An Inevitable Cliff?

Dec 21 2012 @ 11:35am

GT CLIFFDIVING3 20121220

Jeff Madrick says, deal or no deal, we're going over:

Taking $700 billion of buying power out of the economy in its current state, as the fiscal cliff does, would be a body blow, leading to outright recession and unemployment rates of up to 10 percent or higher. Economic recovery would not be immediate, and unemployment rates could well remain above 8 percent indefinitely even once recovery had begun.

But a compromise that reduces that impact to $300 billion, or even $200 billion, by reinstating many tax cuts and reducing spending cuts, will still rob the economy of a huge amount of buying power at a time when it needs every penny. The result will be tepid growth in 2013, just when the economy seemed to be gathering momentum—and little progress on reducing unemployment.

(Photo: Kyle Mitione of the USA competes in the Red Bull Cliff Diving World Series Qualifier at Riverside Oaks Golf Resort on February 4, 2012 in Sydney, Australia. By Ryan Pierse/Getty Images)