The Congressional Budget Office has used the chilling phrase “fiscal cliff” to describe what could happen to the national economy as a result of upcoming tax cut expirations. Are we really in danger of another recession in 2013?
In January, the “Bush tax cuts” will expire for both the wealthy and the middle class. The Obama payroll-tax deduction for employers will also expire. The Affordable Care Act will also bring some tax increases. Meanwhile, more money will be geared toward aggressively shrinking the budget deficit, says Stephen Brown, head of UNLV’s Center for Business and Economic Research.
If increased government revenue is used to pay down debt, the deficit should drop from today’s 7.3 percent of gross domestic product to 2.4 percent by 2014, Brown says. Keeping that number low generally helps grow the economy.
But in the here-and-now, growth has been slowing. The post-recession rebound in Las Vegas visitor volume has been less bouncy than hoped, and Southern Nevada businesses are in wait-and-see spending mode in an election year. Couple this with the possibility that, after tax hikes, consumers and business owners may have a little less to spend next year, and some economists are uttering the dreaded words “double dip.”
The good news—relatively speaking—is that the potential second dip would be mild compared with the first one, Brown says. After all, will a few extra dollars in taxes really kill that many Vegas trips? Time will tell.