Is the "Fiscal Cliff" a Threat to the Economy?

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Ludwig von Mises Institute:

 

Is the "Fiscal Cliff" a Threat to the Economy?

Mises Daily:Thursday, September 13, 2012 by Frank Shostak

The US Congressional Budget Office (CBO) said on August 22, 2012, that scheduled tax increases and spending cuts in 2013 would reverse the current modest economic recovery. The CBO and other experts are of the view that large government spending cuts and tax hikes will cause severe economic slump.

Experts hold that without action by Congress to avoid a "fiscal cliff" Americans should expect a significant recession and the loss of some 2 million jobs. The CBO predicts that the real GDP could shrink by 0.5 percent next year while the unemployment rate could climb to around 9 percent.

The "fiscal cliff" refers to the impact of around $500 billion in expiring tax cuts and automatic government-spending reductions set for 2013 as a result of successive failures by Congress to