A study released Wednesday by the Congressional Budget Office details dire consequences if Congress does not take action to avert the massive spending cuts set to occur in January under sequestration.
The CBO study predicts that the U.S. economy will sink into a deep recession and unemployment will jump from 8.3 percent today to 9 percent by the middle of next year.
As Reuters reported:
Massive U.S. government spending cuts and tax hikes due next year will cause even worse economic damage than previously thought if Washington fails to come up with a solution, the Congressional Budget Office warned on Wednesday.
Without action by Congress to avoid a “fiscal cliff,” Americans should expect a “significant recession” and the loss of some 2 million jobs, CBO director Doug Elmendorf said in his gloomiest assessment yet.
While the White House and Congress seem to agree that allowing sequestration to take effect would be catastrophic, they continue to be at odds over how to resolve the stalemate. As New York Times reported:
The House speaker, John A. Boehner, said the report showed an urgent need for legislation to stop the impending tax increases and the looming cuts in military spending.
“Instead of threatening to drive us off the fiscal cliff and tank our economy in their quest for higher taxes, I would urge President Obama and Congressional Democrats to work with us,” said Mr. Boehner, an Ohio Republican.
The White House said Republicans were blocking a solution.
“They’re willing to hold the middle class hostage unless we also give massive new tax cuts to millionaires and billionaires,” said Jay Carney, the president’s press secretary.
To accompany its report, CBO put out a handy infographic that summarizes the impact of sequestration and what would happen if the massive cuts are averted (seen in the graphic as “An Alternative Fiscal Scenario”). Click for a larger version: