Hit by a combination of tax hikes, Americans would spend $200 billion less next year than otherwise projected, slowing economic growth by 1.4 percentage points if the country goes over the fiscal cliff, according to a report released by the White House this morning.
The report contemplates what would happen if President Obama and Congress can't reach a budget deal by year's end and the country sees the expiration of a slew of tax cuts for the middle class -- defined by President Obama as couples making $250,000 and less.
The reduced spending would come from a wide variety of categories, including housing (which woudl fall by a projected $36 billion), health care ($32 billion), groceries ($15 billion) and at restaurants ($7 billion).
The study by The National Economic Council and Council of Economic Advisers greets lawmakers as they return from a Thanksgiving break with about a month to avert the cliff, a combination of steep tax hikes and spending cuts set to hit at year's end. The report focuses specifically on the tax increases that would hit the middle class, not on the hikes on wealthier Americans or the effect of spending cuts that are also part of the cliff.
Obama has pushed Republicans to extend existing tax breaks for those making $250,000 and less, but GOP leaders have called for reforming Social Security, Medicare and Medicaid in exchange and the two sides are at odds over how to tax those making more than $250,000.
Meanwhile, Sen. Bob Casey (D., Pa.) is planning a hearing to look further into the impact of the fiscal cliff on families and the economy. He announced the hearing Monday morning.
"We need to cut more spending but we need to do so in a smart way that keeps our economy growing. This hearing will allow members from both sides of the aisle to hear from top economists on the best policies to ensure we strike a balanced approach in the best interest of our nation," Casey said in a news release.
Casey chairs the Joint Economic Committee, which includes members of the Senate and House. The committee will hold its hearing Dec. 6 in Washington.