Don't expect a gentle fall if the US goes over the so-called "fiscal cliff." The Congressional Budget Office has concluded in a report today that if Congress doesn't do something about the impending round of tax hikes and spending cuts, US growth will plunge back into recession territory. By its estimate, economic growth would decline 0.5% in fiscal 2013, while unemployment would rise to 9%, according to the Wall Street Journal. “The stakes of fiscal policy are very high right now,” says CBO's director.
The economy as measured by GDP would drop off by 2.9% in the first six months of 2013, notes Politico, then grow to 1.9%. The upside: The tax hikes and spending cuts slated for the end of the year would also shrink the budget deficit, bringing it down to $641 billion, or 4% of GDP. The report also brings better-than-expected news about fiscal 2012, which ends in September: Unemployment currently at 8.2%, compared to the 8.8% predicted in January, and the deficit is at $1.1 trillion, a hair lower than the projected $1.2 trillion.