Recession Imminent, Says CBO

According to the Washington Post and the Congressional Budget Office, a recession is nigh should Congress not act prior to the country reaching the "fiscal cliff." Worse, estimates show that unemployment would go up nearly a full percentage point to 9.1 percent.

Instead of helping the situation, Congress has made it worse, as the report indicates:

Since that forecast was issued, Congress has steepened the fiscal cliff by extending a temporary payroll tax break and emergency unemployment benefits, which are now also set to expire in January.

Here's a new twist, though. Polls show Americans want more government spending. This may have to do with the fact that Obama's stimulus bill ensured we haven't gone the way of the Europeans, as this graph shows. So, it looks like Merkel's austerity measures would not be welcome here (queue Paul Krugman happy dance here).

But here's a problem: we can't just spend our way out of this recession and economic woes. We need a balanced approach. The Simpson-Bowles proposal seems the right way to go--it has the right mix of spending and cuts.

I'm not sure I agree with everything in the proposal. But there are things we need done, or we'll go off the fiscal cliff.

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UPDATE (4:57pm): Derek Thompson at the Atlantic has a great piece on a possible "budgetpocalypse." Read it.