Testimony on the Fiscal Cliff

Video

Chairman Casey, Vice Chairman Brady, and Members of the Committee, thank you for inviting me to appear today to discuss the effects of the fiscal cliff on the economy.

The “fiscal cliff,” that is, the combination of automatic spending cuts and the end of multiple temporary tax cuts scheduled to expire at the end of this year, is estimated by the CBO to reduce the federal deficit in fiscal year 2013 by around $607 billion, or $560 billion after taking into account its effect on the overall economy1. Around two thirds of the $607 billion in savings stem from four tax increases that are scheduled to take place in 2013.

This dramatic budgetary shift would, of course, have a very large impact on the overall economy. In this testimony, I examine the potential short and long term effects of failing to address the fiscal cliff, and then relate lessons from the economics literature on the likely impact of various policy responses to the coming deadline.

Click here to read the full testimony as a PDF.

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About the Author

 

Kevin A.
Hassett
  • Kevin A. Hassett is the State Farm James Q. Wilson Chair in American Politics and Culture at the American Enterprise Institute (AEI). He is also a resident scholar and AEI's director of economic policy studies.



    Before joining AEI, Hassett was a senior economist at the Board of Governors of the Federal Reserve System and an associate professor of economics and finance at Columbia (University) Business School. He served as a policy consultant to the US Department of the Treasury during the George H. W. Bush and Bill Clinton administrations.

    Hassett has also been an economic adviser to presidential candidates since 2000, when he became the chief economic adviser to Senator John McCain during that year's presidential primaries. He served as an economic adviser to the George W. Bush 2004 presidential campaign, a senior economic adviser to the McCain 2008 presidential campaign, and an economic adviser to the Mitt Romney 2012 presidential campaign.

    Hassett is the author or editor of many books, among them "Rethinking Competitiveness" (2012), "Toward Fundamental Tax Reform" (2005), "Bubbleology: The New Science of Stock Market Winners and Losers" (2002), and "Inequality and Tax Policy" (2001). He is also a columnist for National Review and has written for Bloomberg.

    Hassett frequently appears on Bloomberg radio and TV, CNBC, CNN, Fox News Channel, NPR, and "PBS NewsHour," among others. He is also often quoted by, and his opinion pieces have been published in, the Los Angeles Times, The New York Times, The Wall Street Journal, and The Washington Post.

    Hassett has a Ph.D. in economics from the University of Pennsylvania and a B.A. in economics from Swarthmore College.

  • Phone: 202-862-7157
    Email: khassett@aei.org
  • Assistant Info

    Name: Emma Bennett
    Phone: 202-862-5862
    Email: emma.bennett@aei.org

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