CBO Says U.S. Economy Will Fall Off A Cliff If Bush Tax Cuts Not Extended

A new study was released today by the Congressional Budget Office.  It contained recommendations for safeguarding the US economy and said specifically that if the Bush tax cuts are allowed to expire or automatic spending cuts are triggered next year the U.S. economy will likely plunge into recession.

The Congressional Budget Office report also says the US economy will shrink by 1.3% and the U.S. economy will fall of a fiscal cliff.

CBO said,

“Such a contraction in output in the first half of 2013 would probably be judged to be a recession,”

The only bright side is that the CBO says that in the second half of 2013 the economy would expand by 2.3%

Democratic Senate Majority Leader, Harry Reid, is already trying to make the Republican Party shoulder most of the blame for the gridlock about to grip Washington. Republicans insist that debt be matched by spending cuts while Democrats want to raise taxes on the rich.

Reid said in a statement,

“If Republicans want to walk away from the bipartisan spending cuts agreed to last August, they will have to work with Democrats to replace them with a balanced deficit reduction package that asks millionaires to pay their fair share,”

Republicans want to attack the problem now but are not going to budge on taxes.  Senator Orrin Hatch said,

“You can call this a fiscal cliff. You can call it Taxmageddon as others have done. Whatever you call it, it will be a disaster for the middle class. And it will be a disaster for the small businesses that will be the engine of our economic recovery.”