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Economist Peter Morici on the impact on the economy of reaching the fiscal cliff.
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Economy.
Third quarter G-8 GDP came in at 2% today.
Not great better than the -- one point 3% growth rate of last quarter but -- news survey of economists says they're still no light at the end of the tunnel.
If automatic spending cuts kicking in.
It could cost the economy a hundred billion dollars it it's ignore so they say that tax hikes that could come.
Are twice as big of a problem they would cost 200 billion dollars -- very favorite economist Peter -- Here to commiserate with me over this one.
I you know this report is staggering.
I like fell I have to say when somebody goes out -- quantify the impact of these things because I don't want emotion I wanna focus in on the numbers so let's do that.
200 billion dollars out of the private sector if the bush tax cuts go away a hundred billion.
Of government spending that would stop under the sequestration.
To those numbers sound about right you and is there a multiplier work -- does it matter more.
If you take money away from.
The consumer and forms of those -- -- operating tax cuts for the government spending.
-- I don't know that it it matters more over the period of a couple of years but the immediate effect is that the tax.
Increases will take effect and people have to pay the taxes and spending will go down.
I don't know that sequestration is going to -- -- as quickly as people say.
In there will be a reduction in spending over the course of the year -- don't know -- happen as quickly there's a real danger the tax increases could throw us right into recession right.
I mean -- yeah -- 200.
Billion dollars out of the hands of the private sector.
What is that immediately due to GD because that's what we're talking about here today we're talking about the GDP number in this would be just taking a hammer to bat.
It be about 350 billion to be good for about 2% that it will happen pretty quickly.
As a consequence we likely see -- recession.
If -- -- Obama gets reelected.
And there's a stalemate because he does he -- an electoral majority L Electoral College majority but not electoral majority.
And is a stalemate with the Republican House.
We can easily see that stalemate caused the mother of all recessions that is a recession that we don't recover from and that we call in economics depression.
Yeah okay so you're saying it would take 2% away from GDP these tax cuts expire -- we heard today that GDP is growing it to present that would take us right to zero.
Does add a bunch of economists -- get -- they estimate.
That if you coupled that with the sequestration thing that would be something like three point 625 point 2%.
Decline in GDPs that would be deep into negative territory right.
Absolutely and that you you must remember that if you're 2% growth that you get down to -- -- -- It's really not sustainable no odd because just like a man riding on a bicycle it's so slow he falls off.
Now what we're growing about a slow as we can get away with what -- tumbling down.
Yeah in this 2% by the way today that was better than expected is actually horrible -- we continued at this rate.
It would take us like 789 years to add back jobs.
To get to the last administration's low unemployment rate of like 45% right I mean it would literally take 678 years.
It would take at least that long perhaps longer especially you know I expect people to get off the bench -- -- -- looking for work again.
But let's but -- some perspective you know Ronald Reagan inherited a mess to double digit inflation double digit.
Interest rates.
-- sitting -- high oil prices.
And unemployment they have picked -- ten point 8% at this point when he was running for reelection in the third quarter.
He had his recovery going at six better than 6%.
-- the economy going three times as fast as mr.
Obama the important message here is it doesn't have to be this way.
Its -- stewardship it's just it's just lousy leadership and policies that aren't.
Essentially smothering growth yeah so -- Peter -- you -- so Smart thank you for coming on the show we appreciate it --
