What If, Gulp, All The Bush Tax Cuts Expire?


Contra Dish readers who argue that tax increases put money back into the economy, GDP will take a major hit:

The dotted line shows what could happen if Congress can’t reach an agreement and lets all tax cuts expire and spending cuts kick in. If that happened, the U.S. economy would grow at least 3 percentage points less than its potential for each of the first three quarters of 2013 … To put this in perspective, the Federal Reserve expects the economy to grow at a roughly 2.9 percent pace in 2013. If Congress does nothing at the end of this year, much of that growth could be wiped out, and there’s a strong possibility that the United States could lurch back into recession.