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Will a recession come with the 'fiscal cliff'? Experts debate its impact

Published: Monday, Dec. 31 2012 12:20 p.m. MST

Senate Minority Whip Jon Kyl of Arizona walks between the Senate chamber and the office of Senate Minority Leader Mitch McConnell of Kentucky, as Democrats and Republicans try to negotiate a legislative path to avoid the so-called "fiscal cliff." Experts are debating the impact the fiscal cliff would have on the economy.

J. Scott Applewhite, AP

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Check out more stories on the "Fiscal Cliff."

This week, as negotiations on averting the "fiscal cliff" have continued, discussions on the impacts on that potential recession trigger have continued.

Multiple factors could bring a recession, such as increased taxes for almost every taxpayer and many businesses. President Barack Obama’s payroll tax cuts would expire, which added about a thousand dollars a year to the income of an average worker, according to an article by Just Explain It.

Military, domestic and federal programs would have less money as government spending is slashed. That would include $26 billion less in emergency unemployment compensation and an overall loss of $65 billion to federal programs, according to the article.

Likewise, investors and business owners could be hit extra hard. Dividends could go up from 15 to 40 percent. As taxes increase, business owners risk the demand for products decreasing, especially in large purchases.

But others don’t think the cliff will be as bad as projected. Matthew Yglesias, writer for Money Box, is one of them. Yglesias said in his article he thinks the Congressional Budget Office claims of how bad the economy will drop are unlikely. While he knows the damage could be significant, he said he thinks it unlikely for the Feds to do nothing at all.

“Even under the very unlikely scenario where the full cliff is implemented, I think it's very unlikely that things would get as bad as CBO said in August or people fear today,” Yglesias said in his article.

Decisions in Washington continue to be debated Monday, and Americans wait to hear and find out just how the ‘fiscal cliff’ will affect them.

"Whether or not we reach agreement in the short time we have left, we'll need cooperation on both sides to prevent taxes from going up tomorrow on every family in America,” Senator Harry Reid said, according to CNBC. “I repeat there are still issues that need to be resolved before we can bring legislation to the floor."

EMAIL: alovell@deseretnews.com

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