The Congressional Budget Office has concluded that the massive U.S. government spending cuts and tax hikes that will arrive next January will have more catastrophic economic effects than they had earlier predicted. The impact of around $500 billion in expiring tax cuts and automatic spending reductions set for 2013 could drive the economy into a greater recession.
CBO director Doug Elmendorf said Americans should expect a "significant recession" and the loss of some two million jobs. He added that the fact that the government hasn’t committed to fixing the problem means that uncertainty reigns: "The sooner that uncertainty is eliminated, the better. The stakes are very high in the fiscal policy decisions we're going to have to make very shortly."
The CBO has revised their estimates downward since May, when they estimated that 2013 would have a full-year GDP growth of 0.5%, with a 1.3% first-half contraction and second-half growth of 2.3%. Now the CBO predicts full-year GDP in 2013 shrinking 0.5%, much greater first-half contraction of 2.9% and second half growth of only 1.9%
Amanda Henneberg, a spokeswoman for Mitt Romney, charged: "Today's CBO report is another indictment of President Obama's economic policies that have resulted in overspending, increasing debt and a growing financial burden on the next generation."
The Obama administration answered with their standard class warfare attack. White House Press Secretary Jay Carney sniveled, "They're willing to hold the middle class hostage unless we also give massive new tax cuts to millionaires and billionaires -- tax cuts we can't afford that would do nothing to strengthen the economy."
Helen Fessenden, an analyst with Eurasia Group, noted that the CBO report estimates showed there might be slightly more revenue, but she and the CBO make one completely wrong assumption: they assume that tax receipts will continue to rise despite economic destruction.
They won’t, and that’s just one more reason why the picture is far more gloomy than the CBO is willing to admit – and they already acknowledge the future looks bleak.
Four more years of Obama’s policies and CBO will stand for America’s fate: Checkmate, Barack Obama.