Bush-era tax cuts

CBO says US likely to fall off 'fiscal cliff' if Bush-era tax cuts allowed to expire

Published May 22, 2012

Associated Press

WASHINGTON –  A new government study released Tuesday says that allowing Bush-era tax cuts to expire and a scheduled round of automatic spending cuts to take effect would probably throw the economy into a recession.

The Congressional Budget Office report says that the economy would shrink by 1.3 percent in the first half of next year if the government is allowed to fall off this so-called "fiscal cliff" on Jan. 1 -- and that the higher tax rates and more than $100 billion in automatic cuts to the Pentagon and domestic agencies are kept in place.

There's common agreement that lawmakers will act either late this year or early next year to head off the dramatic shift in the government's financial situation. But if they were left in place, CBO says it would wring hundreds of billions of dollars from the budget deficit that would "represent an additional drag on the weak economic expansion."