Skip to comments.CBO says US likely to fall off 'fiscal cliff' if Bush-era tax cuts allowed to expire
Posted on 05/22/2012 4:41:05 PM PDT by tobyhill
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.
There's common agreement that lawmakers will act either late this year or early next year to head off the dramatic shift in the government's financial situation. But if they were left in place, CBO says it would wring hundreds of billions of dollars from the budget deficit that would "represent an additional drag on the weak economic expansion."
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.
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That’s just the news Obama was waiting for. Now his Cloward-Piven strategy is finally going to work.
"Stimulus" only occurs when you take money away from the people who earned it and give it to people who didn't.
Lose the tax increases, keep the spending cuts.
How likely is it that a defeated Democrat majority Senate will approve that action?
And, if they do, will a defeated Democrat President sign it?
The nation's economy is thus left to the tender mercies of a bunch of defeated Democrats. What are the odds that they will do the right thing?
“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.
“Such a contraction in output in the first half of 2013 would probably be judged to be a recession,” CBO said.”
Then NBER, which actually announces recessions, says it is not bound by that definition. The last time it declared that a recession had begun in Dec. 2007, but we had 3.5% growth between Dec. and August, 2008. Of course, that is when a Republican was President. I’m sure they would not do that if a Dem were in the White House. So whether they declare this to be a recession will probably depend on whether there is a Democrat or a Republican in the White House.
The NBER tries to call the inflection point on a graph of GDP. So it is entirely possible that in the quarter where the GDP graph flattens and then turns negative, that you’d still have non-negative GDP.
“The nation’s economy is thus left to the tender mercies of a bunch of defeated Democrats. What are the odds that they will do the right thing? “
They will be too busy with the shredding parties and pardons that will be handed out.
They had negative GDP in Dec. 2007, but every month thereafter until August, 2008, it was positive, and at much of the time, it averaged 3.5%.
Their explanation is that they look at more than just the growth rate. Apparently they only do that if the White House is in the control of a Republican, though.
They do indeed look at more than just GDP, since GDP can be goosed with government spending to obfuscate underlying private sector deterioration.
The problem underlying all of this is that economic stats for the US have become increasingly suspect as our economy is hollowed out and replaced with a shell game of “pass the parcel” (ask a Scot if you don’t know what this game is) with packets of financial paperwork. The NBER was correct in calling the turning point in Dec 2007, IMO, because the financial sector rot had set in, become quite evident and it was only a matter of time before the economy imploded from the debt deflation.
The coincidence with GOP presidential terms is in part due to the feckless ignorance with which both Bushes operated WRT Wall Street. Lots of people could see the implosion coming from as far back as 2005, and in Bush Sr’s term, we could see the problems coming in late 1989. Yet both of these guys thought it best to allow the banking sector to run riot through the US economy.... quite stupidly as history now tells us.
The lame duck dims will be conducting a scorched earth program.
When we were in transition from clinton to Bush, the dims trashed the White House and the clintons stole a bunch of furniture. Bush, being a too nice gentleman, decided not to prosecute any of them. Big Mistake.
The clinton team was a bunch of mental midgets who played high school pranks.
The obama gang is made up of hard core marxists.