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CBO warns of US falling off 'fiscal cliff'

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    Government study says tax hikes, budget cuts could trigger recession in 2013

  • Duration 3:50
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Every delegate America there's a dire warning out there from the Congressional Budget Office that the CBO that says the US -- likely dip into another recession.

As early as next year if nothing is done -- the taxing issue and the spending issue Republican senator John Thune of South Dakota -- senate Republican conference and you're on the senator good morning to you.

Good morning bill what where are we -- it is is this the fiscal cliff that people talk about.

It is there's a big pile up at the end of the year because you've got all the tax rates going up marginal income tax rates capital gains tax rates dividends tax rate tax rates.

State tax all these tax provisions expire you've got this sequester.

Which is going to take effect that would put draconian cuts into the defense budget.

And and frankly that's a result of congress not having passed a budget three years -- reason we've got to sequester is because for the third consecutive year now the senate has not acted.

On a budget so this is what you end up with but that happens at the end of the year the debt limit increase happened that the into the year.

It's going to be very very difficult if if all these things come up in the haze of a lame duck session of congress.

To make a lot of sense of it to the American people you know -- it smells in our best interest to move and get some of these things address now as well as opposed to waiting till then how possible is that.

Because some -- here in gridlock.

Especially well sentence.

I I think that my hope would be at least that we could get something done on taxes and old House of Representatives is talking about taking up something on taxes that it -- least extend the term rates in the next year when we can hopefully get into -- a full blown debate about tax reform.

But if we wait until the very end of the year and all this stuff is negotiated I think and I frankly I think that's why.

The president and his folks would like to see that happen because they wanna leverage these things against each other.

The more certainty we can get to the markets and to investors the more we can get this off the table sooner I think the better off ideas and is.

Do you I think there will be a decision on this before the election.

Everybody's got a hold their cards right now that.

Well I thought we would like to see that happen I don't think there's any -- -- a bomb on the part of the president or the Democrats in congress to do this before the election.

I think they figure they will benefit by having this debate at the end of the year in the -- of that -- -- -- duck session of congress.

But as you pointed out the Congressional Budget Office is now saying that that could really cost -- economic growth next year.

And and we all believe that if we don't get these tax rates -- standard.

What's gonna have a profound impact on the economy is gonna cost us a lot of growth a lot of jobs you know Harry Reid saying he's saying that Republicans need to express Maurer.

What was it.

Flexibility.

Greater flexibility and raising taxes.

What where are you as a party.

We we believe fundamentally what we have bill as a spending problem not a revenue problem it's not that we tax too little students spend too much and that we have to address what is driving federal spending and that is entitlement programs we need to deal with.

Reform of those programs in order to save social security and Medicare.

And the Democrats don't want to go there now I think Republicans are more than willing to talk about the tax code reform in the -- or hopefully achieving.

More revenue the old fashion way which is you economic growth.

But the Democrats -- will not deal with this issue of what's really driving federal spending financial security Medicare Medicaid food -- those things that we call mandatory spending in the budget.

That has to be addressed.

If we're gonna get the spending side of this equation under control and I don't think you can start talking about revenues.

Until we demonstrate the American people that we're serious about spending -- our senator thank you for your time there we're gonna watches Hayward goes under you're you're pushing for transparency act on.

The -- sequestration -- to figure out what is taught him what it's not.

What can be saved him what's gonna go off the table senator so we'll bring you back real soon Johnson all right thank --

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