The economy could be headed for a “fiscal cliff”

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That’s the warning the Congressional Budget Office had for lawmakers on Tuesday after a looking at the consequences of automatic spending cuts set to take effect at the end of the year, and the expiring Bush tax cuts for ALL Americans. The CBO estimates that the economy will shrink by 1.3% in the first half of 2013 should lawmakers let the spending cuts takes effect and let the tax cuts for ALL Americans expire.

On the flip side, the deficit would shrink by about $607 billion. So Republicans would get what they want – which is deficit reduction – unfortunately the economy would tank as well, and millions more Americans would be out of a job. Democrats have proposed a solution to this problem – which is extending the Bush tax cuts for all Americans except for the Romney super-rich.

Unfortunately, Republicans would rather watch the economy go off the cliff than see their Romney super-rich political donors get hit with a tax increase. Even the Associated Press is asking the question “is the GOP trying to sabotage the economy to hurt Obama?” I think the answer is clearly, yes.

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At this point anyone who does not see that what the GOP is planning is more recession is only fooling themselves, or a puppet of the oligarchs.

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Phaedrus76
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Sep. 14, 2010 8:21 pm

This looks like it will play out like 1996/1997 when the Democrats won the White House and the GOP won both chambers of Congress. Then they can put aside their bickering and get down to more tax cuts and more deregulation. Pass the cyanide, please.

chilidog
Joined:
Jul. 31, 2007 4:01 pm

Just goes to show you that austerity in itself will not solve fiscal problems. Many have argued that austerity is the only way. and its not just USA. It's playing out in Euro with the Germans. Chancelor Merkel and her remaining buds are standing few. Greece will exit the Euro as I have been saying for sometime.

If Romney takes the white house, our economy will collapse far worse than the great depression within 3 years (2016 at the latest). And with no social safety net just like the 19th and early 20th century. What will be different this time around is that American culture, with loss of a strong family fabric, Uncles-Aunts-brothers-sisters and so forth, you can no longer count on your relative to help you out in the stark hard reality that will come down.

Spain is headed in the same direction as Greece, and so will Italy. Euro's chance of survival has decreased significantly since the beginning of the year. Along with it, the chance of American economy to recover has dimmed significantly. Chances for American economy totally collapse has increased considerably. One of the likely scenerios is that workers will be working 12 hours a day/6 days a week just as your fore fathers did in robber baron era of late 19th and early 20th century.

This is not something I look forward in next several years. I wish this wasn't the case but who am I to argue?

Self imposed automatic spending cuts is irresponsible. It's not even a matter of passing the buck. Besides, who are they passing the buck?

smilingcat
Joined:
Sep. 23, 2010 9:14 am

American economy can't collapse like the nations of Europe or states in USA like CA because USA creates money and others use it. The analogy is one can't strangle oneself by squeezing the neck with ones own hands.

The solution to our economic problems is the wrong concept of money the media has propagated.

Cutting taxes is good and is much better at the low end of income. Adding to the deficits is also good preferably for infrastructure, SS, medicare and education! Deficit funding for war is wasteful because it removes money from the people economy and transfers it to the military industrial complex which mostly ends up with the 1%.
In the right condition, $1 spent on deficit increases GDP by $8. Here is a plot of deficits vs. GDP from 1969 to 1010 at
http://pshakkottai.wordpress.com/2012/05/25/188/
According to modern monetary theory (MMT)
Deficit spending is the only way to grow the economy. Not only in difficult times but ALWAYS.
(Federal Deficits = Net Private Savings+ net imports), applies to USA and other nations that have their own currencies. If all deficits are added, the above equation leads to
(cumulative total govt_deficit) = (total national private wealth) = 60 Trillion, approx. This is proved in
http://pshakkottai.wordpress.com/2012/02/27/national-debt-and-national-wealth-compared/
http://pshakkottai.wordpress.com/2012/03/30/another-proof-of-mmt-4/

In short, (govt debt) is (peoples' anti-debt) and (govt surplus) is (peoples anti-surplus)!

(Govt_debt / GDP) is exactly the same as (peoples' wealth/ GDP) and can be any number not limited to 100%. This means NO debt ceiling, NO borrowing from itself and NO need for a federal reserve.

So what should we do? Mitchell suggests:

"Third, #Occupy must target the media. Contact the media repeatedly. Flood with Emails, snail mail, personal contacts. And march against the media. A hundred knowledgeable, sign-carrying people, standing on Chicago’s Michigan Avenue, in front of the Chicago Tribune headquarters, demanding that the Tribune print the Monetary Sovereignty facts, will do more than all that has been accomplished to date.

Force the media to educate the public, which will give the 99% the information and the voice they have been missing. And when the 99% has a voice, the politicians will listen." from
http://rodgermmitchell.wordpress.com/2012/05/21/the-solution-to-the-income-gap-in-less-than-1000-words/

This is not a simple task. Galileo had a hard time supporting the heliocentric theory when it was obvious to everybody that the Earth was the center of the universe. Perhaps this reference will teach MMT by the game monopolis

Playing Monopolis Monopoly: An inquiry into why we are making ourselves so miserable | | New Economic PerspectivesNew Economic Perspectives

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