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

[Jackpine Radical]

This was sent to me citing a Fox source (I will be doing penance later today for even clicking on Fux), but it was also an AP story & quotes a CBO report.

The whole thing seems counterintuitive.

Gimme a hand, folks--what's this all about?

Associated Press
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.


Read more: http://www.foxnews.com/politics/2012/05/22/cbo-says-us-likely-to-fall-fiscal-cliff-if-bush-era-tax-cuts-allowed-to-expire/#ixzz1vho4kAxX

[lumberjack_jeff]

1. $100 billion in spending cuts will harm the economy.

Expiration of the tax cuts is only relevant because they'd happen at the same time.

[PoliticAverse]

2. You can read the analysis on the CBO's website...

here:
http://www.cbo.gov/publication/43264
http://www.cbo.gov/publication/43262


"CBO expects—with the economy projected to contract at an annual rate of 1.3 percent in the first half of the year and expand at an annual rate of 2.3 percent in the second half."

[Enrique]

3. it means austerity is bad for the economy

I notice that your Fox headline puts the tax cuts in the headline, but in the article it is secondary. All the stories I can find has the two lumped together, but I wonder if the CBO broke it down. Everything I have heard says that the Bush tax cuts only negligibly add to growth, their main impact is on the deficit and the bank accounts of rich people.

[kentuck]

4. I don't think it necessarily means austerity...

Since businesses are sitting on $2 trillion dollars in cash at the moment. I don't see the dire consequences they predict but I can understand why they would say it. Furthermore, I am not an expert but I do see that this story was from FOX News...

[subterranean]

5. The headline is misleading.

That's probably intentional considering the source.
The CBO said that allowing all the Bush-era tax cuts to expire AND keeping the automatic spending cuts in place would probably send the economy into recession. It did not say that expiration of the tax cuts alone would cause a recession.

[Jackpine Radical]

6. Thanks to everyone who provided the quick & useful analysis.

I've used your insights to respond to the person who sent me the article.