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Former CBO Director Douglas Holtz-Eakin on the impact on the economy if Washington does not take steps to avoid the fiscal cliff.
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My next guest says falling off these so called the school clip will not only raise taxes on every single taxpayer.
It will also put millions of more middle -- households who aren't currently paying taxes back on the tax rolls and at a rate of 15%.
Also says it would lead -- 6%.
Point drop in GDP.
Increasing unemployment by 2% resulting in nearly three million more people unemployed.
That doesn't sound like much of a good idea and no matter what is said in Washington does.
Joining us now the man making that forecast former Congressional Budget Office director Douglas Holtz eakins.
President of the American action -- good to have you with -- Thank you Lou -- if this is.
I mean these are.
Dramatic.
Dramatic.
I can't say it anyway I mean that is necessary stop.
-- -- even think that anyone would make a move a policy decision that would lead to any one of these.
Consequences.
-- seems like sheer madness.
Well it it's a legacy of not doing business in the past and now we have you know congress'.
Dirty laundry essentially build up at the end of the year.
And this is a big a big hit its.
400 billion dollars of tax increases 200 billion dollars of spending cuts.
600 billion dollars total that's 4% of GDP.
At a time we're only growing at 20% at best.
You don't have to be -- economists fear that's just a bad idea and the notion that somehow they should be up political lever.
To get one party or the other to do something is really playing with Americans jobs and you know it's hard to defend that as an -- fairness.
Get away -- you may have noted here I would.
I have taken to calling a -- gotten not a tax again because.
They democratic leadership -- taken ownership of the fiscal -- And -- the straightforwardly senator patty murdered saying that who you know -- you know they're the Democrats are quite comfortable in sending us into recession.
Creating these consequences if Republicans refused to raise taxes on the -- This is put ostrich so we'd even have the discussion level on the result.
What's it going to take to avoid.
This.
Horrible outlook that you provided.
Well way it's gonna require action and one of the things that -- used to buttress.
-- arguing is that notion that this is generally cliff.
It's a slow -- and we won't really feel it and in January it it'll take longer.
That's exactly backwards out what we're gonna have investors looking at the dividends actually going from fifteen to 45%.
And they're gonna get nervous and search shuffled their portfolios we're gonna contractors.
Sending out notices that they're gonna give layoffs and that's gonna.
Her economic confidence the CEO.
Said that this would lower growth in the latter -- to -- all by half a percentage point.
Certainly we -- going to start paying for the fiscal cliff now not later and making -- -- just makes no sense at all I.
And the idea that the president.
Making this proposal is one thing that the democratic leadership would embrace it and take ownership for the fiscal clip -- acts.
-- Baghdad it is truly -- again.
And the idea that they were going to the polls in ownership of this threat.
Putting this nation in and millions of American workers in this jeopardy is under political suicide.
I don't understand it on give you can put aside you might forecast a recession which I'm I'm quite confident on how big it would be I don't know.
Just look at the pieces of this you know if the bush tax cuts to sunset -- raise taxes and every American the 10% bracket goes away that hurts our low income Americans.
But the marriage penalty relief goes away the hurts every married couple of America.
They don't fix alternative minimum tax and and the middle class has the fork -- -- lots of money.
That does not seem like a wise thing to do -- -- -- either politically -- economically.
Thank thank you for being with -- we appreciate -- Douglas -- figure.
