 1.3% shrinkage, we can figure on probably twice that much as Obama never gives them good figures to work with.
Report Post »Anonymous T. Irrelevant
Posted on May 23, 2012 at 5:56pm“‘FISCAL CLIFF’: CBO PREDICTS RECESSION IN 2013 UNLESS SERIOUS ACTION TAKEN”
Report Post »—————————————————————————–
You mean like getting rid of the current Bozo-in-chief?
GUNNSUP
Posted on May 23, 2012 at 7:27pmYES! We are definately not better off than we were nearly 4 yrs ago, it gets worse everyday with this clown
Report Post »progressiveslayer
Posted on May 23, 2012 at 5:55pmOur one party system has put us in this position,that and voter apathy are the two main reasons why we’ll have a depression.This generation will not respond the same way they did in the 30‘s because today’s generation is entitled to so called ‘free’ money health care a house and a job.
Report Post »soybomb315
Posted on May 23, 2012 at 7:53pmamen brother. This generation is not prepared but I say leaders are MADE, not born
Report Post »MCDAVE
Posted on May 24, 2012 at 12:29amA total government failure is the only way to fix it….its going to get ugly…
Report Post »doomytram
Posted on May 23, 2012 at 5:48pmIf by, serious action, they mean a) double up on the class warfare b) spend a trillion and a half more than we take in c) not pass a budget or cut spending and d) pass Obamunist Care.
Report Post »thekuligs
Posted on May 23, 2012 at 5:40pmThey aren’t very bright–or they cling to the idea that something MAGICAL is going to happen and change the course we have been on for years (and years). Our economy, like many others in the world, is currently being propped up with bad math and fairy dust.
Report Post »doomytram
Posted on May 23, 2012 at 5:36pmThe Tea Party wants Lower Taxes, Lower Spending, decrease the size of government, and sane representation. The Most Ridiculous Leftist Wasteful, most inept and pathetic bag’s of monkey turds are Harry Reid, Nancy Pelosi, and Hussein Oblamer et al caused this…
Schumer! Democrats! Oblamer! YOU SUCK! Keep calling the Tea Party Terrorist‘s the shrinking base of Leftist’s won’t even vote for this ridiculous leftist in November.
Report Post »AvengerK
Posted on May 23, 2012 at 5:31pmThe CBO just priced Obamacare at $1.76 trillion…and the treats haven’t even kicked in yet. Repealing Obamacare would be a credible step in stopping us from going over this “fiscal cliff”.
Report Post »This wasn’t unexpected..well at least not unexpected to anyone outside the enemedia, the academic left and “progressives” who swooned over Obama. Obama and his Keystone Kops administration have been playing games for nearly 4 years.
Mutiny
Posted on May 23, 2012 at 5:28pmBy serious action do they mean Obama spending more and more or do they mean Romney not cutting anything from Obama budget and basically endorsing Obama’s spending?
Report Post »3monkeysmomma
Posted on May 23, 2012 at 6:07pmSHHHHHH…..we’re not supposed to know that part! Just show up and blindly vote for the white guy with nice hair!
Report Post »soybomb315
Posted on May 23, 2012 at 8:07pmbut hey, at least Romney is not socialist…..right?
Report Post »JRook
Posted on May 23, 2012 at 5:26pm“And while the GOP has argued that tax cuts for the rich will boost economic growth, the CBO report (and a decade of evidence) found the opposite. Instead, letting tax cuts for the rich expire would have a negligible impact on growth. President Obama’s budget allows the Bush tax cuts for the wealthy to expire, and yet the CBO found that short-term growth under that plan would exceed short-term growth under the current scenario.” As GB would say do your own research and take note that the CBO clearly said that spending cuts, as they have done in Europe, will hurt the economy significantly more than tax increases on the wealthy would.
Report Post »theamericanvision
Posted on May 23, 2012 at 5:45pmThey haven’t cut any spending in Europe.
Report Post »AvengerK
Posted on May 23, 2012 at 5:47pmYou‘re being a lying little lefty again aren’t you JROOK? The GOP is saying exactly what the CBO is saying..that raising taxes on ANYONE right now would be a disaster.
Report Post »Thanks for playing idiot.
AvengerK
Posted on May 23, 2012 at 5:53pmBut I’ll bite JROOK…the individual mandate in Obamacare..is it a tax?
Report Post »Oh and raising cap gains taxes is that good? You know Barry wants to raise them right?
Let me educate you sport…Bush lowered cap gains taxes and government revenue from them went up over 100%. “Why?” asks the befuddled JROOk. “Surely that’s a lie!” the lefty idiot exclaims. “That just doesnt’ make sense..my liberal professors didnt’ tell me that” bleats JROOK.
Because you stupid lefty git…the lower rate promotes more activity. Higher cap gains rates choke off investment activity. The higher activity creates more revenue for the government. Yeah I know JROOK..your brains hurting right now.
Guess what your beloved Obama wants to do JROOK? He wants to raise cap gains taxes (well of course that’s the “rich guy’s tax” right?)…and just like the CBO said…it would hurt us.
You idiot.
AvengerK
Posted on May 23, 2012 at 5:56pmSeriously JROOK….you’re using Europe as a model for the U.S.? We‘re watching Europe implode in real time and you’re actually hoisting up Europe as a model for the U.S. to follow? Are you sane?
Report Post »progressiveslayer
Posted on May 23, 2012 at 6:00pmThe idiots in D.C could tax everyone in the world at 100% and we still aren’t getting out of this hole,144 trillion reasons proves me right.They haven’t cut spending in Europe,I don‘t know what you’re smoking but it’s good stuff.We have a spending problem not a revenue problem,give the government more money and they’ll waste it on BS unconstitutional programs.
Report Post »FromSeaToSea
Posted on May 23, 2012 at 5:25pmPREPARE…………
http://www.youtube.com/watch?v=Zf2K4-BQYAI&feature=player_embedded#!
Report Post »budzy1911
Posted on May 23, 2012 at 5:22pmI’m prepared – are you?
Report Post »FEWL
Posted on May 23, 2012 at 5:20pmCut spending, lower taxes, seriously reduce the actual size of government, eliminate regulation, eliminate regulation, eliminate regulation that impedes job creation and new investment. CBO is usually pretty good but it is often blinded by what it has in front of it and not what is actually hapenning in the whole economy.
Report Post »hatchetjob
Posted on May 23, 2012 at 5:14pmI thought we were already in either a recession or a depression. Snore…..
Report Post »CatB
Posted on May 23, 2012 at 5:25pmMy first thought also .. okay so it is going to get worse .. a recession is when your neighbor loses his job .. a depression is when you lose yours … we are in DEEP SH *T .. Obama is telling the world to double down on stimulus .. pray they don’t listen to the FOOL!
OMG 2012 LIBERTY
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