Common sense and the US economy

Discussion in 'Politics & Religion' started by SouthAmerica, Nov 12, 2012.

  1. .
    November 12, 2012

    SouthAmerica: Regarding the “fiscal cliff” - they should let all the tax cuts expire on December 31, 2012.


    Republicans are used to get a “free lunch” for a long time - they want to wage wars around the world and leave the bill to be paid by the next generation of Americans. In the last 11 years the US government spent more than US$ 6 trillion dollars in defense spending – the real number when all the indirect figures are included then the actual number probably is close to US$ 10 trillion dollars.

    Money well spent with great prospects for the future of the US economy...

    Hah, hah, hah....(I am being sarcastic, since all the new generation of Americans are going to get is US$ trillions in debt, and more people hating America around the world that most people can imagine.)


    *****


    The Washington Post – November 9, 2012
    It’s not a fiscal cliff—it’s an austerity crisis
    By: Suzy Khimm


    Reading the headlines this week, you might get the impression that the country was hurtling towards a huge deficit catastrophe on Dec. 31. From the front page of Thursday’s New York Times (“Back to Work: Obama Greeted by Looming Fiscal Crisis”) to today’s Wall Street Journal (“Pressure Rises on Fiscal Crisis”), the rhetoric suggests that the U.S. is facing a crisis akin to problems that have engulfed Europe. (A Yahoo headline from 2011: “The U.S. Fiscal Crisis: Just Like Greece, With One Exception.”)

    In fact, the problem with the fiscal cliff is precisely the opposite: The tax hikes and automatic spending cuts that would kick in after Dec 31 would sharply curb our federal deficit through enacting major, sudden austerity measures that would save the U.S. government about $720 billion in 2013 alone, according to the Bank of America’s estimates, which would be about 5.1 percent of GDP.

    “If we let all of those changes [happen], there would be a sharp reduction in the budget deficit—in decline in debt to GDP, falling deficits as a share of GDP,” says Chad Stone, chief economist at the Center for Budget and Policy Priorities. “It’s all a dream for people who want really sharp austerity.”

    So the reason that the fiscal cliff could push us into another recession in 2013 is because it enacts too much deficit reduction upfront, not too little. By contrast, the reason that Europe became mired in a fiscal crisis in the first place is because profligate nations haven’t done enough to curb their spending and raise revenue to their more fiscally responsible neighbors’ satisfaction.

    The folks who want to avoid the fiscal cliff for fear of its impact on a still-faltering economy are effectively arguing that now isn’t the time to enact austerity measures: Instead of taking money out of government programs and people’s paychecks, the government should be putting that money into the economy. And certain parts of the fiscal cliff bring more bang for the buck than others, CBBP’s Stone points out: Payroll tax cuts and unemployment benefits are more effective way to boost economic growth in the short-term than the Bush tax cuts for upper-income Americans, according to a new report from the Congressional Budget Office.

    So if it’s immediate austerity that we want to avoid, and stimulus that should take its place, why is there so much talk about the need for major deficit reduction as a solution to the fiscal cliff? It’s because lawmakers decided months and years ago that they wanted this austerity crisis to happen as a way of creating leverage for more sensible, long-term deficit reduction measures.

    Despite all their hand-wringing over the fiscal cliff, it was Congress and the White House that decided in the summer of 2011 that we would raise the debt ceiling only on the condition of reducing the deficit by over $2 trillion, with some cuts upfront and the rest attached to the supercommittee with a sequester trigger. (As President Obama reminded us in his speech today, “Last year, we cut more than $1 trillion in spending that we couldn’t afford.”) It’s also because lawmakers decided nearly a decade ago that the Bush tax cuts would be phased out in 2010, which Obama and Congress then extended for another two years because of the weakness of the economy.

    The essential dilemma, as both the U.S. and European countries like Greece have begun to discover, is that weak economies don’t respond well to immediate austerity measures. The deficit hawks arguing for a bipartisan “grand bargain” or similarly ambitious deficit-reduction plan want to replace the kind of austerity that we’re facing now with austerity that takes effect further down the road, not undo it altogether. Others simply want to put austerity off for at least a year by extending all the tax cuts and suspending the sequester.

    All of these solutions affirm one underlying truth: The reason the fiscal cliff is so scary is that it’s an austerity crisis.

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  2. Humpy

    Humpy

    I don't like the way the politicians responsible for the world wide financial crisis are getting away with it. They can ruin a whole country and then just fade off into relative obscurity on huge pensions etc.

    They should be tried and held to account for their incompetence and flushing their countries down the toilet !!
    They won't be going short but a lot of people at the bottom of the heap will !!

    Justice doesn't affect them it seems

    Apparently there is an even worse crisis looming in the distance like a tidal wave. It is called the entitlement crisis when millions get to draw their entitlements.
     
  3. Klemen

    Klemen

    Being a young American now really aint easy and optimistic...
     
  4. .
    November 12, 2012

    SouthAmerica: Reply to Humpy

    The Social Security system it's O.K. for the long term with minor adjustments.

    The problems are with Medicare and Medicaid system.

    We can't look to the past for solutions, since the United States never had such a large number of senior citizens which is growing in numbers with every passing year.

    Not only the number of senior citizens is increasing as a percentage of the total population, but senior citizens are living longer than ever before.

    It is a very complex problem that can't be solved with easy or simplistic solutions.

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  5. .
    November 12, 2012

    SouthAmerica: In my opinion, Barack Obama needs to create a new government agency responsible for reconstruction, with a five and ten year plan.

    In the first five-year plan they should spend at least US$ 5 trillion dollars to start updating the infrastructure of the United States.

    These 5 and 10 year plans would serve as a guide for companies to plan their growth and job creation.

    When you have a plan to rebuild the water systems of major cities, upgrade the electric grid (place it underground) in the entire country, fix bridges, and all sorts of infrastructure necessary for the economy of the 21st century, upgrade the high-speed broadband internet connection around the country, and so on....that would create millions of local jobs and economic activity.

    In a nutshell: we need a new Marshall Plan for the reconstruction of the foundations of the US economic system.

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  6. Humpy

    Humpy

    Constructive thinking SA which would have been enough when only an outdated and feeble Europe was a serious competitor.

    They have been numero uno and blown it !!

    Next thing is they will be asking for sympathy !

    Having dished out death and destruction for 50 years there may not be much of that around. They could meet some of the people they trod on, on the way up, on the way down.
     
  7. Short-sell more and more EWZ. :cool:
     
  8. In a nutshell... there's a nut ......

    :cool:
     
  9. ?...... a Brazil nut? :confused: :eek: :D :p :) :cool:
     
  10.  
    #10     Nov 12, 2012