CBO:Economy will contract by 0.5% in 2013 if Bush-era tax rates expire

The nonpartisan Congressional Budget Office (CBO) on Wednesday warned the economy will enter a recession next year if the country goes over the so-called fiscal cliff.

In its most dire warning yet about the fiscal cliff, the CBO said the economy would contract by 0.5 percent in calendar year 2013 if the George W. Bush-era tax rates expire and automatic spending cuts are implemented.

Unemployment also would rise from 8.2 percent in 2012 to 9.1 percent next year, the office estimates.

“The stakes of fiscal policy are very high right now,” CBO Director Doug Elmendorf said. He urged Congress to act in September to avoid the fiscal cliff.  (Continues)