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Joined: May 2003
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Officially "too old for this shit" 15000+ posts
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OP
Officially "too old for this shit" 15000+ posts
Joined: May 2003
Posts: 43,951 Likes: 6 |
Cornell expert: The 'sky will not fall' if U.S. hits the ‘Fiscal Cliff’- The sky is not falling.
That's according to Steven Kyle, an expert in macroeconomics and government policy, and a professor of management at Cornell University's Dyson School of Applied Economics, who offered his comments on the potential economic implications of Congress and President Barack Obama failing to come to an agreement ahead of the Jan. 1, 2013 "Fiscal Cliff" deadline.
“The fiscal cliff isn't an emergency that requires most people to take immediate action," he said. "Actually, it is more of a slope than a cliff.
The "Fiscal Cliff" refers to the effect of laws that, if unchanged, could result in tax increases, spending cuts and a corresponding reduction in the budget deficit in 2013. The laws include tax increases due to the expiration of the "Bush tax cuts" and spending reductions under the Budget Control Act of 2011.
“If the government cuts spending levels as of Jan. 1 while allowing taxes on the bulk of the population to rise, it will constitute a negative shock whose effects will accumulate through the year to dampen growth," Kyle said. "Many commentators have spoken of ‘cuts of half a trillion dollars’ to defense spending and similar cuts to domestic budgets. What they often fail to emphasize is that these cuts would be spread over 10 years, making the effect in any one year far less, and that in the month of January 2013 even smaller.
“There is no explosion or crisis that will occur as was the case with the debt ceiling a couple of summers ago when failure to agree could have resulted in a default of the U.S. government on its debt obligations," he added. "Tax increases are more substantial in percentage terms than are spending cuts but are also spread out across the year. Most people have proportional amounts deducted from each paycheck and would not see the entire tax hike all at once."
That's not to say that resolving the issue before the Jan. 1, 2013 deadline wouldn't be the optimal choice.
“Would it be better to solve the problem before January? Sure. It is always better to do it ahead of time than play yet another game of chicken with our nation's economy," Kyle said. "But would the economy by substantially damaged if we didn’t get it done until the end of January? No."
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Joined: Jun 2003
Posts: 15,799 Likes: 40
Fair Play! 15000+ posts
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Fair Play! 15000+ posts
Joined: Jun 2003
Posts: 15,799 Likes: 40 |
There seems to a positive vibe coming from both sides. Also think the longer the process is drawn out the harder a deal becomes on anything significant. I'm wondering if both sides have some key things worked out already?
Fair play!
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Joined: Sep 2001
Posts: 25,027 Likes: 31
brutally Kamphausened 15000+ posts
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brutally Kamphausened 15000+ posts
Joined: Sep 2001
Posts: 25,027 Likes: 31 |
I've actually seen several pundits say that even if there were no deal made, it would take several months for that to have repercussions, and a deal could wait until January or even February or March without major impact.
All the same, I'd be more comforable if they worked it out sooner. I agree with Bill Kristol that opposing letting taxes go up slightly for the wealthiest Americans isn't working in the Republicans' favor, and it's a relatively small concession in order to work out a compromise. To basically choose their battles wisely, and this is one they can roll with.
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Joined: May 2003
Posts: 43,951 Likes: 6
Officially "too old for this shit" 15000+ posts
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OP
Officially "too old for this shit" 15000+ posts
Joined: May 2003
Posts: 43,951 Likes: 6 |
John Stossel is also weighing in on the fiscal cliff: - America, however, continues to go broke.
"They're not going to admit that we're bankrupt, and they won't admit that we're on the verge of a major, major change in our society," says Rep. Ron Paul (R-Texas). "So they'll keep putting it aside, but then we'll eventually probably destroy the dollar."
The across-the-board cut, or "sequestration," was designed to be so distasteful that Congress would be moved to cut more deliberately. If it doesn't act, $110 billion in projected spending will be automatically cut—half from domestic spending, half from the Pentagon.
"They assume that they made it so bad that they wouldn't accept it, but I don't think they did," said Paul. "They're not even...talking about real cuts. They're talking about cuts in baseline budgeting."
Right, the old baseline budgeting trick.
"If they propose, let's say, a $10 billion increase for next year and cut it down to $9 billion, they say they're cutting 10 percent. But they're not cutting anything, they're only increasing it $9 billion instead of $10 billion. It's done on purpose so that people get confused."
Republican House Speaker John Boehner calls the fiscal cliff a "nightmare."
But why? Trillion-dollar deficits are more terrible.
Cuts of $110 billion would even be good for us because it would keep money in private hands, away from the bloated and freedom-killing bureaucracy.
"When government spending is about $3.8 trillion, you're going to cut $100 billion? That's a deck chair on the Titanic," said Russ Roberts of the Hoover Institution. "If they're actual cuts, I think that would be great. I'd cut 10, 20 percent across the board if I had my druthers. But across the board scares people because they think, 'Let's save the things that are really important and cut the things that are not so important.' (But) that never works."
Lately the media are focused on the $400 billion in tax increases that make up four-fifths of the fiscal cliff. We're told that if the Bush-era tax rate cuts expire and the spending reductions kick in, catastrophe will follow.
"The tax increases sound scarier. But we have a trillion-dollar deficit!" Roberts pointed out. "So to me, the idea of raising taxes is probably a good idea. It says this spending that we've been doing is not a free lunch."
I'm not convinced that giving politicians more money is ever a good idea.
And won't the wealthy high-earners find a way around the higher rates? When rich people do that, much of their money goes to lawyers instead of consumer satisfaction.
The other thing that scares Washington are the automatic cuts to Pentagon spending. "These draconian cuts represent a threat to our national security," say Republican Sens. John McCain of Arizona and Lindsey Graham of South Carolina.
"The Pentagon is hysterical about it," notes Ben Friedman of the Cato Institute. "But it's about 10 percent, which would bring us roughly back to where we were in defense spending in 2006 ... adjusted for inflation, not exactly a crisis year in the Pentagon. They've gotten very spoiled at the Pentagon. They had years of luxury."
Automatic cuts might even be good, said Friedman.
"We need probably bigger cuts in the defense budget because we do too much. This will force us to make some choices. We try to be everything in the world ... pretending that every unstable country is a threat to us."
I won't lose sleep over automatic spending cuts. The "fiscal cliff" frightens me less than the bankruptcy cliff.
This is something I've been wondering about: wouldn't the so-called "fiscal cliff," be something fairly similar to Simpson-Bowles?
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