(WASHINGTON) — Now that all the confetti has been cleaned up, the harsh reality of dealing with the so-called “fiscal cliff” looms for President Obama and Congress over the next seven weeks.
Expiring tax cuts, deep automatic spending reductions and the growing deficit have combined for a perfect storm that could send the U.S. plummeting into another recession by early 2013 and add trillions to the national debt, according to the non-partisan Congressional Budget Office.
On Thursday, the CBO got more specific about what inaction will mean for the country. For instance, the unemployment rate would jump from its current 7.9 percent to 9.1 percent by this time next year.
Keeping the tax breaks, the CBO said, should create about 1.8 million jobs in 2013. The White House and Democrats say that shouldn’t include the nation’s wealthiest taxpayers, contending that 1.6 million jobs would still be added to the economy if the breaks are extended for the other 98 percent of Americans.
The CBO predicts that if tax breaks for all are extended along with fixing the Minimum Tax, halting the automatic spending cuts and extending expiring payroll tax cut and unemployment benefits, the gross domestic product would rise three percentage points by the end of next year.
Of course, there’s a catch and it’s big one. Avoiding the entire fiscal cliff will mean adding to the annual deficit — currently around $1 trillion — by $503 billion in 2013 and $682 billion in 2014.
Copyright 2012 ABC News Radio
Aaron Smith, CNN Newswire
Tara Bench, KSL.com
Cristina Alesci Seth Fiegerman and Charles Riley, CNN
David Goldman, CNN