WASHINGTON (AP) — Congressional budget experts are offering a dire analysis of what would happen to the economy if the "fiscal cliff" of tax increases and spending cuts can't be averted.
The report from the Congressional Budget Office says the economy would go back into recession, with the jobless rate jumping to 9.1 percent, if the tax hikes and spending cuts are allowed to take effect in January.
But the analysis assumes a lengthy impasse that would leave those changes in effect for the entire year -- and many analysts think that's unlikely to happen.
The report says the tax and spending changes would cut the federal deficit by $503 billion through next September. But the adjustments also would cause the economy to shrink by 0.5 percent next year.
It estimates that if the tax cuts from the Bush era are extended, the nation's gross domestic product would grow by 2.2 percent next year. And it says that growth would be almost 3 percent, if President Barack Obama's two-percentage-point payroll tax cuts and current jobless benefits for the long-term unemployed are extended.
Obama and Congress are looking for ways to avert the changes, or at least ease possible damage from them.
245-c-22-(Jerry Bodlander, AP correspondent)-"below eight percent"-AP correspondent Jerry Bodlander reports the Congressional Budget Office has issued a stark analysis that makes clear what's at stake in avoiding the fiscal cliff. (8 Nov 2012)
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244-v-29-(Jerry Bodlander, AP correspondent)--The health of the American economy hinges on avoiding the fiscal cliff. AP correspondent Jerry Bodlander reports. (8 Nov 2012)
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GRAPHICSBANK: Barack Obama, as US President, and John Boehner, as US Representative of Ohio and House Speaker (r-l) drawing on money texture and US Capitol, partial graphic (8 Nov 2012)
APPHOTO MDCO102: President Barack Obama, with his arm around daughter Sasha, and first lady Michelle Obama and eldest daughter Malia exit Air Force One at Andrews Air Force Base, Md., after a flight from Chicago, Wednesday, Nov. 7, 2012. (AP Photo/Cliff Owen) (7 Nov 2012)
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APPHOTO DCSA103: Speaker of the House John Boehner, R-Ohio, talks about the elections and the unfinished business of Congress,at the Capitol in Washington, Wednesday, Nov. 7, 2012. The first post-election test of wills could start next week when Congress returns from its election recess to deal with unfinished business — including a looming "fiscal cliff" of $400 billion in higher taxes and $100 billion in automatic cuts in military and domestic spending to take effect in January if Congress doesn't head them off. Economists warn that the combination could plunge the nation back into a recession. (AP Photo/J. Scott Applewhite) (7 Nov 2012)
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