Most Americans expect the U.S. economy to slide into a recession next year whether policymakers avoid the fiscal cliff or not, a new Rasmussen Reports survey finds.
The White House and Congress remain at odds over fiscal reforms, and failure to agree on a 2013 budgetary framework would allow sweeping tax hikes to kick in at the same time deep government spending cuts take effect a the end of 2012, a combination known as a fiscal cliff that could tip the country into a recession next year.
Republicans in the U.S. House of Representatives canceled plans to vote on a budget proposal put forth by House Speaker John Boehner, R-Ohio, widely known as Plan B, that called for tax hikes on those with incomes over $1 million, well above a White House plan that would hike taxes on those with incomes topping $400,000.
Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.
Further delays could prove harmful or even fatal for U.S. gross domestic product growth next year, as even if a deal is struck, confidence has been bruised to the point that households and businesses have put plans to spend on hold, which could contract the economy.
If a deal is reached before 2013, 54 percent of voters believe a recession is likely next year, the national telephone survey reveals.
On the flipside, if no deal is reached, 70 percent feel a recession is likely, with hopes fading on both sides of the political aisle.
“Most Republicans and unaffiliated voters think a recession is likely either way. If a deal is reached, Democrats are evenly divided over whether or not a recession is coming,” Rasmussen Reports stated.
“However, in the absence of an agreement, 61 percent of those in President Obama’s party believe a recession is at least somewhat likely.”
Some economists have said policymakers may not reach a deal by Jan. 1 but will quickly work together in January to avoid taxes from rising on most Americans and address spending cuts as well.
Such policy would allow markets to bungee jump, falling at first and shooting back afterwards should fiscal reforms become reality, though the fallout of such brinkmanship is already beginning to cool the economy.
“What’s been missing in this recovery has been confidence,” said Michelle Meyer, senior U.S. economist at Bank of America Merrill Lynch, according to The New York Times.
“We’d see a healthy recovery if it weren’t for this uncertainty and the potential shock from Washington.”
Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.
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