Budget gloom inside report
WASHINGTON — A new recession is likely if a stalemate over tax and spending cuts continues between Democrats and Republicans, according to fresh, dire projections by the nonpartisan Congressional Budget Office.
In its annual summertime report, the budget office said Wednesday that letting decade-old tax cuts expire and sweeping spending cuts occur in January — which will happen without congressional action — “would lead to economic conditions in 2013 that will probably be considered a recession.”
If that happened, the economy would contract by 0.5 percent — a gloomier projection than the budget office made earlier this year when it envisioned slight growth under that scenario. Unemployment would rise to around 9 percent by late next year if the standoff persists, the analysts said.
The budget office’s latest warning came amid a presidential and congressional election year in which neither President Barack Obama nor congressional Republicans have shown any signs of giving ground in their protracted battle over taxes, spending and the budget. The economy and massive federal deficits are top-flight issues in this year’s campaigns.
Obama wants to renew expiring tax cuts for everyone except individuals earning over $200,000 and couples who bring in above $250,000. Republicans are demanding that all tax cuts be extended. The two sides also have made no progress over how to prevent budget-wide spending cuts from taking effect. These automatic cuts were set in motion by the failure of lawmakers last year to reach a bipartisan debt-reduction agreement.
