From the Heritage Foundation.
About 1.6 million American jobs hang in the balance. That is the clear implication of analysis contained in the annual budget update by the Congressional Budget Office (CBO).
Along with all manner of dire and dreary budget data reflecting President Obama’s budget and economic policies to date, CBO provides its assessment of what would happen if the President and Congress sit on their respective hands and fail to defuse the threats of Taxmageddon and the fiscal cliff. The answer is fairly simple: recession.
As CBO so diplomatically put it, “such fiscal tightening will lead to economic conditions in 2013 that will probably be considered a recession.”
Taxmageddon is the $500 billion tax hike slated to take effect on January 1, while the fiscal cliff consists of Taxmageddon plus various spending reductions—among them the sequestration left over from the disastrous negotiations that led to the Budget Control Act in 2011.
According to CBO’s analysis, if Congress defuses Taxmageddon and the fiscal cliff, then the economy will grow at a tepid 1.7 percent in 2013 and the unemployment rate will remain stuck around 8 percent. But if President Obama and Congress play chicken with Taxmageddon and fail to act, then the economy will contract by about 0.5 percent and the unemployment rate will shoot up to 9.1 percent, about halfway back to the peak from the past recession.
Forget percentages—what does this mean in actual jobs lost if President Obama and Congress fail to act? It means roughly 1.6 million more Americans will be out of work—on top of the 12.8 million who already want to work but can’t find jobs.
Just about every relevant school of economics, from the President’s pure Keynesianism to supply-side and neoclassical persuasions, tells much the same tale on net: Raising tax rates on a weak economy produces a weaker economy. It’s not terribly complicated.
Here’s my advice: This time, let’s elect someone with someone with experience in business administration and economics.