Congressional procrastination could lead to chaotic decision-making on the federal budget after the November elections, but many economists believe this procrastination is already harming the economy.
The damage stems from widespread uncertainty over what elected officials will do, if anything, about the “fiscal cliff” – a combination of sharp “automatic” spending cuts and the scheduled expiration of tax cuts at year’s end.
The Wall Street Journal reported today on its survey of 47 economists, noting their widespread concern about the growing economic cost of congressional inaction. This “adds insult to injury to an economy already flirting with a stall rate,” said Diane Swonk of Mesirow Financial. Another analyst, Julia Coronado of BNP Paribas, said: “We are already feeling the effects in hiring and investment.”
The general expectation in Washington is that elected officials will not take action on the fiscal cliff until after the elections, despite encouragement throughout much of this year from The Concord Coalition and many other analysts and groups to work out a bipartisan action plan as soon as possible....