As I noted yesterday, it’s not the threat of recession from the fiscal cliff that is despairing so much as it’s the CBO estimate that, even if the fiscal cliff gets put off, we’re staring at anemic 1.7% growth for 2013, and an unemployment rate remaining above 8% by the end of next year. This points to some serious problems with the US economy, and being the “best in the world” at a time of global slowdown is a cold comfort.
One of the reasons to expect such slow growth in 2013 is that CBO assumed some degree of fiscal consolidation next year. They’re right to assume it. Greg Ip at The Economist does a good job explaining the fiscal clifflet, a series of actions that are extremely likely to happen, even if Congress avoids the bigger threats out there.
Here’s the real threat. Even if the Bush tax cuts are extended and the sequester delayed, a huge amount of fiscal drag remains in place. They include the expiration of the payroll tax cut, the expiration of extended unemployment insurance benefits, imposition of a new 3.8% Medicare investment tax on the wealthy, and the bite to discretionary spending embedded in the Budget Control Act and prior continuing resolutions. ISI Group projects $220 billion of fiscal tightening in 2013, or 1.4% of GDP. JPMorgan, noting that many Recovery Act programmes are rolling off at the same time, puts the hit at a slightly higher $266 billion, or 1.7% of GDP. The IMF reckons fiscal policy will tighten more in America next year than in Spain, Italy or Portugal. Though smaller than the full fiscal cliff, the fiscal clifflet still poses a significant headwind to the economy. If enough other bad stuff is going on, it could push the economy back into recession.
I’m not sure all of this will actually hit – we might get an extension, at a somewhat lower level, of unemployment benefits – but the rest of it will in all likelihood happen. The Medicare taxes on the wealthy are part of the Affordable Care Act. The continuing resolution on the budget adheres to the spending cap from the Budget Control Act. And absolutely nobody in Washington is advocating for the extension of the payroll tax cut. So all of this will depress fiscal policy in 2013, and that’s without the Bush tax cuts or the automatic trigger cuts to defense and discretionary spending.
And I don’t think it’s credible that the Federal Reserve will somehow break with recent practice and provide the monetary accommodation to fill this gap.
The new President will have to face the challenge that he will preside over a bad economy in 2013. Neither of the candidates have offered anything in the way of a solution to this, at least not in the form of fiscal accommodation. In fact, both of them are more concerned with reducing deficits, at least rhetorically. As Greg Ip writes, “the age of austerity has begun.” And that’s bad news for Americans still trying to get up after being knocked down in the Great Recession.




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The global growth rate has been in decline for four decades now.
http://monthlyreview.org/2007/09/01/september-2007-volume-59-number-4
And this was posted in 2007, before the worst hit.
In other words, we are still screwed.
Troops’ kids early victims of Congress budget inaction
thanks for the great news DD o_o
Look at the bright side mary…..that “spectre of uncertainty” has been removed.
And all of this assumes a “stability” of no attack on Iran, in 2013…much less a decision by Netanyahu and the warbots to attack Iran BEFORE the election, so as to ensure a Romney presidency.
Why would Israel care who is the U.S. President when Obama allows them to dictate U.S. Middle East policy and subsidizes them at whatever level they demand? How much better could Romney be to them if they have Ideal now?
The speculation is that Netanyahu would bomb Iran right before the election, when Obama (and Romney as well) would be under the most pressure to support his actions. Some people (but not Democrats who support further domestic stimulus, apparently) have actually figured out that politicians are more responsive to pressure *during* a campaign rather than gaining office.
Stanley Kurtz and his book:Spreading the Wealth: How Obama is Robbing the Suburbs to Pay for the Cities
Here is a link to reviews on Amazon.
Just this sort of activities is happening and has been happening in Portland OR. Some of us have witnessed the kind of behavior by the Smart Growth people which the reviews outline.
Perhaps he would be a good subject for the book posts. I Googled his name here and many know of him.
An Excerpt from one of the reviews:
In “Spreading The Wealth” Stanley Kurtz outlines the “regionalist” agenda for all to see and shines the spotlight on the radical left-wing organization Building One America. Basically, there are three major components to this approach that you should be keenly aware of. First and foremost, you should know that redistribution is the heart and soul of “regionalism”. The ultimate goal of these radicals is for the major cities to annex the surrounding suburbs. Pause and contemplate that one for a moment and you begin to understand just how destructive these policies would be. In this scenario suburban tax money would be transferred to the cities. Next, those who subscribe to the regionalist model would incrementally implement policies that would ultimately strip suburban cities and towns of their right to self-rule. And finally, these people would champion zoning and tax policies that would ultimately force suburban residents to move back to the cities. It may sound bizarre to you but these people are bound and determined to do all of this and if Obama is re-elected there very little will stand in their way.
That’s a fair question.
I’d answer by saying that Obama is marginally less likely to attack Iran (a very small margin) and is almost certainly leaning on Netanyahu to refrain from doing it, pre-election…with a post-election attack very much on the table if Obama wins. I think Romney would be delighted with a pre-election attack on Iran. It would practically guarantee his election, and the huge downside, he could then blame on Obama.
If Israel goes after Iran unilaterally, I think either Obama or Romney would join right in. They couldn’t sit out while Iranian missiles were landing on Israel, or threatening Persian Gulf shipping.
I’d add, the idea that Obama is slowly pulling ahead, which is currently in vogue among some of the bloggers here, is, I think, whistling past the graveyard:
http://news.yahoo.com/blogs/ticket/obama-holds-lead-ohio-slips-florida-wisconsin-poll-104836458.html
How well he’s doing or not doing will surely affect his decisions between now and November.
I’d add, the belief that Obama is slowly pulling ahead, currently in vogue with some of the bloggers here, is, I think, whistling past the graveyard:
http://news.yahoo.com/blogs/ticket/obama-holds-lead-ohio-slips-florida-wisconsin-poll-104836458.html
If Obama is slipping in the all-important swing states, it will surely affect his policy decisions between now and November.
I understand your points, mine is that Israel will continue to get carte blanche from the U.S. at any time on any issue. The absurdity that Iran is an existential threat to Israel will continue to be sold by the duopoly and the media ad nauseum. During the last round of dark scary fear mongering about Iran went the severely underreported stories of Israel buying another nuclear missile submarine and threatening war with Egypt unless the U.S. pressured them into selling Israel natural gas at under market prices. Israel is far more likely to continue its militaristic aggression against Gaza, the West Bank, the Sinai, southern Lebanon and eastern Syria using the “threat” of Iran than attacking Iran. Regardless of which half of the duopoly is in power, or the timing, and knowing there will be no negative consequences from the Empire.
Apropos of the jacked-up economy, etc…
Shoto; that should be required reading for every “Obama sucks less!” democrat.
It explains, to a comma, why we’re in the position we are. Thanks for posting it….3XXX…
Add my thanks to your list too. Outstanding article. Depressing, but expresses my sentiments and disappointment perfectly.
To be honest, that sounds absolutely batshit insane.
Nice and succinct.
I thought so also,except, as I said, I see it under way in some context here. We are community activists fighting the kind of movements which his description reflects.
I think it is insane, but by whom?
Due diligence is required, imo, anyway.
Given the almost universal opposition within Israel to an attack on Iran, I was wondering if Netanyahu is basically an arm of the Romney campaign.
I doubt that many of the above comments are well-founded ,but mine are up for grabs too .I think Israel might attack ,but history shows the public usually sticks with the incumbent when we are in conflict ,and we will surely have the whole fucking mess externalized onto us .Secondly ,even without the Israel trigger ,we will likely have a global currency collapse .Beyond dog days ,listen to CNBC and the primary message ,albeit nuanced ,is get the fuck out of Dodge .Virtually no volume , and a consensus belief that a huge correction is at the door .I believe it will be a wipeout .Third ,watch the aggression against China ,our military needs energy to function if the price soars when the $800 trillion swaps market blows .