On January 1, 2013, tax cuts enacted under the Bush Administration are set to expire. On that same date, incremental automatic spending cuts, totaling approximately $2 trillion, are set to kick in. According to a study released yesterday by the Congressional Budget Office [CBO], the combined effect of these tax increases and spending cuts will lead to a recession in the first quarter of 2013. Specifically, the CBO points out that under this double whammy of automatic tax increases and spending cuts,
[w]hich will occur under current law, growth in real (inflation-adjusted) GDP in calendar year 2013 will be just 0.5 percent, CBO expects—with the economy projected to contract at an annual rate of 1.3 percent in the first half of the year and expand at an annual rate of 2.3 percent in the second half.…
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