The fiscal cliff may be overblown - The Term Sheet: Fortune's deals blog Term Sheet - 0 views
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By not going off the cliff, the CBO estimates that deficits over the next decade would rise by a total of $7.7 trillion (that's "trillion" with a "T"). That would bring the total national debt somewhere to around $24 trillion by 2023 which is equal to 90% of GDP (that's pretty high). If we go off the cliff, don't expect a clean slate, though, as the nation would still have a significant budget deficit equal to 58% of GDP in 2023 due to all the mandatory spending associated with the impeding explosion in costs emanating from Social Security and Medicare.
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The cuts in spending and the increased taxes will cause thousands of people to lose their jobs pretty much overnight (millions of Americans owe their jobs directly or indirectly to federal government spending). This would push unemployment up across the country from 7.9% to 9.1%. As a result, the CBO projects that real GDP would drop by 0.5% in 2013 after growing by 2.1% in 2012. Real GDP would fall at an annual rate of 2.9% in the first half of next year, tipping the nation into a recession that the CBO figures would be similar in magnitude to the one the nation experienced following the first Persian Gulf War in the early 1990s (for those who didn't live through that, it was bad)
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Indeed, the fiscal cliff is about as real of a problem as the nation's burgeoning national debt – it's theoretically bad, but it isn't bad enough for Washington to risk making the short term any more economically unpleasant than it has to be. After all, there will be elections for the House in just two short years, so neither side wants to go into that election cycle trying to defend why the government instituted growth killing spending cuts while allowing taxes to shoot up to address some arbitrary debt load that investors continue to fund for next to nothing
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