An ongoing stalemate in Congress could have dire consequences for the economy, according to the nonpartisan Congressional Budget Office's latest report.
A combination of massive spending cuts and the looming expiration of the Bush tax cuts, both set to go into effect New Year's, could send the U.S. into another recession in 2013. This despite the significant impact both would have on lowering the deficit, a major focus in the tea party-infused House over the last two years. If the spending cuts go into effect and the Bush tax cuts simultaneously expire, the deficit in fiscal year 2013 would be $500 billion less than in 2012--but according to the CBO report, the belt-tightening would increase unemployment and bring down real gross domestic product (GDP).
The looming economic nightmare has been dubbed a "fiscal cliff" by economists.
Both parties are pointing fingers at each other. Republicans call the CBO's report an indictment on President Obama's failed economic policies, while the president blasts Republicans for holding the country hostage with their refusal to allow the Bush tax cuts to expire for wealthy Americans.
"Instead of doing the right thing, Republicans in Washington have chosen to double down on the same failed policies that led to the economic crisis in the first place," White House press secretary Jay Carney said in a statement. "They're willing to hold the middle class hostage unless we also give massive new tax cuts to millionaires and billionaires--tax cuts we can't afford that would do nothing to strengthen the economy."
Carney also said Congress "needs to act right now" to replace the $1.2 billion in "arbitrary spending cuts" with higher taxes on wealthy Americans and large corporations.
The president has called on letting the Bush tax cuts expire on Americans making more than $250,000, while keeping them in place for everyone else.
Mitt Romney's campaign fired back, calling the report another indicator "of President Obama's economic policies that have resulted in overspending, increasing debt, and a growing financial burden on the next generation."
In addition to the $1.2 billion in cuts and the Bush tax cuts, Congress needs to address several other policy changes before the year is up: the expiration of emergency unemployment benefits, the expiration of a 2 percent payroll tax cut, scheduled reductions in Medicare payments to doctors, and other changes.