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The U.S. is creeping closer and closer to the “fiscal cliff.” These are the tax cuts and spending plans that are set to expire automatically at the end of the year.Some economists argue that we could lose up to 5 percentage points of GDP if Congress doesn’t act.
But one analyst thinks that even if we do completely avoid the cliff, the damage will be done.
From Politco’s Ben White:
THE BIG IDEA: FISCAL CLIFF WILL HIT NO MATTER WHAT – Per KBW: “We expect slow GDP growth in the second half of 2012 of just under 2.0% in both our base-case forecast and our fiscal cliff alternative. Even if the fiscal cliff is addressed by Congress, we believe that the December debate on the issue will be negative for consumer confidence and will slow spending. In our base case, the economy reaccelerates in 2013, ending the year with 2.2% GDP growth and the unemployment rate at 7.3%. Under the fiscal cliff alternative scenario, we would expect the U.S. to fall into a recession in the first half of 2013, with negative GDP growth and the year ending with the unemployment rate at 9.1%
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