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CBO Warns Of ‘Fiscal Cliff’ If Tax Cuts Expire

From the Associated Press:

CBO says US likely to fall off ‘fiscal cliff’ if Bush-era tax cuts allowed to expire

May 22, 2012

WASHINGTON – A new government study released Tuesday says that allowing Bush-era tax cuts to expire and a scheduled round of automatic spending cuts to take effect would probably throw the economy into a recession.

The Congressional Budget Office report says that the economy would shrink by 1.3 percent in the first half of next year if the government is allowed to fall off this so-called "fiscal cliff" on Jan. 1 — and that the higher tax rates and more than $100 billion in automatic cuts to the Pentagon and domestic agencies are kept in place

CBO projected that the economy would contract by 1.3 percent in the first half of 2013, which would meet the traditional definition of a recession, which is when the economy shrinks for two consecutive quarters

Unless there is a Republican in the White House, and then it only takes on quarter of negative growth. (Cf. George Bush and 2007.)

At issue is the full expiration of two rounds of major tax cuts enacted during the Bush administration and automatic spending cuts on the Pentagon and domestic programs that are scheduled to take effect as punishment for the failure of last year’s deficit "supercommittee" to produce a deficit-cutting agreement last year.

Last summer’s debt and budget agreement imposed almost $1 trillion in cuts to agency budgets over the coming decade and required automatic cuts — dubbed a sequester in Washington-speak — of another $1 trillion or so over the coming decade.

The "cuts" to "domestic programs" are really the only thing that the CBO and the AP are concerned about. Even though they are only cuts to the baseline projected growth, and are thereby only minuscule in reality. And even though the only real cuts come in Defense.

But what the CBO and AP are really trying to to do here is warn Republicans that they can’t even think of cutting any more spending in the upcoming ‘debt ceiling’ negotiations. And, as we have noted before, when there is no Congressional budget, these ‘debt limit’ negotiations are the only way the Republicans can even try to cut spending.

But now the Democrats and the CBO and the media want to take even that minor tool away from them.

The CBO study came as Capitol Hill is hopelessly gridlocked over spending and taxes in advance of the fall elections. The White House and top Democrats like Senate Majority Leader Harry Reid of Nevada say they will refuse to act on the expiring tax cuts and automatic spending cuts unless Republicans show greater flexibility on raising taxes…

Republicans are pressing to deal with the problem now. But they’re not showing any more flexibility on tax increases

"CBO observes that simply extending all of our current tax and spending policies will produce unsustainable deficits and debt, which will also send the economy into decline," said Rep. Chris Van Hollen, D-Md., the top Democrat on the Budget Committee. "We need to act and we must do so in a balanced way."

CBO is the respected nonpartisan agency of Congress that produces economic analysis and estimates of the cost of legislation.

In truth, the CBO is neither "respected" nor "nonpartisan." They are just another organ of the Democrat Party.

This article was posted by Steve on Wednesday, May 23rd, 2012. Comments are currently closed.

One Response to “CBO Warns Of ‘Fiscal Cliff’ If Tax Cuts Expire”

  1. GetBackJack says:

    Oh Noes!!!

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