Congressional Budget Office Warns Recession Looming If Congress Doesn’t Act On “Fiscal Cliff”

Source: Stephanie Condon / CBS News

If Washington doesn’t reverse the several fiscal policy changes set for the end of the year, the nation could head into another recession in 2013, the nonpartisan Congressional Budget Office said in its latest economic report.

A whole bevy of policy changes are set to go into effect on Dec. 31 and Jan. 1, 2013, including the $1.2 billion in across-the-board spending cuts that Congress agreed to in 2011 after the bipartisan congressional “supercommittee” failed to come up with its own deficit-shrinking plan. The much-debated Bush-era tax cuts are also set to expire.

Those policy changes would have the intended effect of reducing the deficit — by fiscal year 2013, the deficit would be nearly $500 billion less than the shortfall in 2012, the CBO reports.

However, the CBO also expects the belt-tightening to bring down real gross domestic product (GDP) by .5 percent between the fourth quarter of 2012 and the fourth quarter of 2013. Additionally, it predicts that unemployment would rise to about 9 percent by mid-2013.

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