Fiscal Cliff to Boost Deficit Outlook But Pull down the Economy

by San Antonio Attorney

In case the fiscal cliff becomes effective in 2013, it will enhance the U.S. debt outlook, but timetabled spending cuts and tax raises would drive the nation into economic downturn and up to 9 percent increase of unemployment.

That is one of the major downsides based on an analysis of Congressional Budget Office. The agency has released its new budget and economic forecasts for the next 10 years.

The fiscal cliff is consisting of tremendous tax increases and spending cuts in 2013.

Included in this is the expiry of the Bush administration’s tax cuts and the $1 trillion spending cuts being made since Congress did not produce an alternate plan to reduce debt.

If the policies are implemented, the CBO predicts that the U.S. economy will decline by 0.5 percent within the fourth quarter of 2012 until the fourth quarter of 2013. The current unemployment rate is 8.3 percent and will climb to 9 percent during the second half of next year.

The CBO’s prediction for next year has gotten worse since May, during its initial prediction that fiscal cliff would probably lead to a recession.

However, the fiscal cliff is going to significantly improve the debt outlook. The CBO estimates that debt will reach $1.1 trillion in 2012. But for next year, it will slide to $641 billion, which is 4 percent of GDP below the fiscal cliff. It will stand for the largest single year decline in the yearly deficit since 1969.

On the other hand, if the fiscal cliff is not allowed by Congress the economy will keep growing, although at a sluggish 1.7% stride. Moreover, it will create 2 million jobs.

At this point, the Congress is not yet certain how they will manage the fiscal cliff. No party wants all the slated policies to become operative, but in a rough campaign season, nobody wants to stir on their partisan beliefs on how to supplant the fiscal cliff.


–   If you do not have the financial resources to protect yourself and  your possessions from your creditors, seeking Bankruptcy Help can help eliminate or significantly reduce your debt.

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