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Fasten your seat belt, the fiscal cliff approaches [Video]

May 23, 2012|By David Lazarus

It's called the fiscal cliff, and Americans are going to drive off it early next year, the nonpartisan Congressional Budget Office has warned.

Since it's never too early to worry about the economy plunging back into recession, let's turn away momentarily from Facebook's IPO and other such matters of import to appreciate the complete lack of responsible leadership coming from our elected representatives in Washington.

Several big tax cuts, including the budget-busting Bush tax cuts for rich people, will expire in January as deep spending cuts take effect. Economists say the double whammy of tax hikes and spending cuts will pistol whip the economy after four years of stimulus measures.

The economy would contract at an annual rate of 1.3% in the first half of next year, the CBO report concludes. Slow growth would resume in the second half, it forecasts.

"Such a contraction in output in the first half of 2013 would probably be judged to be a recession," the CBO warns.

But extending the tax cuts and dodging the automatic spending cuts would push deficits even higher and sink the country deeper into debt. It's not a good situation.

What's the solution? I'll leave that for deeper thinkers.

But I do know that this is not the time for playing political chicken. What's needed is politicians capable of making grown-up decisions for the benefit of the entire country.

What we'll almost certainly get instead if the usual posturing and brinksmanship that is quickly turning the United States into a banana republic.

And every day, that fiscal cliff draws a little closer.

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