If the government does not do X, Y, Z we will re-enter recession

[cthulu2016]

Last edited Wed May 23, 2012, 03:59 PM - Edit history (1)

The CBO report on the economic effects of current fiscal law is one of the most perplexingly non-story stories I've ever seen.

Under current law the US will re-enter recession in 2013. Triggered spending cuts and expiration of tax cuts mandate this result. 2013 will start with a huge anti-stimulus... unless congress does something.

Not 2023 or 2033, Q1 2013... mere months from now.

Shrug. I guess they'll work something out.

One would think politicians would be all about their plan for avoiding this outcome, but it's after the elections so it might as well be a century away.

By the way, anybody who thought the Bush tax cuts would expire... no. They're like Rasputin. No telling what it would take to kill them, but it won't be anytime soon.

[grok]

1. won't spending cuts negate the revenue increase?

I don't have the numbers(so somebody enlighten us)

The problem with government policy(any) is that it often assumes the one you want to control will stay static and wait for you to make your move.

Look at Greece. while the government is diddling back and forth, solid assets are going OUT. Gold, euros, equipment. The smart BIG money will not wait. It's gone already. But if you try to control it, it leaves faster.


In the long run it looks like stability/statism is here to stay. one decision negates the other.

It's like telling a blue whale where to go and yet warning the krill it's going to change direction at the same time

[cthulu2016]

2. They are additive

Increasing taxes is (all things being equal) contractionary.

Cutting spending is (all things being equal) contractionary.

Mandated spending cuts and expiration of tax cuts are both contractionary, hence the CBO's gloomy analysis of the overall effect.

[grok]

3. so the reverse is best

keep taxes low(Bush tax cuts and go cut deeper)

And expand spending( more shovel ready projects(too few were ready before))

Very Keynesian no?

Should work but sooner or later we run out of money.

Sounds like Greece.

taxes are high but but many didn't bother paying. corruption and such.

lot of infrastructure built but now no money to pay salaries. And the money has left the country.

[cthulu2016]

4. "sooner or later we run out of money"

As a matter of math, yes. There has to be a point where any debt is unsustainable without devaluing the issuing currency.

But we are far from that point. Japan has a much larger debt and her bonds still sell with almost exactly the same yield as ours, so we are far from any point of disaster.

What our policy should have been from the start was to triple or quadruple or whatever the word is for five-fold the deficit in the first year and use monetary policy to reign in any runaway growth/inflation if it developed. (It is easy to reign in growth with monetary policy) That would have offered the possibility of jarring the economy back into a self-sustaining growth mode.

What we do instead offers no such hope... increase the deficit to soften the effects of the down economy, but not enough to have any chance of really changing the economy and then limp along like that for ages.

The total addition to the national debt from such "caution" is likely to be greater than the cost of "irresponsibility" would have been.

[Initech]

5. Tax churches, windfall profits, close corporate tax loopholes, tax the 1%. Budget balanced.

[cthulu2016]

6. What would the benefit of balancing the budget be?

[Aerows]

7. If we enact Wall Street controls

we will enter recession, depression, and a zombie apocalypse. The zombie apocalypse happens the second we regulate anyone on Wall Street's ability to steal wholesale from taxpayers, investors and the American public.

Oh: And if we don't privatize Social Security and let them steal that, too, you know what happens - zombie apocalypse.

[Fire Walk With Me]

8. Never forget: Banks stole and were given trillions upon trillions of our dollars.

Take it back and many problems are solved before they even begin.

Then again, crashing the economy is a power-grab tactic, so we haven't seen the last of them.