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Fiscal Cliff Will Cause Recession, CBO Warns

CNBC - Aug 22, 2012

Massive spending cuts and tax hikes due next year will cause even worse economic damage than previously thought if Washington fails to come up with a solution, Congress' budget referee warned on Wednesday.

The Congressional Budget Office said failure to avoid the so-called "fiscal cliff" of expiring tax cuts and automatic spending reductions would cause the gross domestic product to shrink 0.5 percent in 2013. Previously, the nonpartisan CBO forecast full-year GDP growth of 0.5 percent.

The first half of 2013 will be particularly difficult, the CBO said in its mid-year forecast update. Tax hikes and spending cuts will cause GDP to shrink 2.9 percent in the first half, compared with a prediction in May for a 1.9 percent contraction.

There will still be a slight bounceback in the second half of 2013, but it will be weaker, with growth of only 1.9 percent, compared with a previous forecast of 2.3 percent growth.

Read Full Article from CNBC

- Posted: 2012-08-22 16:51:18


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