Congress' inaction on the fiscal cliff could cost U.S. GDP more than 5%

The year-end "fiscal cliff" consisting of government spending cuts and tax increases is projected to have crippling effects on the U.S. economy if lawmakers stand by and do nothing. A BlackRock research note published last month notes that under the worst-case scenario where nothing is done and the combination of tax hikes and spending cuts kick in on the first day of 2013, U.S. gross domestic product could decline by 5.1% in 2013. Inaction on tax policy could lower GDP by 3.4% and spending cuts could cut output by 1.7%.