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.
So is this prediction one that Republican leadership has approved or should I wait for it to be rescinded?
ReplyDeleteSo double dip recession or will we really not pull out and end up in a death spiral a la Greece? Maybe the Republicans did shape this so their gridlock approach will look acceptable in the short term.
I am confused. When did the CBO become part of the Republican Party. They claim to be non-partisan. You don't see it that way?
ReplyDeleteYes, a double dip recession or like one of the European PIIGS.
I guess I am confused also regarding the evil in the Republicans wanting to get the deficit and debt under control. The Republicans want to preserve Social Security and believe the Democrats are just prepared to ride that horse until it drops. Am I wrong about that?
Regards — Cliff
I am referring to the CBO kow towing to Republican leadership and withdrawing reports after discussions with the leadership (or was it Congressional Research Service?). The one that showed there was no correlation between tax cuts and improved economic growth.
ReplyDeleteI am not sure what entitlement reform is since the Republicans don't actually offer a plan for long enough to understand it. With Romney moving out of the picture maybe things will slow down. If the campaign had gone on another 4 weeks Mitt had a good chance of overshooting his rebound from the primaries and ending up Left of Center.