CBO: Current Law Will Lead U.S. Into a Recession in 2013

Congressional Budget Office: Continuing Under Current Law Will Lead U.S. Economy Into a Recession in 2013

On August 22, the Congressional Budget Office (CBO) released its update to the ten year U.S. Budget and Economic Outlook. The report highlights how high the stakes will be for federal lawmakers who will face hard choices in the six-week lame duck session of Congress following the November elections.

Under current law

  • on December 31, 2012 the Bush-era tax cuts and the payroll tax holiday are set to expire.
  • in January 2013, about $109 billion in across-the-board spending cuts to defense and nondefense programs are scheduled to take effect for the remaining eight months of fiscal year 2013
  • also, the length of time under which people can collect emergency unemployment benefits will decrease.

According to CBO, if this occurs, it “would lead to what will probably be deemed a recession, with growth in GDP declining in 2013 and the unemployment rate staying above 8% through 2014.”

CBO concluded that the fiscal contraction from allowing the tax credits to expire and the across-the-board spending reductions to take effect would shrink the deficit to an estimated $641 billion in fiscal year 2013, a $500 billion decline from its current estimate for fiscal year 2012 of $1.1 trillion. On-budget revenues would increase from 2012 15.7% of Gross Domestic Product (GDP) to 21.4% by 2022 (40 year average = 18%).

CBO also produced projections under an alternative fiscal scenario to show potential outcomes. If Congress decided to extend the tax cuts and spending policies for some period of time the economy would continue growing albeit at a slow pace but deficits would increase to likely unsustainable levels.  Unemployment would hover just above 8%. Debt held by the public would climb to 90% of GDP by 2022. The country has not witnessed this level of debt since the period just after World War II.

Program Cuts Will Affect Everyone!

If Congress is unable to reach an  agreement on the expiring Bush-era tax cuts and budget sequestration amounting to $109 billion dollars in program cuts occur across multiple federal agencies, every sector of the U.S. economy will be impacted. Every interest group and lobby will be vying to protect their interests and programs prior to the sequestration date. Your organization needs to make sure that your points of view are heard and that the impact to favorable programs are minimized.


Cansler Consulting is a certified lobbying practice that is experienced in the multi-faceted and inter-related industries of Agriculture, Food and Drug Safety, Rural Healthcare, Transportation & Infrastructure, International Trade and Energy. Through our congressional and regulatory relationships established for over two decades we can help you influence the policy makers on Capitol Hill and navigate the federal budgeting process. You can contact us at info@canslerconsulting.com or at (202) 220-3150.

Tim Cansler
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