CBOE Sees More of a Fiscal Cliff Than Others

“WASHINGTON (Reuters) – Massive spending cuts and tax hikesdue next year will cause even worse economic damage than previously thought if Washington fails to come up with a solution, Congress’ budget referee said on Wednesday.

The Congressional Budget Office said failure to avoid the so-called “fiscal cliff” of expiring tax cuts and automatic spending reductions would cause U.S. gross domestic product to shrink 0.5 percent in 2013. Previously, the non-partisan CBO forecast full-year GDP growth of 0.5 percent.

The first half of 2013 will be particularly difficult, the CBO said in its mid-year forecast update. Tax hikes and spending cuts will cause GDP to shrink 2.9 percent in the first half, compared with a prediction in May for a 1.9 percent contraction.”

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