Fresh reports pointing to a slowdown in the struggling U.S. economy, coupled with worries of Europe's fiscal woes, have experts warning that Recession 2013 is inevitable.
Just last month, the nonpartisan Congressional Budget Office reported that unless lawmakers move to avert scheduled tax increases and spending cuts at the end of this year, a recession is likely.
This marked the first time the CBO has forecast a recession resulting from the fiscal cliff.
The CBO projected that gross domestic product (GDP) will contract by 1.3% in the first half of 2013 before growing 2.3% later in the year. Annualized, GDP would grow just 0.5% in 2013.
That forecast is an about face from January when the CBO forecast a 1.1% GDP growth in 2013 (if policies are not dealt with).
The report stated, "Given the pattern of past recessions as identified by the National Bureau of Economic Research, such a contraction in output in the first half of 2013 would probably be judged to be a recession."
Now other economic experts are saying the same.
Recession 2013: A Popular View
Even Fed Chief Ben Bernanke has warned that shocks from the scheduled changes will most probably cause the economy to contract, resulting in a recession.
"It's very important to say that, if no action were to be taken by the fiscal authorities, the size of the fiscal cliff is such that I think there's absolutely no chance that the Fed could or would have any ability to offset, whatsoever, that effect on the economy," said Bernanke. "I am concerned that if all the tax increases and spending cuts that are associated with current law would take, absent congressional actions…that'd be a significant risk to the recovery."
Legendary investor and commodities guru Jim Rogers also chimed in and said the country's massive debt load will plunge the U.S. into a recession in 2013. Rogers added that the Fed is only making the situation worse.
"Every four to six years since the beginning of the Republic, we've had economic slowdowns, we've had recessions. Always. It's coming again," Rogers said in an interview with Newsmax TV. "You can add as well as I can-in 2013 or 2014, we've going to have another slowdown, whether it's caused by Europe or who knows what is going to cause it, but it's coming."
Any Other Option for 2013?
It seems as if the nation is in a lose-lose situation.
We've already discussed how the spending cuts and tax increases can hurt the country. If Congress and the Obama administration nix the automatic cuts and taxes, growth would rise 4.4%, the CBO report stated.
But the CBO warned that unless alternative spending cuts were implemented, the national debt would grow at unsustainable rates and hurt long-term growth.
With Democrats and Republicans at odds over economic issues and not likely to take on the fiscal cliff until after the November presidential election, lame duck actions could prolong the agony of uncertainty into 2013.
Right now the only certain thing is that everyone should be prepared for Recession 2013. It's not "what if" that matters, it's "what will be."
Related Articles and News:
- Money Morning:
Fiscal Cliff 2013: How Investors Can Prepare
- Money Morning:
How this Year's Election Will Shape "Recession 2013"
- The Hill:
CBO: Recession in 2013 unless Congress acts on fiscal issues
Jim Rogers: U.S. to plunge into recession on 2013
- Money News:
Jim Rogers: If You Are Not Worried About 2013, Please—Get Worried