For John, BLUF: There is a Fiscal Cliff coming up in January 2013 (two months away). We are counting on Congress to fix it. Nothing to see here; just move along.
The non-partisan Congressional Budget Office has issued a report, "Economic Effects of Policies Contributing to Fiscal Tightening in 2013". This is otherwise known as the "Fiscal Cliff".♠ Here is a Summary of the report. Key finding is a GDP drop of 0.5 percent and an unemployment rate of 9.1%.
Substantial changes to tax and spending policies are scheduled to take effect in January 2013, significantly reducing the federal budget deficit. According to CBO’s projections, if all of that fiscal tightening occurs, real (inflation-adjusted) gross domestic product (GDP) will drop by 0.5 percent in 2013 (as measured by the change from the fourth quarter of 2012 to the fourth quarter of 2013)—reflecting a decline in the first half of the year and renewed growth at a modest pace later in the year. That contraction of the economy will cause employment to decline and the unemployment rate to rise to 9.1 percent in the fourth quarter of 2013. After next year, by the agency’s estimates, economic growth will pick up, and the labor market will strengthen, returning output to its potential level (reflecting a high rate of use of labor and capital) and shrinking the unemployment rate to 5.5 percent by 2018.Here is the full document, in PDF format. The Wall Street Journal scores it at $136 billion in spending cuts and $532 in tax increases.
- That would be $87 billion in discretionary defense and domestic spending.
- 435 billion expiration of extended unemployment benefits.
- $15 billion in reduced Medicare Doctor rates.
- $24 billion in new taxes from the PP/ACA (so called "Obama Care").
- $127 in the ending of the Payroll Tax Holiday.
- $295 from ending the "Bush" tax cuts.
- $87 billion from other tax provisions.
♠ No, it is no relation to me.