by Patrick Appel
There are major spending cuts and tax increases that will take effect if Congress does nothing. Various pundits, Ezra Klein chief among them, have advocated fixing our deficit by simply letting current law run its course. Howard Gleckman throws some awful chilly water on the idea:
Compared to this year, spending in 2013 would effectively be frozen, while taxes are increased by $750 billion.
CBO projects such a sharp dose of austerity would slash economic growth by between 1.5 and 3.5 percentage points in 2013. With most economists projecting a 2013 expansion of about 3.5, this could cut growth by between one-third and, well, 100 percent. Keep in mind that with interest rates at close to zero, the Federal Reserve couldn’t do much to help. And, btw, while CBO doesn’t try to estimate what a new recession would mean for the deficit, it wouldn’t be pretty.