Under current law, a sharp reduction in the federal budget deficit between 2012 and 2013 will cause the economy to contract, the Congressional Budget Off ice projects, but will also put federal debt on a path more likely to be sustainable over time. To illustrate the eff ects of fiscal tightening, CBO compared its projections under current law (the “baseline” projections) with projections under an alternative set of policies — two scenarios in a broad spectrum of choices.
Before one gets excited, this forecast is based on the fiscal cliff occuring – in other words that Congress will take no action on the expiring Bush era tax cuts.
