If Congress and the White House can’t reach a compromise on the fiscal cliff before the end of the year, a slew of massive spending cuts and tax hikes will send the economy into another recession, shrinking the GDP by half a percentage point and pushing the unemployment rate up to 9.1 percent.
The report – issued by the Congressional Budget Office Thursday just days before Congress returns to Washington for the lame duck session – estimates that extending the expiring Bush-era tax rates to all income earners would boost the nation’s gross domestic product by 2.2 percent next year. The CBO also said that the GDP would expand by almost 3 percent if the payroll tax cut and current jobless benefits for the long-term unemployed were extended as well. The report reiterates a previous CBO projection from August that the economy would fall into a shallow recession in 2013 if Congress and the Obama administration failed to act. - Read more at the Congressional Budget Office
S&P: 15 PERCENT CHANCE OF GOING OVER THE CLIFF
Experts and analysts are giving odds on how the fiscal cliff drama is likely to play out, with many predicting at least a short-term fix. Standard & Poors analysts say there is only a 15 percent chance that nothing will get accomplished and that the economy will go sailing off the cliff, Reuters’ reports. “The most likely scenario, in our view, is that policymakers reach sufficient political compromise in time to avoid most, if not all, potential economic effects of the cliff,” S&P analysts wrote. - Read more at Reuters
BIDEN: DEMS READY TO COMPROMISE Vice President Joe Biden said that the president is ready to forge ahead on a compromise to avoid massive year-end spending cuts and tax increases. Biden told CBS News’ Matthew Daily on Wednesday that he believes there are at least six GOP senators ready to compromise on fiscal issues, adding that the real question is whether House Republicans will be willing to do the same.
“What is the takeaway going to be on the part of our Republican colleagues? What judgment are they going to make?” Biden asked. “I know it takes a little time to kind of digest what’s going on. But I think people know we’ve got to get down to work and I think they’re ready to move.” The vice president said he believes the election results that gave Obama another four-year term offered a clear mandate on taxes. “Voters are coming much closer to our view about how to deal with tax policy.” - Read more at CBS News
CHAMBLISS: ‘RIOTS IN THE STREETS’ Sen. Saxby Chambliss (R-Georgia), one of the Senate’s bipartisan “Gang of Eight” members working on a deficit reduction plan, told The Washington Post’s Suzy Khimm that Congress needs to deal with the deficit immediately and not kick the can down the road or there will be “drastic” consequences. “You could see riots in the streets of the United States if we don’t do this right,” Chambliss said, in a bit of fiscal hyperbole. “We have the opportunity right now, and it’s imperative that we do, primarily through a $4-5 trillion package over 10 years.” – Read more at The Washington Post
SCHUMER ‘HEARTENED’ BY BOEHNER’S TONE
After House Speaker John Boehner told reporters Wednesday he was ready to “stand with the president” on a budget deal that included new federal revenue linked to tax reform, Sen. Chuck Schumer, D-NY, told the Christian Science Monitor Thursday he was “heartened by the tone that Speaker Boehner showed yesterday.” However, Schumer said the content of Boehner’s speech “doesn’t quite work,” adding that the idea that tax cuts lead to revenue growth, as the Speaker implied, was “a Rumpelstiltskin fairy tale. You may remember Rumpelstiltskin was the fairy tale figure who turned straw into gold.”
Nonetheless, Schumer believes the Speaker has “seen the handwriting on the wall, and it makes me very hopeful we can do something big in the next month and a half.” - Read more at the Christian Science Monitor