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  • Morning Bell: Another Recession Is Imminent

    Yesterday, the Congressional Budget Office (CBO) reported that without a doubt, America will have a fresh recession next year unless Congress and the President prevent it.

    We are facing the largest tax increase in history—Taxmageddon, scheduled to take effect January 1—and what experts are calling a “fiscal cliff” of sharp and unforgiving budget changes that will send the country spiraling downward. Congress and the President have the power to prevent this, and when the August congressional recess is over, that is exactly what they should do.

    In its new report, the CBO said that if Congress does not act, it’s not economic growth we should be worried about, because the economy will actually shrink next year. It will shrink by 0.5 percent, and the unemployment rate will spike to 9.1 percent. As Heritage’s J.D. Foster explains:

    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.

    Preventing Taxmageddon and the fiscal cliff are necessary just to keep the economy from taking a nosedive. The status quo isn’t attractive, but Congress certainly shouldn’t make things worse. If Congress moves to prevent the nosedive, the CBO projects that the economy will grow only slightly next year, at an anemic 1.7 percent, and the unemployment rate will remain stuck around 8 percent.

    Why? The CBO report makes it clear: Our spending problem continues, and it’s driven mainly by the three major entitlements: Medicare, Medicaid, and Social Security. Spending on these programs will outpace tax revenue over the next decade.

    Heritage’s Patrick Louis Knudsen points out several other sobering projections from the CBO report:

    • For the fourth year in a row, the federal government in 2012 will run a budget deficit exceeding $1 trillion.
    • The deficit is already $49 billion higher than CBO’s January estimate.
    • Debt held by the public this year will reach $11.3 trillion by October, roughly three-fourths of the entire economy.

    In the middle of this fiscal disaster, the government has no budget. That’s right—Congress has abdicated its responsibility for producing a budget for the country. The Senate failed to produce a budget for the third year in a row. Congressional leaders keep passing temporary stopgap bills to continue funding government operations, but this is unacceptable. They have to take this seriously. Perhaps the CBO’s dire warnings will give them the sense of urgency they are missing.

    Once Congress gets back to the business of budgeting, it must address the runaway entitlement spending that is driving the never-ending budget crisis.

    We often say “It is time for Congress to act.” In the case of Taxmageddon and the fiscal cliff, the CBO has added a red exclamation point. The consequences are clear: About 1.6 million American jobs hang in the balance. A recession is imminent. And if they allow it, it will be squarely on the shoulders of this Congress and this President.

    Quick Hits:

    • The U.N. Secretary-General will attend a summit in Iran, conveying a legitimacy to the meeting that American officials had warned against.
    • One of the Navy SEALs on the mission that killed Osama bin Laden has apparently written a book about it—and the Pentagon is caught off guard, reports Reuters.
    • Al-Qaeda’s affiliate in Iraq has claimed responsibility for 43 attacks over the summer.
    • President Obama still hasn’t decided whether he will issue cybersecurity regulations by executive order.
    • Ethanol is still a thing—and it’s a crucial thing when drought is already driving up corn prices.
    Posted in Economics [slideshow_deploy]

    44 Responses to Morning Bell: Another Recession Is Imminent

    1. glynnda says:

      Well, no surprise here…..I read an overview of Romney's energy policy this morning……it is certainly in sharp contrast to BO's policy of "let's just "shut er' down" and waste money on expensive and inefficient methods so I can put some money in the pockets of my big contributors".

      Heritage, it's time to take this message and begin putting it on national television…..an ad campaign based on this article alone could spark Americans into action where before they were still indecisive.

      • Ken says:

        The Heritage story needs to go a little further. What would the "compromise be? Middle-income people keep the tax break while the "one percent" lose it? What deal should the Congress be pushing for? Does it need to preserve ALL the Bush cuts. Can the economy afford to take away the tax breaks for the "rich." This will be the question and Heritage needs to answer this in more specific terms.

        Ken

    2. Don says:

      this is Obamas plan all along to punish America…to reward government reliance from every angle of our society…he is bent on reducing our ability to have a say in anything global…..and also reducing every possible freedom we have this man is extremely dangerous to our republic and must be voted out…this is serious….he is threatining every aspect of our nation from finance to education to military to our borders…he has no tolerance for Christianity any whaere or for Isra'el either…his actions speak much louder than his little words,,,pray for our nation and for peace of Isra;el–shalom

    3. Lloyd Scallan says:

      After the past three and a half years of this, how can anyone honestly doubt that this is not a deliberate attempt by Obama and the Dems to collapse our economy to force people to turn to a total government controlled system (socialism). Obama is not stupid nor incompetent. He sees what we all see. He knows exactly what he is doing. And what he is doing is not good for America or the American people.

    4. Not important senior says:

      Excuse me, but I get hot when S.S. and Medicare are called entitlements, I have paid into them all my life. Welfare, and most Medicaid ARE entitlements. That…. by the way I have paid for also. Why does everyone in DC want to call SS and Medicaid entitlements, and never hit where the problem is. People not working, getting paid, and getting health benefits, but. Gee don't touch their money.

      • Barbara Guest says:

        Exactly correct! And it is the Republicans who want to raid these funds to pay for the 2 unfunded wars thanks to GWB.

      • BlueShadowII says:

        You're absolutely right. Every time Medicare and Social Security are lumped in with Medicaid and other entitlements, you can be sure the speaker or author is a liberal at heart or has lazily accepted another liberal redefinition. Which is it, Heritage?

      • Bobbie says:

        They use entitlements to confuse but open for all those government "unlawfully" deems entitled whether contributed anything, nothing or all their lives. Government has no respect to where the money comes from, just favorites and they have to squeeze their favorites in somehow so rules of eligibility are changed to discriminate for government bias! New America. The government has no care who suffers the consequences! It just builds more government!

        America doesn't tolerate this indecent leadership. Hopefully America will have some honorable leadership soon with plans that doesn't expire in months time with a crisis waiting to happen…

    5. WaylanL says:

      I think if they would stop giving tons of money to overseas countries ,,we would be alot better off.!!!!

    6. Ben C. says:

      Brinksmanship – the game played by politicians. Survival – the resulting struggle faced by the rest of us. People are worried already. My business relies on discretionary income. Only the really wealthy or naive are spending money. The informed are circling their wagons. If business continues to decline I will be required to lay off at least one employee. Remember, employers are typically the last to be paid. I can only go so long without a paycheck. And remember, employers can't collect unemployment.

    7. Jim Few says:

      Decline is a choice!

    8. makesense says:

      We can't afford to have the president " act".

    9. Amazing how so many are ignoring how the economy has gotten worse over the last 3 1/2 years and is not projected to get better. Also not paying attention to how medicare has already been cut by 716 Billion dollars and beginning Jan 2013 a lot of seniors won't be able to afford their medicare advantage plans that helps them with medicine and doctors visits.

      • Barbara Guest says:

        Medicare has not been cut by 716 Billion $. That is another Romney Lie. Reputable sources have disputed the LIE, but folks keep repeating it anyway. Just because you say something over & over, doesn't make it TRUE.

        • timpclimber says:

          It has too, What happened to Medicare Prime? And why did AARP suddenly become such an avid supporter of Obama's plan? They get to sell seniors supplemental insurance to make up for the cut.

    10. BackwoodsLawyer says:

      The fact that Congress has not produced a budget in 3 years puts the focus on the determinative underlying problem with the economy. Congress does not need a budget. One only needs a budget when one has a limited amount of money. Our government has endowed itself with an unlimited line of credit known as the Federal Reserve. With an unlimited line of credit, one does not even have to be able to make the payments on one's outstanding debt. One borrows the money to make any payments that may be due. The problem is that there comes a day of reckoning when the government must default on its obligations – either through runaway monetary inflation or outright default. The crash is inevitable and we all know it.

    11. Bill Ewing says:

      I'm tired of the skewed reporting on the 'unemployment rate.' Start including people who have given up and stopped looking and the true rate is in the 18-23% range!

      This means we have gone right past 'recession' and directly into 'Depression!"

      Stop covering for Washington's PC numbers and I'll be much more impressed with your reportage.

    12. The senate will kick the can down the road and congressional dems will blame republicans for it and even try to blame Romney for it. Think I'm crazy just watch.

    13. JDH says:

      Maybe Taxmageddon is exactly what we need to cause the tax reforms this country desprately needs. The longer we go with just putting patches on our taxing and spending problems, the longer it will be before we get true tax and spending reforms. I am a Libertarian and beleve in the less government, the better. What government we need should be concentrated at the lowest possible level posible(city and township at best) State and Federal governmet should be shrunk to the lowest possible size justifiable, as was envisioned in the Constitution our foundng fathers enacted. Maybe a year or two of rampant over taxation is what we need to shock the populace into reform. I have lolng held that doi8ng away with witholding tax wo;;uld quickly spur fiscal reform if nobody got a refund of their own money at the end of the year, but instead had to dig deep in their own pockets on April 15.

    14. The amazing thing is that Americans are so apathetic; they're being robbed-blind by the Democrats with the highest taxes in the world, and they act like brain dead zombies willing to be taken to the work kamps after the economy crashes. If you want to get Healthy, and get free Healthcare, read "The Healthcare Guide for Republicans", an ebook at Amazon, Apple, or Barnes and Noble for your laptop or Ipad. Real stories about real diseases, effective treatments and pointless treatments. What's curable, what isn't. You will be outraged at the fraud and waste. mensunion org

    15. Rhonda Hughes says:

      Thank you for the very insightful article.

      I would like to request that you abstain from calling Social Security and Medicare entitlements. I worked for over 50 years putting money into these programs. If our government had not robbed them at every opportunity there would be funds available. I am offended by the the word "entitlement" and I am sure many others are as well.

    16. Political manipulations must stop. Everything the Dems have done since Clinton have had one thought in mind; Socialism is the answer to America's problems.:

    17. Rod Fonkert says:

      Entitlements? I have paid into Social Security for 47 years and Medicare since it began. If anyone other than the government was holding my money I would have a great deal of money. Now the government thinks that they are giving me money? It's MINE!! Give it back!

    18. toledofan says:

      This is exactly the reason why Obama and the Democrats have to be defeated in November, no if's and or but's about it. There is no doubt, in my mind, that the Democrats would rather see the country and the economy go down the tubes rather than cede political points to the Republicans. It'as too bad that the Democratic Party has morphed into the Socialist Party of America. If you're a blue dog, it's not your party anymore.

    19. Casey Carlton says:

      "The Senate failed to produce a budget for the third year in a row." This is what your article says in the third paragraph from the end. My copy of the United States Constitution does not mention the Senate as a producer of the federal budget. Does yours? Would it not be more accurate to say that the Senate has done nothing to help approve a budget for three years in a row? Granted, the House of Representatives did nothing for two of those years. That not withstanding, let's put the Senate back in its proper place, according to the Constitution.

    20. Ren says:

      Social Security and Medicare aren't entitlements. Congress had no Constitutional authority to enact legislation for those programs and the programs need to be reformed, but they're not true "entitlement" programs since working Americans pay into both programs (FICA payroll tax) and, in return, are supposed to be guaranteed a return/benefit upon reaching specific benchmarks.

    21. The future under a re-elected Obama.

    22. Stirling says:

      Given the current administrations no budget in 1000+ days I would not assume any democrat controled branch of government (now or after the election) has any incentive to fix the problem. When the liberal political establishment's goal is class warfare (to a socialist goal) taxmegedon is not feared but is embraced. If the goal is more dependency (food stamps, stimulus, government programs) and more government spending this "crisis" is a perfect excuse to continue the policies of the past 3+ years. The debt (to liberals) has no meaning unless the voters make it an issue by voting them out..

    23. Blair Franconia, NH says:

      I have the perfect t-shirt for someone who voted for Obama: "I VOTED FOR OBAMA AND ALL I GOT WAS THIS
      LOUSY T-SHIRT AND THIS LOUSY ECONOMY." :)

    24. Edward Kimble says:

      And Obama continues to feed America's other great addiction. By ignoring federal laws and endorsing a totally insane "drugs for guns" porous border policy, a policy that drains public safety nets, creates crime and prostitution in the inner city (the inner city that Obama falsely claims to care about) , Obama is aiding and abetting in death in Mexico, drugs in our streets, and voter fraud (by definition, not by some Huffington poll) every freaking day. Wouldn't it be great if tomorrow morning the madness would stop? He promised to bring the troops home, Nixon brought the troops home. He promised to close the prison camps, Nixon closed the prison camps. PS-People like myself (and myself) live off the money put into SS. If the government had invested our money, not commingled it, not used it as a pork barrel slush fund for every Democrat road project in NY, and had not tried to buy votes from every entitlement challenged jackhandle (and third world whiner) on the block, paying out more to the jackhandle than the jackhandle ever put in, aha, AHA!!, then there would be plenty of money and the entitlement guys wouldn't be drooling around SS like Hyenas around a freshly killed Dik Dik. 65 is the right age for retirement, that's when you get old (I'm old, I know these things), so why not fix the system, suck it up and put the money back where it came from, no more "special favors", no more commingling, no more tinkering by Congress, sane public investment (i.e not government bonds) with an atom of integrity.

    25. Terrence Pohl says:

      It's obviously going to be the Republican's House fault for not passing Obama's 'tax cut' for
      the middle class only……

      • Stirling says:

        when the president "targets" one group at the expense of annother that is not "FAIR" is it? A real president does not devide the country along class lines.. (that is what Europe does with it's socialism.)

    26. CforUS says:

      If you even THINK there is going to be a ressession and the conditions are ripe, we're probably already in one. I really don't think BO cares. As long as the press protects him when he blames the problem on others, we'll not see the change he promised.

    27. R. Reynoldson says:

      What is the rest of the story? Will the economy improve fatser after taxamagedon or will it improve faster without it?

    28. Ramar says:

      Don't know if you're allowing my comments any longer… but here goes anyway.

      Have you ever stopped to ask, "Why"… "why hasn't congress passed a budget act in three years"? The truth is simple… if they have gone three years, and probably over four years before anyone seriously looks at it… and, according to them, everything is fine, then why do we need any budget in the first place!

      If you don't have a budget… and, you can spend whatever you want to spend, for whatever you went to spend it for!

      If I could run my life and my business that way, I wouldn't want a budget either! Would you?

      So, like it or not, after the election when Mr. Obama is reelected… he will simply get on TV and state, we haven't had a budget over these past four years. Things have gone along very well, we don't need a budget… I so declare that government budgets are henceforth "Illegal and Outdated".

      So be t!

      Ramar

    29. Robert Ferrari says:

      There is only one way to effect any change from the status quo and that is to tie the congress and the administration to the results of their inaction. As it stands, neither of them stand to lose anything should we reenter a recession or even a depression. Our elected representatives have isolated themselves from any negative fallout from and economic crash and all we do is wring our hands and ask the average citizen for more money to fight such folly.

    30. Kenezen says:

      Put heat on both sides to sign Simpson Bowles untouched with no modification. The side that refuses will lose the Election!!

    31. hturner says:

      I wish the readers would stop complaining about the word "entitlements". The government is required to pay SS & medicare to me because i paid those taxes over many years. Our government has paid excessive bebefits to buy vots.

    32. Obama's planned bankruptcy of US.

    33. Robert says:

      I've been doing the math all of my life. If Obama is re-elected (most probable as the takers now number enough to insure tyranny by the majority) I calculate 22.5% unemployment by the end of his second year into his second term. Worse, we will never get rid of the "Democrat" party; which will need to change its name by the end of Barry's second term.
      Joke: What's black and white and red all over? The president of the United States.

    34. Mary says:

      I agree with the man Rod Fonkert , who says Medicare should not be called an entitlment……. He is correct. We have paid into it all our working years, and I am still paying into it because I worked the first half of this year. I paid every year even while receiving Medicare. What albout all the free money and Medicaid , a freebee that many more people are receiving, who have never paid into any of them. Our current President has spent more than any other President just on vacations. He cares nothing about the sucess of this country. . All he cares about it getting re-ellected, GOD FORBIT. Good bye U SA.

    35. Normajean Bingaman says:

      Tell Obama to put that 716 Billion back in Medicare where it belongs. Keep your hands off of social security and don't forget to vote but DO NOT VOTE FOR OBAMA

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