As per yesterday’s CBO update, there’s been a boomlet of page-A-1-above-the-fold stories on the serious risks to the economy of going over the fiscal cliff.* That’s true—the US economic bicycle is already too wobbly to sustain a $500 billion fiscal contraction over the course of 2013.
But that’s the thing these articles are leaving out: the recession scenario assumes you go over—and stay over—the cliff. If it takes going over to get a responsible budget deal—one that quickly reverses the impact of the tax increases and spending cuts (see video clip below–watch the whole thing)—the result will be a lot better for our fiscal and economic future than another can kick to another super committee.
*To be fair, the CBO slightly deepened the recessionary impact of the cliff in this report relative to their earlier one. Their downward revision for 2013 “…primarily reflects two factors: One is the agency’s reassessment of the underlying strength of the economy heading into next year. The other is that the fiscal tightening that will result from current law in 2013 is larger than previously estimated…”