The nation would be plunged into a deep recession during the first half of next year if Congress fails to avert nearly $500 billion in tax hikes and spending cuts set to hit in January, the Washington Post is reporting that congressional budget analysts said Wednesday.
The New Year's belt-tightening -- known as the "fiscal cliff" or Taxmageddon -- would disrupt recent economic progress, push unemployment rate up to 9.1 percent by the end of 2013, and cause economic conditions "that will probably be considered a recession," the nonpartisan Congressional Budget Office (CBO) said.
That outlook is considerably darker than the the agency forecast in January, when the budget office predicted that the fiscal cliff would trigger a modest recession in the first half of 2013, followed by a quick recovery.
Since that forecast was issued, Congress has steepened the fiscal cliff by extending a temporary payroll tax break and emergency unemployment benefits, which are now also set to expire in January.
In addition, the budget analysts concluded that the underlying economy is weaker than previously predicted. In its latest budget outlook, the CBO predicts that the federal deficit will be $1.1 trillion in the fiscal year that ends in September, marking the fourth straight year of deficits in excess of $1 trillion.