President Barack Obama and Congress face the question of whether to step back from the fiscal cliff by not allowing the current tax rates to expire at year end and by postponing the spending curbs mandated by last summer’s Budget Control Act.
Before year end, Congress must also decide whether to allow a 27 percent cut in Medicare payments to doctors to take effect – as required by a 1997 budget law -- or whether to put it off, as it has done for the past several years.
“We think that economic growth right now is being held back by the anticipation of this fiscal tightening, both in terms of the possibility of a sharp downturn, but also just uncertainty about what will happen,” Elmendorf told reporters at a CBO briefing.
“The sooner that uncertainty is resolved – especially if it is resolved in the direction of less fiscal tightening next year, then the stronger we think the economy would be” for the rest of this year and next year.
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