In today's edition of "Off the Cliff" news, both President Obama and Mitt Romney laid out their respective economic visions in dueling stump speeches this afternoon. Their talk of America's economic future could not come at a more appropriate time.
A new report from the nonpartisan Congressional Budget Office details exactly what going off the fiscal cliff would mean. Spoiler alert: recession!! (If you need a refresher on what going off the cliff entails, please to read this.)
The report states if we went off the cliff and stayed off the cliff, "Such fiscal tightening will lead to economic conditions in 2013 that will probably be considered a recession."
If you really want to go crazy with all 89 wonktastic pages of the report, it can be found in its entirety here. But what the CBO's analysis seeks to do is lay out the different sets of probable consequences of going off the cliff versus what the report calls "an alternative fiscal scenario." What's the difference?
I leave that to wonkier folk than myself. From the Wall Street Journal:
The CBO painted two starkly difference scenarios for next year, depending on what path lawmakers decide to take.Under current law, the Bush-era tax cuts are scheduled to expire at the end of this year, raising tax rates on more than 100 million Americans.These tax increases, combined with roughly $100 billion in planned spending cuts on military and other government programs, would reduce projected deficits from $1.13 trillion in the fiscal year ending Sept. 30 to $641 billion for the year that ends Sept. 30, 2013.That would reduce the deficit from roughly 7.3% of the nation's gross domestic product to roughly 4.0% of GDP, the CBO said, the largest one-year reduction since 1969...If Congress were to postpone the tax increases and spending cuts, the deficit would shrink just slightly in the next fiscal year, to $1.037 trillion, or 6.5% of GDP.
If nothing changes (as in we go off and stay off the cliff), the CBO states "real GDP (will decline) by 0.5 percent between the fourth quarter of 2012 and the fourth quarter of 2013 and the unemployment rate (will rise) to about 9 percent in the second half of calendar year 2013."
Under the CBO's "alternate fiscal scenario" as explained above the CBO report explains, "The economy would be stronger in 2013: Real GDP would grow by 1.7 percent between the fourth quarter of 2012 and the fourth quarter of 2013, and the unemployment rate would be about 8 percent by the end of 2013, CBO projects."
What will make the difference? Yeah, the CBO answered that question in its report, too. Buried in there is a big fat one sentence economic truth bomb.
"Whether lawmakers allow scheduled policy changes to take effect or alter them will play a crucial role in determining the path of the federal budget over the next decade and the outlook for the economy."
Oh... and if the Off the Cliff movement needs a theme song (and what good movement doesn't?), I suggest this: