The U.S. will go over the fiscal cliff early next year before a deal gets cut in January to address the country’s fiscal problems, Peter Orszag, a former Obama administration official and current vice chairman at Citigroup, told CNBC’s "Closing Bell" on Wednesday.
“I think what's going to happen is probably early next year, not late, next year, you will have a big fiscal deal that gets cut,” he said.
If Obama wins, Orszag said it will be a centrist deal with a Republican House. “It will be a centrist deal, and it has to happen because we have constraints that need to be lifted and both sides know that,” he said.
Orszag conceded “it might be a little rocky before we get there, but we will get there.”
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The former Office of Management and Budget director in the Obama White House expects a deal to combine a more progressive tax cut than what will expire in January with entitlement reform while simultaneously raising the debt limit.
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But there are still dangers if the U.S. goes over the fiscal cliff and a host of tax cuts expire and automatic spending cuts kick in.
“I think the big danger here is that we have such a prolonged period of uncertainty and anxiety that there is a longer lasting harm that comes out of that,” Orszag said.
“If we spend a month or two in this anxiety mode, you could have a longer-term effect from that,” he said.