Tags: Fiscal | cliff | survey | avoided

Survey: Fiscal Cliff Is Dangerous, but Will Likely Be Avoided

Wednesday, 03 Oct 2012 07:48 AM

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Letting the economy speed over the dreaded fiscal cliff at the end of the year would very likely throw the country into a recession, though lawmakers will likely save the day and steer the country away from disaster, a new CNNMoney survey of economists finds.

At the end of this year, the Bush-era tax cuts and other tax breaks are scheduled to expire at the same time automatic cuts to government spending kick in, a combination known as a fiscal cliff that could send the country sliding into a recession if left unchecked by Congress.

Lawmakers so far have avoided dealing with tax and spending issues in an election year, but some have suggested they can address the problem after elections or even early in 2013 with extensions or retroactive legislation.

Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible

A CNNMoney survey of 17 economists found that 14 believe the end of tax breaks and the arrival of federal spending cuts would throw the economy into a recession, with 12 pointing to the fiscal cliff as the most serious risk facing the economy.

“Should gridlock prevail, business sector investment and hiring will be stymied, and the household sector will sharply curtail spending,” said Patrick O’Keefe, director of economic research for accounting firm JH Cohn, CNNMoney reported.

However, all 17 economists agreed the economy will avoid the fiscal cliff, pointing out that Democrats and Republicans will agree on a way to extend the tax breaks and prevent the spending cuts either during the lame duck session of Congress or early in the new year.

“The politics of disagreement is not good,” said Maury Harris, chief U.S. economist for UBS.

A Tax Policy Center study finds that failure to do anything at all about the fiscal cliff could send income, payroll and other taxes rising for 90 percent of all Americans.

“Lawmakers could soften that near-term hit by delaying or repealing provisions in the ‘cliff’ or by enacting other spending and tax policies that would provide offsetting support for the economy,” the study stated.

Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible

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