October 23, 2014

Gloomy CBO economic report has attention of Nebraska’s senators (AUDIO)

A dire prediction of what might happen to the economy if Congress does nothing to head off drastic budget cuts and the expiration of current tax breaks has the attention of Nebraska’s senators.

The gloomy forecast comes from the Congressional Budget Office which predicts that if automatic budget cuts go into effect and Bush-era tax breaks expire, the economy will plunge back into recession. The two-barrel shot would suck $607 billion from the economy, causing it to retract by approximately 1.3% in the first half of next year, according to the report.

We asked Sen. Ben Nelson if he believes Congress has the political will to deal with the problem.

“No I don’t,” Nelson responded, his gloom matching that in the report. “It’s an election year. It’s about electioneering and it’s about who gets control of Congress, who ends up in control of the White House.”

Nelson, a Democrat, blamed Republicans for refusing to consider tax increases to deal with the deficit. That stance has prompted Senate leader, Democrat Harry Reid of Nevada, to threaten to allow the automatic budget cuts to do into effect. Nelson also charged that Republicans don’t want to solve the problem, believing that inaction hurts the re-election chances of President Obama.

We have been here before. A deficit “supercommittee” tackled the deficit, yet failed to reach agreement on how to reduce it. That triggered a countdown to automatic cuts of $100 billion to be spread across-the-board among defense and domestic programs beginning next year. Congress failed to reach agreement on what to do with a myriad of tax breaks enacted during the Bush Administration and extended them for a year. They are due to expire at the end of the year.

Sen. Mike Johanns, a Republican, has a different perspective on the impasse than Nelson. Johanns put the blame on President Obama during an interview with Nebraska Radio Network. He said the president is in full campaign mode and unwilling to deal with the issue.

Johanns struck a more optimistic tone about Congressional action.

“One way or another, we have to find the political will, we have to reach across party lines,” according to Johanns. “This is going to take some effort to reach agreement on points that are very difficult to agree upon, but it has to be done.”

The CBO predicts the economy would rebound in the second half of next year, climbing back to 2.3% growth. If Congress acts, the economy could see solid growth next year, according to the report, which estimates economic growth of about 4.4% under that scenario.

AUDIO: Brent Martin reports [:59]