CBO: Taxmageddon would throw US back into recession
Wednesday, May 23, 2012
CBO: Taxmageddon would throw US back into
recession
By: Lori Montgomery, Washington Post
Tax hikes and spending cuts set to take effect in January would
suck $607 billion out of the economy next year, plunging the nation
at least briefly back into recession, the nonpartisan Congressional
Budget Office said Tuesday.
Unless lawmakers act, the economy is likely to contract in the
first half of 2013 at an annualized rate of 1.3 percent, the CBO
said, before returning to 2.3 percent growth later in the year.
Canceling those tax and spending policies would protect the
recovery in the short run and encourage more vibrant growth, around
4.4 percent, in 2013, the CBO said. However, unless lawmakers adopt
policies that would reduce budget deficits by a comparable amount
down the road, the CBO said, the national debt would continue to
climb, imperiling future economic growth.
The report, "Economic Effects of Reducing the Fiscal Restraint
That Is Scheduled to Occur in 2013," comes as policymakers are
bracing for the most consequential battle over government tax and
spending policies in years. The George W. Bush-era tax cuts are set
to expire on Dec. 31, along with a payroll tax cut proposed by
President Obama. Meanwhile, sharp cuts are scheduled to hit the
Pentagon and other federal agencies to meet a deal cut during last
summer's showdown over the nation's debt limit.
Anxiety is growing over how the impact of those tax and spending
cuts would affect the nation's economic recovery come January, when
what's been nicknamed "taxmageddon" hits. After the November
election, a lame-duck Congress will have barely two months
to resolve a grinding standoff over taxes and spending - a
battle that brought the United States to the
brink of default last summer.
Republicans want to extend the Bush tax cuts and reconfigure the
spending cuts to protect the Pentagon. But Obama has threatened to
veto any effort to amend current policies unless Republicans agree
to let the Bush tax cuts expire for households earning over
$250,000 a year.
For additional information about Taxmageddon from Jennifer Rubin
of the Washington Post, click
here.