The non-partisan Congressional Budget Office said simply allowing the tax cuts adopted under President George W. Bush to expire and automatic spending cuts to take place would lead to a recession, with the economy shrinking by half a percentage point, The Hill reported. The CBO predicted a rise in the unemployment rate from 8.2 percent to 9.1 percent during 2013.
"The sooner that that uncertainty is resolved, the stronger the economy would be in the second half of this year," CBO Director Doug Elmendorf said. "Economic growth right now is being held back by the anticipation of this fiscal tightening."
Republicans in the House have passed legislation that would extend the tax cuts and cut spending. Democrats are pushing for a plan that would extend tax cuts on all income up to $250,000 and cut spending, but not as much as the GOP proposal would.
House Speaker John Boehner, R-Ohio, accused Democrats of "threatening to drive us off the fiscal cliff and tank our economy in their quest for higher taxes."
"I would urge President Obama and congressional Democrats to work with us to stop the coming tax hike that threatens our economy and replace the looming defense cuts with common sense reforms," he said.
Obama has repeatedly urged Republicans to allow top marginal tax rates to return to pre-tax-cut levels.
"But instead of doing the right thing, Republicans in Washington have chosen to double down on the same failed policies that led to the economic crisis in the first place," he said in a statement released by the White House. "They're willing to hold the middle class hostage unless we also give massive new tax cuts to millionaires and billionaires -- tax cuts we can't afford that would do nothing to strengthen the economy."