Patt Morrison for August 22, 2012

Congressional Budget Office: Fiscal cliff will cause significant recession

House Budget Committee Holds Hearing On The Congressional Budget Office's Outlook

Chip Somodevilla/Getty Images

Congressional Budget Office Director Douglas Elmendorf testifies before the House Budget Committee on Capitol Hill June 6, 2012 in Washington, DC. The committee quizzed Elmendorf about the CBO's long-term budget outlook.

The Congressional Budget Office’s latest analysis predicts “a significant recession” if planned January 1, 2013 tax hikes and spending cutbacks aren’t delayed. The CBO warned in January of this year that the planned belt-tightening in the federal budget — known as the Fiscal Cliff or Taxmageddon — would bring negative economic consequences.

However, today’s updated forecast from the non-partisan CBO is significantly more dire: Unemployment is predicted to rise to 9.1 percent and stay there into 2014, and the underlying economy is now viewed to be weaker than anticipated.

The last CBO forecast merely predicted a mild recession would hit in the first half of 2013.

WEIGH IN:

Does the fiscal cliff’s political wake alter the presidential election? Could the CBO be wrong?

Guests:

Diana Furchtgott-Roth, former senior fellow at Hudson Institute, former chief economist of the U.S. Department of Labor under President George W. Bush. She also served in the White House under Presidents George H.W. Bush and Ronald Reagan.

Dean Baker, co-director of the Center for Economic and Policy Research in Washington, DC.


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