Congress: Fiscal cliff cuts would mean recession
WASHINGTON - Congressional budget experts are offering a dire analysis of what would happen to the economy if the "fiscal cliff" of tax increases and spending cuts can't be averted.
The report from the Congressional Budget Office says the economy would go back into recession, with the jobless rate jumping to 9.1 percent, if the tax hikes and spending cuts are allowed to take effect in January.
But the analysis assumes a lengthy impasse that would leave those changes in effect for the entire year -- and many analysts think that's unlikely to happen.
The report says the tax and spending changes would cut the federal deficit by $503 billion through next September. But the adjustments also would cause the economy to shrink by 0.5 percent next year.
It estimates that if the tax cuts from the Bush era are extended, the nation's gross domestic product would grow by 2.2 percent next year. And it says that growth would be almost 3 percent, if President Barack Obama's two-percentage-point payroll tax cuts and current jobless benefits for the long-term unemployed are extended.
Obama and Congress are looking for ways to avert the changes, or at least ease possible damage from them.