The effects of the coming “fiscal cliff” are already being felt in the U.S. economy, cutting 0.6 percent from GDP growth this year with huge job losses, drops in personal income, and a possible recession in 2013 on the horizon, a new report by the National Association of Manufacturers
The report, “Fiscal Shock: America’s Economic Crisis,” paints a grim picture of the failure of the government to address the looming $100 million in budget cuts adopted last year by Congress and the end of $400 million in tax cuts.
“The worst could be ahead,” the report said. “If the fiscal contraction happens, the economy will almost certainly experience a recession in 2013 and significantly slower growth through 2014.
“From 2012 to 2015, the economy will lose 12.8 percent of the average annual real GDP it could have attained with moderate growth, sapping critical resources from all economic sectors. Job losses will be dramatic. By 2014, the fiscal contraction will result in almost 6 million jobs lost, and the unemployment rate could reach more than 11 percent. Households will take a big hit. Real personal disposable income will drop almost 10 percent by 2015. “
The report also maintains that manufacturers of consumer goods will see large “contractions of their industries,” as will defense contractors and predicts it will take “most of the decade for economic activity and employment levels to recover from the fiscal shock.” The report added that another recession could “permanently reduce living standards in the United States.”
The report called the potential job loss “dramatic” and said the economy could lose 3.6 million jobs by 2013 and in 2014, “the peak year of loss, employment is 5.7 million jobs lower relative to the baseline.” The unemployment level could be at nearly 12 percent in 2014 and remain poor through 2015.
“Even if the Administration and Congress resolve the uncertainty before the end of the year, economic growth already has sustained significant damage,” the report concluded. “The short-term fiscal contraction set for 2013 will trigger long-run durable losses to GDP, productivity, and real income.
“Even under the best-case scenario, it will take almost a decade for economic activity and employment to reach the levels they would have reached without a fiscal shock. While the spending cuts and tax increases reduce the federal deficit and debt, the substantial negative consequences of not addressing the end-of-year fiscal crisis before it happens will be
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