CBO sees recession in 2013 unless lawmakers act - The Hill's On The Money

CBO sees recession in 2013 unless lawmakers act - The Hill's On The Money

The non-partisan Congressional Budget Office said Tuesday that unless lawmakers act to prevent scheduled tax increases and spending cuts at the end of the year, a recession will likely result in early 2013.

Early next year income taxes are set to go up when the Bush era tax rates expire. Automatic spending cuts triggered by last August’s debt ceiling deal to the tune of $109 billion are set to hit. Meanwhile, payments to physicians under Medicare will be slashed

CBO projects that these and other elements of the so-called “fiscal cliff” will cause the economy to contract as demand dries up.

It projected in a Tuesday report that the gross domestic product (GDP) will contract by 1.3 percent in the first half of 2013 before growing 2.3 percent later in the year. Annualized, GDP would grow just 0.5 percent in 2013.

“Given the pattern of past recessions as identifiedby the National Bureau of Economic Research, such a contraction in output in the first half of 2013 would probably be judged to be a recession,” the report states. A recession is technically defined as two economic quarters of negative economic growth.