Holtz-Eakin: Going Over Fiscal Cliff Would be Disaster

Sunday, 22 Jul 2012 04:06 PM

By Dan Weil

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If Congress and the White House don’t prevent a fall over the “fiscal cliff” next year, we’re in big trouble, says Douglas Holtz-Eakin, president of the conservative American Action Forum and former director of the Congressional Budget Office.

"This is an enormous hit" to the economy, he tells Yahoo.

If the government doesn’t take action, the economy will lose $400 billion from tax increases and $200 billion from spending cuts in 2013.

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

“That’s a $600 billion fiscal cliff. -- 4 percent of GDP,” Holtz-Eakin says. “Right now we’re growing about 2 percent. It’s hard to imagine the economy can weather that kind of hit.”

Job losses would likely total about 3 million, he says.

It’s unlikely Congress will address the fiscal cliff before the election, Holtz-Eakin maintains. The most likely scenario: “In a lame duck session Congress will do what it does best and kick it to 2013,” he says.

If that scenario indeed plays out, Holtz-Eakin hopes Congress will find a way to pay for any waivers of automatic spending cuts so that the government’s debt doesn’t get downgraded again. And he hopes Congress will start on tax and entitlement reform.

The fiscal crisis may even top Europe as a concern for investors and businesses.

“While our analysts are somewhat less worried about the impact of European bank strains, the negative impact of fiscal cliff uncertainty is becoming more widespread,” according to a Morgan Stanley report cited in The Washington Post.

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

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