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What Happens If Congress Can’t Come Together?

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    Former CBO director Douglas Holtz-Eakin on the election, the fiscal cliff and the Fed.

  • Duration 3:39
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-- another four years of President Obama a Democrat led senate and a Republican led house.

I am looking forward to reaching out and working with the leaders of both parties to meet the challenge as we can only solve together.

Reducing our deficit.

Reforming our tax code.

Fixing our immigration system itself.

From corn oil.

But the nation is dangerously close to the fiscal -- another president may be earnest in his remarks can we expect congress to come together what happens if they do not.

Joining me now Douglas Holtz Aiken former director of the congressional.

Budget office.

Market participants today a lot of analysts notes floating around Wall Street saying don't think they're gonna come to a deal not so quickly.

Well I think we have a very very clear set of circumstances number one there isn't imminent economic danger raising taxes but 440 billion dollars at the end of the year is a recipe for recession.

Number two we have the same cast of characters -- -- failed comes agreement for quite some time and we -- very little time so.

There's good reason to be nervous.

But we did see in 2010 in similar circumstances the president say look we're not growing very fast we shouldn't be raising taxes withstand everything for two years.

I don't think you'll see two years there should be -- deal that gets -- safely to spring of 2013.

Where they take on the big debt.

It warnings are saying today is a weaker dollar and a big piece of that is that is the concern to Republicans -- actually -- -- that that they think the Fed is stoking inflation that's gonna come sooner rather than later they're gonna get the same policies -- -- Bernanke whoever succeeds Bernanke he leaves.

What do you make of that do you think that that's -- we're looking -- as far as -- forecast for the next -- lawyers -- I think is for this sensible forecasts are mean the Fed to comment on moves -- coming out of recessions typically if you look back in history.

This fed said it very clearly it's worried about downside risks is gonna -- even later.

And they have a hard job now -- mean unwinding what they've done is harder than things in the past.

And they can only do it as fast as we get our fiscal house in order so -- stock you.

I wanna send someone to show our viewers and show you this the -- forecast if you look at and there's federal spending but if you look at the debt forecast of this fiscal Clinton that mark in this can go to different ways for the economy we can go basically into another recession.

Spending goes down or get -- forecast is we we we actually.

And has had backup higher and things are are fixed like where's.

Your take right -- I think the crucial thing by getting past the end of the year without a recession is that we won't do real deficit reduction in foreign recession but it just won't happen in the US so.

He gets in the spring safely and then the -- to be a big budget deal and we know what the outlines look like.

Republicans have said we're not raising taxes and what should fix entitlements Democrats has set for years.

-- -- of these entitlements until you raise taxes.

Now's the moment the president said both sides are gonna have to give some it's time for principled compromise that team take us forward.

Do you think that in some way the president will take on some of the ideas that were put out there by governor Romney during election.

I think if he wants to be successful he is going to have to bend as well he likes to blame Republicans in the house but.

Now that's electoral politics it's now time to develop a legacy what will he accomplish and a second term.

To do that he -- Republicans and Democrats who's actually pass legislation he can't do don't want party's ideas okay really quick GDP what is your forecast for GDP.

If we don't -- over the fiscal -- -- we we wander along at something like got 2% ramping up next year with a stronger housing market so it's a three by the end of the year.

All right what they have got -- on the CBO good -- ask Doug great to see you think you might know that you had about as much slick design have so appreciate it coming up.

Honestly I didn't still -- you are still standing older grades are all right that is.

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