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Fiscal Challenges and Fiscal Follies

BERKELEY – Where is America’s economy headed in 2013? Will the recovery continue at its frustratingly slow pace? Or will it accelerate as the housing sector rebounds, bank lending expands, household balance sheets improve, and state and local government budgets strengthen?

With economic headwinds dissipating, the United States’ prospects for faster GDP growth appear promising. But there is also a significant risk that a large and unnecessary dose of fiscal austerity will weaken demand, undermine confidence, and tip the economy back into recession.