On January 1, 2013, America’s tax and spending picture changes suddenly and dramatically. Taxes go up by about $400 billion. (The Bush/Obama tax cuts expire, the stimulus tax cuts expire, the payroll tax cuts expire, the business investment tax cuts expire, *and* the health care reform tax increases begin.) Spending goes down by about $100 billion. (The Budget Control Act, which cuts into discretionary spending, coincides with reduced unemployment insurance payments and a sharp drop in Medicare payment rates for physicians.) That’s a painful bite for an economy clinging to growth and 8% unemployment.
We’d lose our grip on both things — growth and 8% unemployment — without further action. Unemployment would go back to 9%. Real GDP would fall by about 3% in the first half of 2013. The double-dip would be very real.
CBO: U.S. Is on Track for a Terrible 2013 Recession (Unless Congress Acts) – Derek Thompson – The Atlantic23 Aug