Tax: How "Taxmageddon" Would Affect the U.S. Economy

What will the economy look like in 2013? A great deal depends on what Congress decides to do at the end of this year. Remember, the Bush tax cuts are expiring, the payroll tax holiday will sunset, and a bunch of new spending cuts under the debt-deal "sequester" are scheduled to kick in. Coming all at once, that's a potentially big drag on growth.

Jared Bernstein passes along a chart from Goldman Sachs that tries to map out a couple of different scenarios here. The dotted line shows what could happen if Congress can't reach an agreement and lets all tax cuts expire and spending cuts kick in. If that happened, the U.S. economy would grow at least 3 percentage points less than its potential for each of the first three quarters of 2013:

For more, see How Taxmageddon Would Affect the U.S. Economy by Brad Plumer, May 17, 2012 at Wonkblog.