If Congress is not willing to develop a sound plan to reduce the debt and balance the budget by raising taxes and cutting spending, then it is better to face the fiscal cliff. The long-run consequences of kicking the can down the road will be apocalyptic.
If $641 billion is extracted from the economy, it would lead to a contraction in income and jobs by an amount that is much greater than the original spending cuts. That is, the multiplier will work in reverse.
The Congressional Budget Office (CBO) projects that GDP growth will average 2.2% in 2012. However, if the fiscal cliff occurs, growth in 2013 will decrease to 1.1%. This will occur if stimulus policies expire.
