The Not-So Good, The Bad and The Ugly: Goldman's Worst-Possible, Black-Sky Scenario For The Fiscal Cliff

BusinessInsider asks what's the worst possible thing that could happen when we hit the fiscal cliff?  Here's Goldman's Alec Phillips and Jan Hatzius going through some of the possibilities:

Under the baseline “not so good” scenario, fiscal policy would shave nearly 1½ percentage points from real GDP growth in early 2013, compared with ¾ points in 2012. In this case, we expect a renewed moderate GDP growth slowdown to a 1½% pace in early 2013.

Under the alternative “bad” scenario, the fiscal drag would rise to nearly 2 percentage points in early 2013. This bigger hit, combined with the possible greater uncertainty if an agreement proves elusive for a few weeks in early 2013, would probably cause a sharper slowdown in GDP growth to 1% or less.

Finally, there is the tail risk scenario….

Read more: http://www.businessinsider.com/goldman-possible-fiscal-cliff-scenarios-2012-10#ixzz28gf97LkS