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  • CBO Warns: President Obama and Congress Risk Triggering Another Recession

    About 1.6 million American jobs hang in the balance. That is the clear implication of analysis contained in the annual budget update by the Congressional Budget Office (CBO).

    Along with all manner of dire and dreary budget data reflecting President Obama’s budget and economic policies to date, CBO provides its assessment of what would happen if the President and Congress sit on their respective hands and fail to defuse the threats of Taxmageddon and the fiscal cliff. The answer is fairly simple: recession.

    As CBO so diplomatically put it, “such fiscal tightening will lead to economic conditions in 2013 that will probably be considered a recession.”

    Taxmageddon is the $500 billion tax hike slated to take effect on January 1, while the fiscal cliff consists of Taxmageddon plus various spending reductions—among them the sequestration left over from the disastrous negotiations that led to the Budget Control Act in 2011.

    According to CBO’s analysis, if Congress defuses Taxmageddon and the fiscal cliff, then the economy will grow at a tepid 1.7 percent in 2013 and the unemployment rate will remain stuck around 8 percent. But if President Obama and Congress play chicken with Taxmageddon and fail to act, then the economy will contract by about 0.5 percent and the unemployment rate will shoot up to 9.1 percent, about halfway back to the peak from the past recession.

    Forget percentages—what does this mean in actual jobs lost if President Obama and Congress fail to act? It means roughly 1.6 million more Americans will be out of work—on top of the 12.8 million who already want to work but can’t find jobs.

    Just about every relevant school of economics, from the President’s pure Keynesianism to supply-side and neoclassical persuasions, tells much the same tale on net: Raising tax rates on a weak economy produces a weaker economy. It’s not terribly complicated.

    The good news is that the House of Representatives has passed a bill preventing a big part of Taxmageddon. The Senate has passed a much less adequate bill. These form the basis of a good final product.

    The other good news is that Congress will have time after the August recess to avoid the economic peril that CBO projects. Talk of 2013 and tax reform is dangerous, and waiting on a post-election lame-duck session even more so, as the policy outcome would likely be worse. Both likely assure a recession, for which this Congress and this President will unequivocally be at fault.

    President Obama and Congress failed at their summer job of preventing Taxmageddon, but there is still time—just not much.

    Posted in Economics [slideshow_deploy]

    6 Responses to CBO Warns: President Obama and Congress Risk Triggering Another Recession

    1. Dau Tieng 59 says:

      You mean the first one is over. Who knew?

    2. Becky Bixler says:

      Americans! Wake Up!

    3. Bobbie says:

      First of all the president has no priorities. He'll talk as if to gain the trust an untrustworthy man doesn't get. What changes if the tax cuts are permanent? Nothing and he's telling his people that because of the tax cuts he can't restrain his activities within, teachers and police and firefighters won't get paid. So he singles out and targets the rich as his refuge! May I remind everyone his target specified the "white" rich. He uses the teachers to threaten their pay just to guilt everyone else. He's got all kinds of money for his social communism but not enough in the areas he vowed to protect where the country benefits as a whole. Obama has done nothing without wanting more money and sacrifice put on America's innocent. When are we going to walk on our own again? Don't let this man lead us down his road!!!

      He said he wasn't going to haul Americans from their homes in the dark of night and that's exactly what the thin skinned, intolerant, abusers of America are doing. He's circumventing the Patriot Act along with all laws that protect AMERICA! I've written it before, we don't want civil unrest. This man and his many need discipline and removal from America! America doesn't look to his direction to raise arms against he.r Obama has a force of his own.

    4. Read this to see how your taxes will be changed if Obama stays in office and congress does not act.

    5. basavaraj says:

      Q: You say you are reducing debt, and increase defense spending and giving tax breaks to every one most ecomonist say it does not compute.
      A: If we grow the economy to 4 percent growth, the revenue to the fed government will add another trillion dollars. Making the tax rates fairer and simpler, will increase the revenue by another 500 billion dollars. If the economist’s takes these into their calculations, they will agree with my policy. Let me tell you, if you are an unemployed, if a company like apple can hire you, and your income improves, you will be better off. If Mr O’bama taxes the so called millionaire employer, that money is not coming to you. It will go to more waste and abuse. Any government program only 25 cents on a dollar reaches the ultimate beneficiary.

    6. basavaraj says:

      Q: You claim you can create 12 M jobs. What is your plan?
      A” As an Example” you all know APPLE is an American company, but you all also know their manufacturing is in China/ Taivan. They also have $47 Billion Cash. As soon as I become a president, I will sit with the CEO and my policy will be what we can go do to help them to invest in research , development and manufacture in US. By not taxing that 47 billion ( currently not taxed in US) one company may be able to create 5000 jobs. With the multiplier effect ( supply chain, distribution chain and service sector jobs) the effect is 35,000 jobs. With the low risk of low interest rates, many companies will take more risk in research and development.

      Like wise there are more than 500 companies sitting on 2 trillion or 2000 billion or 2million of millions dollars sitting which can come back to US and create investment and jobs, essentially creating ore than 14 million jobs. This is not Rocket science, we just have to understand the business and without spending a dime of government money US companies can grow the economy to 4 or above GDP.

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