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“Economic growth will remain slow this year,” begins a report from the Congressional Budget Office published this week. The top concerns illustrated by the report are the size of the nation’s deficit and debt, the rate of unemployment, and the federal policy that guides it all.
Government agencies tend to make forecasts based on what the laws on the books are, and not what the hope in the market is. The March 1 deadline for the sequester — $85 billion in spending cuts this fiscal year, with nearly $1.2 trillion scheduled over the coming years — looms ahead of market participants with the same menacing presence as the fiscal cliff. The reason, perhaps, is that these spending cuts are the half of the fiscal cliff that Congress couldn’t find the time to deal with before the New Year deadline, and decided to push them off for two months while they passed a tax bill.
As it stands, the CBO projections on the size of the nation’s deficit and debt are based on the tax measures that were passed — higher taxes on the wealthy and the expiration of the payroll tax holiday, to name just two main provisions — as well as the sequester that is on the books. If congressional leaders manage to agree on a different set of spending cuts, then the CBO’s projections will need some editing…
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