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The United States will have a recession early next year unless Congress acts to cut short a fiscal cliff of higher taxes and lower spending, the Congressional Budget Office projects.
The CBO predicts that the deficit would be cut roughly in half if all of the tax and spending cuts take effect on schedule, but at a cost. The CBO projected the economy would shrink by 1.3 percent in the first half of 2013 and then expand at a 2.3 percent rate in the second half of the year.
If Congress blocks all of the tax and spending cuts, the CBO expects the economy will grow by 4.4 percent in 2013.
Senate Majority Leader Harry Reid quickly jumped on the report to call on Republicans to agree to raise taxes on the wealthy.
“We could avoid the so-called fiscal cliff tomorrow if Republicans would agree to extend the middle-class tax cuts, which would provide certainty to millions of families and give us ample time to deal with the other challenges facing Congress at the end of the year,” the Nevada Democrat said.
“If Republicans want to walk away from the bipartisan spending cuts agreed to last August, they will have to work with Democrats to replace them with a balanced deficit reduction package that asks millionaires to pay their fair share,” he added.