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Recession Coming if Congress Doesn’t Act, Warns Congressional Budget Office

Recession Coming if Congress Doesn’t Act, Warns Congressional Budget Office

The Congressional Budget Office warned that the U.S. economy faced another recession if Congress failed to act to stop impending spending cuts and tax increases.

While spending cuts and tax increases would reduce the budget deficit, the changes would “lead to economic conditions in 2013 that will probably be considered a recession,” according to a new CBO report.

If the current plans are not changed, the CBO warned that growth could stall out, and that unemployment could increase to 9.1 percent.

The spending cuts were demanded by Republicans as part of the 2011 agreement to increase the debt ceiling. The cuts, which are split between defense and Medicare compensation, would pull $110 billion out of the sputtering economy. The cuts were designed to force bipartisan agreement on debt reduction, but Republicans refused to agree to any tax increases as part of a deficit reduction plan. Republicans have attempted to shift the defense cuts into other spending programs, but Democrats have refused to agree to further social spending cuts.

Additionally, taxes are scheduled to increase by as much as $500 billion in 2013, as the Bush tax cuts expire at the end of the year. Democrats and Republicans agree that the cuts should be extended for people earning less than $250,000 per year, but Republicans have insisted that cuts should be extended across the board, while Democrats favor ending the cuts for the wealthiest Americans.

The CBO’s warning sparked a round of recrimination in Washington. “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 to stop the coming tax hike that threatens our economy and replace the looming defense cuts with common sense reforms,” said House Speaker John Boehner, R-Ohio.

In a response, the White House issued a statement saying the CBO’s projections show the “need for House Republicans to follow the Senate’s lead and pass a bill that gives middle-class families the confidence that they won’t see their taxes go up at the beginning of next year.”

While most analysts expect the “fiscal cliff” will be avoided, most believe that Congress will not act before November’s elections.

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164 comments

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1:30AM PDT on Aug 30, 2012

GOING to be a recession? My area is already headed PASSED the recession, we're practically in an economic depression already!

8:46PM PDT on Aug 27, 2012

@ Ron B: Hands down the most true and sensible comment of all. I agree with you and was going to say pretty much the same things so I won't bother to reiterate what you have so clearly stated already!

4:00PM PDT on Aug 27, 2012

David F


ROTFLMFAO. Michael FORCED you to respond??? He forced you to engage in insults??? HAHAAHAHAAHAHAAHAHAHA. Thats simply hilarious.


11:13AM PDT on Aug 27, 2012

Some good points put up here. I just want to add that we can't expect any real recovery while the dogs of capitalism are still out of their cages. Capitalism is doomed to failure just by it's very nature but we certainly will not give up on it until it collapse and we reap the damage from it. And letting the financial, banking, market and insurance industries run wild in free market abandon is not only decimating the middle class, increasing the poor class but is also perpetuating this recession. It's a disease that Congress refuses to treat. They've worked on some of the symptoms but nothing comes even close to a treatment. The wealthy elite are cannibalistically feeding on us in ever more dramatic ways. You can't imagine that it will somehow get better while this continues..

9:21AM PDT on Aug 27, 2012

Sorry Jeff,

but a recession is not coming it is already HERE!

5:39AM PDT on Aug 27, 2012

Any "FIX" is coming too late, in my opinion. The numbers are staggering and one day soon everybody will realize that the governments on ALL LEVELS grew and SPENT to the point that could only be deemed INSANE. Governments everywhere have to be reduced by 70% to 80% because we simply can not afford anything bigger especially when they usurp true capitalism by protecting the criminals and stealing money out of the economy to fund themselves and create false market conditions. All that does is produce boom / bust cycles that further DRAIN the economies AND give millions of people this insane sense of entitlements that is plaguing all the western nations. Stealing money from the rich (other than the fraudtser bankers) won't even scratch the surface of our debt problems. ONLY the reduction of governments will do that. Rid the nations of this blood sucking LEECH called the Central Banks - Federal Reserve for the USA and let the nations control their own asset backed currencies. No more out of control FIAT money that those PRIVATE BANKS charge us interest on our OWN damn money.

Your points, my points all good but it will NOT happen until it is forced to happen by a collapse and that is coming faster than most fools in here think could ever happen. One side believes Obama will continue to SAVE us from (who? ) and the other half believe Romney will somehow reverse the economic downturn in a couple of weeks (almost as stupid as the people who thought barry would be able to do the sa

5:36AM PDT on Aug 27, 2012

JT, welcome to the scrum. I agree with you on almost all your points. Yes, this could have been a recession if it had been allowed to run its course. The governments think that it is within their power and their right to intervene. By doing so they made it worse by far and spending tens of TRILLIONS of dollars borrowed from future generations and giving that money to the banks did NOTHING to improve anything but keeping FRAUDSTER banks from going bankrupt.

ANother point. PLEASE don't confuse true capitalism and communism. ANybody who has actually READ Marx can tell you the system is perfect. In theory. Sadly there is a fundamental FLAW in marxist theory that attracts the meanest SOB on the block to run things. Marxist revolutions have been forced on either sleeping populations or by armed revolution. It has NEVER, in practise, taken on the utopian ideals of the theoretical.

The last point of challenge is your "Republicans VS Democrats" it should read "We the People VS the government" because unless you are rabidly partisan like some deluded fools in here you KNOW that is the REAL problem. BOTH parties have participated in the total evisceration of the Constitution and the Bill of Rights. Neither party has pushed for a proper investigation into WTF happened to drop America into the bucket it's in right now and WHO committed CRIMINAL FRAUD to get there.

3:46AM PDT on Aug 27, 2012

Two more things. First, if anyone is going to post links to support their arguments, PLEASE connect to real sites that vet their information. I say this because frankly any schmuck with a webcam and some video editing software can post something on YouTube. That does NOT make it accurate! (And Fox Noise is below The National Enquirer on the list of reputable information sources.)

Second, I promise that I am not trying to post my comments on here (or any other blog post) in duplicate. It appears to be a computer glitch of some kind, but I'm uncertain where it is (which also means that I cannot currently fix the problem from my end). I am only sending my individual responses once. And even when you see "[...continued]" at the beginning of a post, it simply means my response was cut off and I want to be certain that all of it got through. Not due to ego on my part, but simply to be certain there isn't mistranslation of what I'm trying to say.

3:46AM PDT on Aug 27, 2012

Two more things. First, if anyone is going to post links to support their arguments, PLEASE connect to real sites that vet their information. I say this because frankly any schmuck with a webcam and some video editing software can post something on YouTube. That does NOT make it accurate! (And Fox Noise is below The National Enquirer on the list of reputable information sources.)

Second, I promise that I am not trying to post my comments on here (or any other blog post) in duplicate. It appears to be a computer glitch of some kind, but I'm uncertain where it is (which also means that I cannot currently fix the problem from my end). I am only sending my individual responses once. And even when you see "[...continued]" at the beginning of a post, it simply means my response was cut off and I want to be certain that all of it got through. Not due to ego on my part, but simply to be certain there isn't mistranslation of what I'm trying to say.

3:39AM PDT on Aug 27, 2012

[...continued] And before anyone on here tries to claim that I'm recommending Socialism, please do us all a favour and actually READ what Karl Marx had to say about what Capitalism, Socialism, and Communism REALLY are and the progression predicted for them. Also note his own take on the reality in terms of the transition between Socialism and Communism. What I am recommending is simply protecting the American economy in the best way feasible. And that's by making certain that the ones with the most financial capability step up and finally pay their fair share!

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