By Zachary Roth and Daniel Gross
On the long list of risks the economy faces in 2012, the prospect of Congressional inaction would seem to rank quite low. But thanks to legislative tripwires on issues such as the payroll tax, unemployment benefits, and Medicare reimbursement rates, gridlock over the next few weeks may have a significant impact on growth next year.
The economy grew at a 2.0 percent annual rate in the third quarter, and Macroeconomic Advisers pegs fourth quarter growth at 3 percent. The White House had hoped to address all three issues as part of a grand bargain on deficit reduction. But the failure of the "supercommittee" to hammer out a big deal nixed that plan. Economists suggest the cumulative cost of inaction on all three measures could result in a reduction of several hundred billion dollars of demand — not enough to tip the economy into recession on its own, but enough to slow it down and boost the unemployment rate.
"It increases the headwinds for this economicRead More »from D.C. Gridlock Could Hurt Economy in Early 2012