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CBO Warns of Recession If "Fiscal Cliff" Not Averted
On Aug. 22, the Congressional Budget Office (CBO) warned that the U.S. economy will enter another recession if Congress fails to avert the “fiscal cliff” of tax increases and spending reductions set for the end of 2012.
At the end of the year, the Bush-era tax cuts, the payroll tax reduction, and the alternative minimum tax cut patch are set to expire. Additionally, sharp reductions in Medicare’s payment rates for physicians’ services are scheduled to take effect and the estate tax is set to revert to pre-2001 levels (55 percent rate, $1 million exemption). These expiring provisions are on top of the $1.2 trillion in automatic spending cuts set to go into effect in early 2013 from the sequestration process.
The CBO cautions that the U.S. economy will contract by 0.5 percent and unemployment will rise to 9.1 percent in 2013 if Congress doesn’t:
• Extend all expiring tax provisions indefinitely (except the payroll tax reduction in effect in calendar years 2011 and 2012)
• Index the AMT for inflation after 2011
• Maintain current Medicare payment rates for physicians’ services
• Prevent the automatic spending reductions
The economy would also lose more than two million jobs without congressional action.
Due to partisan gridlock, many fear lawmakers will be unable to forge a consensus that avoids such a nightmare. For months, AED has been warning members about the impending economic damage that will result without swift action. The association urges Congress to temporarily extend the Bush-era tax cuts and find an alternative to the automatic spending cuts.
Those attending the AED/INFOR Executive Forum next month can hear Rep. Peter Roskam (R-Ill.), a member of the House Ways & Means Committee and chief deputy Republican whip, discuss how he sees the tax reform and sequestration debate shaping up.
To urge your lawmakers support for action to avoid this looming fiscal catastrophe, be sure to visit AEDAction.org.
Article Date: 2012-08-27
Source: Associated Equipment Distributors
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