November 1st, 2012
08:20 AM ET

Breaking the deadlock

By Fareed Zakaria

Unless Congress acts, the spending cuts and tax increases that would be triggered automatically next January would take 5.1% out of the country's GDP in one year, according to the Congressional Budget Office. That would be one of the most severe experiments with austerity in history–larger than anything Greece, Spain, Italy or the U.K. has tried. In fact, it is almost three times the size of Britain's program. And the results of those European austerity policies have thus far been a dramatic slowdown in economic growth and a sharp spike in unemployment. Virtually every economist who has studied this believes that similar measures, even if enacted for a few months, could push the U.S. into a double-dip recession.

Even a prominent CEO-sponsored public campaign geared explicitly toward deficit reduction has warned that this much reduction this fast would be catastrophic for the country. In fact, just the fear that it might happen has already stopped companies from expanding. And once again, the rest of the world watches to see if the U.S.–the center of the global economy–will actually commit economic hara-kiri.

Read the full column at TIME here

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soundoff (6 Responses)
  1. Patrick

    The big problem here is that since the M.I.C.(military-industrial-complex) owns the vast majority in Congress and the White House, there is virtually no chance for a reasonable cut in military spending nor foreign aid. These two items have become a veritable cancer on the national treasury but the people in Washington today think only about themselves and how to become yet wealthier! This will, if unchecked, bring this country to it's very knees!!!

    November 1, 2012 at 11:27 am | Reply
    • j. von hettlingen

      Indeed to cut spendings would pose a huge problem for Romney, should he be elected. If not, he might just as well be relieved. Sitting in the Oval Office is not an enviable job momentarily. Perhaps Romney should let Obama stay for another term to clean up the mess, before he claims this office next time.

      November 1, 2012 at 6:04 pm | Reply
  2. matt

    Term limits aren't a reality The dream continues.

    November 1, 2012 at 1:44 pm | Reply
  3. Muin

    How come U.S have 16 trillion dollars in deficit if CBO is such an effective organization? Did it forget to give warning about consequences of tax cut? Did it forget to give warning about consequence of bush medicare deal and keeping iraq war off the budget? I won't get into repeal of glass stegall act because CBO don't have talented people to understand the consequence of repealing glass stegall act. Even math PH. D holder Alan Greenspan did not understand why CDO's were getting triple A rating from rating agencies.

    November 2, 2012 at 1:35 am | Reply
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    November 6, 2012 at 3:11 pm | Reply

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