Expiring Tax Cuts, Spending Cuts Could Mean Recession

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The U.S. economy could be thrown into another recession if the Bush-era tax cuts expire or if a series of automatic spending cuts take place, according to a new government study.

The Congressional Budget Office report revealed that the economy would shrink by 1.3 percent in the first half of next year if the government lets a series of Bush-era tax cuts expire and automatic budget cuts kick in.

"Under current law, increases in taxes and, to a lesser extent, reductions in spending will reduce the federal budget deficit dramatically between 2012 and 2013 -- a development that some observers have referred to as a "fiscal cliff" -- and will dampen economic growth in the short term," said the report.

The CBO said the threat of recession comes in if tax bills go up quickly for all Americans.

President Obama wants to eliminate the Bush-era tax cuts for individuals who make more than $200,000 a year. Republicans want to make all the tax cuts permanent.

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