Economists at big banks and companies predict the U.S. economy will grow faster in 2013, but a poll on Monday showed their forecasts have a big caveat. Most believe Congress will steer away from sharp tax hikes and spending cuts.
The U.S. economy will likely expand 2.4 percent next year, up from projected growth of 1.9 percent in 2012, according to the survey of 44 forecasters made by the National Association for Business Economics.
Some businesses worry the U.S. government could trigger a recession by pushing the economy over what Washington is calling a fiscal cliff — about $500 billion worth of tax increases and over $100 billion in government spending cuts due to start on Jan. 2.
But the forecasters surveyed by the NABE — who included economists at Ford, Dupont, and JPMorgan — think most of the fiscal cliff dangers will be avoided, sparing the economy from much of the potential damage.
Some 55 percent of respondents think tax cuts enacted under former President George W. Bush will be extended for all taxpayers in 2013, rather than expiring at the end of this year.
Another 36 percent expect those lower tax rates will be extended for lower-income individuals but not for those with higher incomes.
Also, about four-fifths of the economists polled predict that planned spending cuts will be greatly watered down.
The NABE survey was carried out between Sept. 14 and Sept. 26.
The predictions gathered by the NABE stand in contrast to a scenario outlined by congressional analysts who have tried to project what running off the fiscal cliff would do to the economy.
The Congressional Budget Office said in August that such severe belt tightening would cause a 0.5 percent contraction in gross domestic product next year, likely triggering a recession.
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