CBO Predicts 9.1% Unemployment In Event of Full Fiscal Cliff

The Congressional Budget Office has released its projections of both short-term and long-term effects of the U.S. going off the fiscal cliff in January, Fierce Government reports.

Along with Bush-era tax cuts expiring and spending cuts under sequestration, Geoff Whiting writes the fiscal cliff also includes the end of the payroll tax holiday, middle-class tax cuts from the stimulus, unemployment insurance for the long-term unemployed, cuts to Medicare providers’ fees and a Medicare surtax.

CBO estimates all those events occurring would reduce the nation’s deficit by $500 billion annually, but raise unemployment to 9.1 percent and reduce the gross domestic product by 2 percent.

If none of those events occur, CBO estimates the deficit for fiscal year 2013 would increase by $500 million and then $700 billion in fiscal 2014.

CBO suggested that the Congress take a downward slope approach to avoid the cliff by balancing reduced entitlements, spending cuts and raising tax revenues.

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