U.S. lawmakers will allow the country to go over a fiscal cliff on New
Year's Eve but quickly return in January and deal with tax increases and
spending cuts striking at the same time retroactively, said Peter
Orszag, vice chairman of global banking at Citigroup.
At the end of the year, the Bush-era tax cuts and other tax breaks expire at the same time that automatic cuts in government spending kick in, a combination known as a fiscal cliff that could send the country sliding into recession next year if left unchecked by lawmakers.
Don't expect lawmakers to address the cliff during this election year, but do expect them to try and address the problem retroactively after elections by adjusting the timing and scope of the adjustments as well as lifting the nation's borrowing limits to meet spending needs, Orszag said.
"I unfortunately think the most likely scenario is we actually go over the cliff, and then there's a deal that's cut in early or mid-January in which you combine a more progressive tax cut that what would have just expired with entitlement reform and simultaneously raise the debt limit," Orszag told CNBC.
The nonpartisan Congressional Budget Office has said failure to address the fiscal cliff will spark a recession, though that is not likely to occur, said Orszag, also former director of the Office of Management and Budget in the Obama administration.
At the end of the year, the Bush-era tax cuts and other tax breaks expire at the same time that automatic cuts in government spending kick in, a combination known as a fiscal cliff that could send the country sliding into recession next year if left unchecked by lawmakers.
Don't expect lawmakers to address the cliff during this election year, but do expect them to try and address the problem retroactively after elections by adjusting the timing and scope of the adjustments as well as lifting the nation's borrowing limits to meet spending needs, Orszag said.
"I unfortunately think the most likely scenario is we actually go over the cliff, and then there's a deal that's cut in early or mid-January in which you combine a more progressive tax cut that what would have just expired with entitlement reform and simultaneously raise the debt limit," Orszag told CNBC.
The nonpartisan Congressional Budget Office has said failure to address the fiscal cliff will spark a recession, though that is not likely to occur, said Orszag, also former director of the Office of Management and Budget in the Obama administration.
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