The Congressional Budget Office came out with a new report today saying the “fiscal cliff” that Congress has put into law … if enacted … would put our country back into another recession.
Now – conservatives are going to latch on to this report and say something like “If Obama is President – we’re going to go into another recession” or they’ll just think the economy is going to go into another recession because of the President. This isn’t true at all. There is no reason to see us go into another recession – the country is growing at a “modest pace” and expected to do better in the 2nd half of the year than we had in the first half; the economy is picking up steam. All Congress has to do is enact legislation to prevent the tax cuts for the middle class from expiring and the huge cuts to government spending from occurring … this is entirely avoidable.
If you haven’t heard of the “fiscal cliff” or “sequestration” – you can read more about that HERE. Last year when the Republicans were threatening not to increase the debt ceiling which would have made the government default on its debt or stop paying checks to troops, seniors and paying for Medicare … in the 11th hour – President Obama negotiated a deal with John Boehner to put in place a set of forced spending cuts if Congress failed to act to reduce the deficit by $1.2 trillion. But now if Congress fails to take action … the following things will automatically occur:
All of this is entirely avoidable. If Congress can agree to reduce the deficit via some mixture of reducing taxes and cutting spending … they will be able to achieve this $1.2 trillion mark and avoid sequestration. The Bush tax cuts for the rich are worth $800 billion on their own. So – if Congress can find $40 billion a year in cuts to government spending (like pulling out of Afghanistan or saving the money from pulling out of Iraq) … we can hit this $1.2 trillion in savings with relative ease.
If Congress can come to some agreement on $1.2 trillion in savings – the economy will continue to grow at a “modest pace” and significantly better than Europe. But Republicans have to be willing to raise taxes on the wealthy.
The CBO says the economic recovery is moving along but slowly:
CBO expects the economic recovery to continue at a modest pace for the remainder of calendar year 2012, with real (inflation-adjusted) GDP growing at an annual rate of about 2¼ percent in the second half of the year, compared with a rate of about 1¾ percent in the first half. The unemployment rate will stay above 8 percent for the rest of the year, CBO estimates, and the rate of inflation in consumer prices will remain low.
You can read the report HERE. The CBO is a nonpartisan agency that just gives the facts … they’re the scorekeeper, the referee. They work very hard not to allow politics to be injected into its findings. Just the facts ma’am.
On the positive side – even though we would be plunged into another recession … doing nothing would reduce the deficit. As we’ve written HERE:
To sum it up – to fix the deficit – all Congress has to do is DO NOTHING. The tax cuts will expire and spending cuts will take affect. This would be like a fiscal cliff as it has often been called…and would throw the country into recession immediately; however – for people concerned about the deficit…these are two real alternatives.
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