CBO: US likely to fall off 'fiscal cliff' if Bush-era tax cuts allowed to expire

YankeeFan · May 23, 2012

So, do we let 'em expire, or extend them?

I can't see the Republicans compromising, so I'd guess it will be one or the other.

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.

The Congressional Budget Office report says that the economy would 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.

"Such a contraction in output in the first half of 2013 would probably be judged to be a recession," CBO said.

...

"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."

Read more: http://www.foxnews.com/politics/2012/05/22/cbo-says-us-likely-to-fall-fiscal-cliff-if-bush-era-tax-cuts-allowed-to-expire/#ixzz1vjVvA2pb
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bigpern23 · May 23, 2012

Seems like this is stating the obvious, no? Isn't that specifically why those conditions were put into the agreement, basically to force Democrats and Republicans to compromise, come to an agreement and avoid triggering the automatic cuts (which affect both social programs and defense spending, each party's "baby," so to speak)?

LongTimeListener · May 23, 2012

Shocking that your headline would focus only on the tax cuts that expire and not mention the automatic spending cuts that would also kick in.

Stitch · May 23, 2012

Let's roll!

Azrael · May 23, 2012

Crazy like a Fox!

Uncle.Ruckus · May 23, 2012

bigpern23 said:

Seems like this is stating the obvious, no? Isn't that specifically why those conditions were put into the agreement, basically to force Democrats and Republicans to compromise, come to an agreement and avoid triggering the automatic cuts (which affect both social programs and defense spending, each party's "baby," so to speak)?
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Correct. Except the Kochsucker Republicans in Congress have sworn an oath of fealty to Grover Norquist and have reneged on the deal they made last year. They want all the cuts to come from the Dems and none from their side.

I'm guessing none of the righty posters here will admit Congressional Republicans are a bunch of Goddamned liars, though.

Starman · Dec 15, 2014

YankeeFan · May 23, 2012

LongTimeListener said:

Shocking that your headline would focus only on the tax cuts that expire and not mention the automatic spending cuts that would also kick in.
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Well, to be fair to me, it was FoxNews' headline.

It was also their top story on "Special Report" at 5:00 CDT, which apears to be the only place it's getting big play.

doctorquant · May 23, 2012

Uncle.Ruckus said:

bigpern23 said:

Seems like this is stating the obvious, no? Isn't that specifically why those conditions were put into the agreement, basically to force Democrats and Republicans to compromise, come to an agreement and avoid triggering the automatic cuts (which affect both social programs and defense spending, each party's "baby," so to speak)?
Click to expand...

Correct. Except the Kochsucker Republicans in Congress have sworn an oath of fealty to Grover Norquist and have reneged on the deal they made last year. They want all the cuts to come from the Dems and none from their side.

I'm guessing none of the righty posters here will admit Congressional Republicans are a bunch of Goddamned liars, though.
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What part of what deal did they renege on?

DanOregon · May 23, 2012

An interesting read and not too much gobbledygook.
http://www.cbo.gov/publication/43262

So it seems we can "solve" the immediate problem by causing headaches down the road or suck it up for six months.

So do we want to address the debt or face immediate economic hardship?

The Big Ragu · May 23, 2012

Responsible fiscal policy won't be responsible for throwing the U.S. economy off a cliff.

It's the irresponsible fiscal policy for the last 15 years that has led us to where we are that makes serious consequences inevitable.

We can continue to avoid dealing with the mess we created -- and make that mess worse by running budget deficits of more than $1 trillion a year. Or we can deal with the consequences today rather than worse consequences down the line.

Those deficits (and our accumulated debt of $15.5 trillion) are the result of an account imbalance -- that includes spending AND revenues. If we want to spend $3.5 trillion to $4 trillion a year, we have to raise our tax rates. And that is well beyond what people are talking about with regard to pre-Bush rates. Consequently, if we don't want to broaden our tax base and raise way more revenue, we have to cut spending dramatically, which means first and foremost slashing our entitlement programs. Or we can do a combination of the two.

But we are already at the point where we can't just wish away consequences for the good times we have already gorged ourselves on. We are massively in debt and continue to add to that debt. We can get away with not dealing with it for a bit longer. Or we can face it.

Uncle.Ruckus · May 23, 2012

The Big Ragu said:

Responsible fiscal policy won't be responsible for throwing the U.S. economy off a cliff.
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http://www.esquire.com/blogs/politics/defense-spending-austerity-9091199

Everything "budget wonk" Paul Ryan knows is wrong....

"...we have an entirely predictable and preventable jobs crisis approaching in January, where because of the sequestration [automatic spending cuts], my state alone will lose 91,000 private sector jobs - and there are about a million private sector jobs at risk if the sequestration goes into effect on January 2."

Really? Well, buckaroo, maybe screwing around with the debt ceiling the last time wasn't such a good idea.

Conversely, if all of current policy — the Bush tax cuts, the payroll tax holiday, federal spending, etc — is extended, economic growth will boom next year. If Congress picks a middle ground approach — extending the Bush tax cuts but nixing the automatic spending cuts — CBO forecasts modest growth, but no major economic hit.
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