Washington --
The Congressional Budget Office said Wednesday that the economic recovery would continue "at a modest pace" for the rest of 2012, but if Congress took no action to stave off tax increases and automatic budget cuts scheduled for Jan. 1, the economy could fall into a recession.
The nonpartisan analysis predicted that economic output would shrink and the jobless rate would rise in the second half of 2013.As it happens that less jobs have been a big concern to the Obama Team in election campaigns.
In its semiannual report, the budget office said that the economy was somewhat weaker than it projected in January. Fears about tax increases and spending cuts are depressing economic growth, it said.
In January, the office predicted that the economy would grow by one-half of 1 percent in 2013. Now it predicts that the economy will contract by one-half of 1 percent, partly due to the "sudden and sizable fiscal tightening" scheduled to occur under current law.
If Congress cannot break the impasse on tax and fiscal policy and if current law remains in place, the office said, the federal deficit will plunge, to $641 billion in the fiscal year 2013 and to $387 billion in 2014.
The budget office said that the economy would be stronger and the deficit would total $1 trillion under "an alternative fiscal scenario" in which most expiring tax provisions are extended indefinitely, automatic spending cuts do not occur, and Medicare payments to doctors are frozen instead of being reduced Jan. 1 as scheduled.
Edited By Cen Fox Post Team
