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Simpson-Bowles: It’s Back, and Better Than Ever

June 15 (Bloomberg) -- Whoever wins the U.S. presidency in November will potentially have to deal with combined tax increases and spending cuts that could extract 3 percent to 4 percent of gross domestic product from the economy -- a potentially catastrophic fiscal blow to the recovery from the deepest recession in 80 years.

The U.S. faces a reckoning at year’s end. The Bush-era tax cuts are scheduled to expire, resulting in huge tax increases for almost all taxpayers, not just the rich. Cuts in domestic spending, particularly on defense, could automatically take effect. The federal debt ceiling once again will bump up against legal borrowing limits. And the elections may narrow each party’s majority in Congress, making compromise more difficult in 2013. There is little leeway to “kick the can down the road.”