The non-partisan Congressional Budget Office released some sobering figures on Tuesday, forecasting deficits hovering near $1 trillion a year until 2017 unless Congress makes good on vows to slash spending and raise new revenue. But the flip side of the prediction is also troubling: If Washington takes such prudent measures — allowing the Bush era tax cuts to expire and going through with spending cuts under last summer's deal to raise the debt ceiling — economic growth will be significantly slower next year. Will Congress' deficit-cutting fever slow down the recovery?
Yes, cutting back now hurts the economy: This is the great "irony of Washington's laser-like focus on the deficit," says Sahil Kapur at Talking Points Memo. Letting the Bush tax cuts fade away and going through with the cuts prescribed by the August debt deal shaves $2.4 trillion from the next decade's deficits. However, if Congress forgoes such austerity measures, GDP growth would increase by up to 2.9 percent next year. Washington's brand of fiscal responsibility has "held back rather than helped the economy."
"Chart: How deficit cuts are about to hurt the economy"
The looming tax hike is the problem: The really disturbing projection from the CBO, says Dave Carter at Gateway Pundit, is that "the amount of money that the federal government will suck out of the private sector will increase by more than 30 percent between now and 2014," thanks to expiring tax relief and new taxes, fees, and penalties set to take effect — "a euphemistic description of Obamacare." In other words, President Obama is "pushing the economy over a cliff."
"'That giant sucking sound'"
The point is that only tough reform will avert calamity: Don't waste time gabbing about all those tax hikes hitting at once, says Peter Suderman at Reason. Sure, that's what's written into current law, but "there's simply no plausible near-future political environment in which this happens." Here's the bottom line: The government is spending 23.2 percent of our total economic output, and history says it can't collect the equivalent of that in revenue without killing the economy. So eventually, without tough reform, we face a "Budgepocalypse."
"Budgepocalypse 2012: Revenge of the Budgepocalypse"