August 22, 2012
Today, CBO released its updated budget and economic forecast. The report shows that pending tax increases and arbitrary spending cuts would send the U.S. economy into another economic recession and drive the unemployment rate above 9 percent by the end of 2013. Only House Republicans have passed legislation to avoid this recession by stopping the tax hike and replacing the sequestration with common-sense spending reductions. Unfortunately, President Obama and Senate Democrats have not brought forth a credible plan to avoid the next recession. House Republicans have urged the president and Democrats in the Senate to join us in preventing another recession. Without action from the president and the Senate, CBO confirms that we are heading for another recession.
The Coming Recession:
- If pending tax increases are not stopped, and arbitrary sequestration cuts are not replaced, the U.S. economy will be plunged into another recession in 2013, according to CBO.
- Only House Republicans have passed legislation to avoid another recession by stopping the tax hike and replacing arbitrary sequestration cuts with responsible deficit reduction. The Senate and the president have no plan to avoid the coming recession.
- According to CBO, the full impact of looming tax increases and automatic cuts under sequestration (the so-called “fiscal cliff”) would cause unemployment to increase to 9 percent in the second half of 2013.
- Unless Democrats in the Senate and the president join House Republicans to avoid the fiscal cliff, the U.S. will be pushed into another recession.
Economic Growth and Unemployment:
- According to CBO, the U.S. economy will contract by nearly 3.0 percent at an annual rate in the first half of 2013 as a result of the tax increases and sequestration cuts that are slated to take effect early next year. For the entire year, real GDP would contract by 0.5 percent.
- CBO’s economic growth estimates are a far cry the White House’s unrealistically optimistic growth numbers, which show economic growth of 2.7 percent in 2013 and 3.5 percent in 2014. The Administration’s growth estimates are also higher than the private-sector Blue Chip consensus.
- According to CBO, the pending fiscal cliff will cause the unemployment rate to increase to 9.1 percent in the fourth quarter of 2013.
- The White House’s unrealistic estimates show the unemployment rate falling to 7.6 percent in the fourth quarter of 2013. Even using the administration’s inflated numbers, the president would fall woefully short of his promise to bring the unemployment rate to 5 percent by 2013 when his “stimulus” became law.
- While the White House paints a rosier employment picture than CBO, neither the president or the Democrat-controlled Senate has a serious plan to avoid devastating tax increases and replace arbitrary cuts which CBO says will doom the economy to another recession in 2013.
- Only House Republicans have passed legislation to avert the coming recession by stopping the scheduled tax hike and replacing sequestration cuts.
Deficits and Debt:
- The deficit for FY 2012 will total $1.12 trillion. This will mark the fourth straight year under President Obama’s fiscal policies that the U.S. will borrow over $1 trillion.
- The deficit for 2012 alone is equal to $9,500 of debt for every family in America.
- Federal debt held by the public will reach 73 percent of GDP by the end of FY 2012, twice the 36 percent of GDP that it measured at the end of 2007.
- The highest deficit ever before President Obama took office was $458 billion; in the four years since President Obama took office, deficits have averaged $1.28 trillion each year.
For additional information, contact:
The House Republican Conference Policy Office