2 months until next budget crisis?
A prominent economist known as 'Dr. Doom' says the country's budget dispute will come roaring back soon.
Without Congressional action, the country will see $110 billion in spending cuts commence on March 1, writes New York University professor Nouriel Roubini in the Financial Times. And just as those spending cuts hit, the U.S. will hit the debt ceiling. "That is only the beginning," he added.
Known as "Dr. Doom" for his dour views on the economy, Roubini won acclaim for predicting the collapse of the housing market and the 2008 recession. Now, he says that 2013 will be plagued by numerous debates on the budget and the economy. Later this year, talk will turn to medium-turn fiscal consolidation, triggering yet another argument between Republicans and Democrats, he adds.
So expect a big fight about entitlements, and a series of little fights over tax reform: Should the US introduce a value added tax? A flat tax? Higher (or lower) income taxes? A carbon tax? Should we close corporate tax loopholes to raise more revenue? It'll soon get messy.There's more. Amid all the fierce debates on the horizon, there will be real damage to the economy. Roubini and other economists expect that the combination of tax increases, spending cuts and an increase in payroll taxes will eat into the country's economic growth. Roubini estimates that it will translate into a 1.2% of GDP drag on the economy this year.
If the economy was strongly growing at around 3.5%, then that wouldn't be as much of a problem, he said. But recently, the economy has only grown at about 2%.
"So the U.S. could quite easily come perilously close to stall speed this year -- or worse, if the eurozone crisis worsens," he added.
So who's right on this issue, Republicans or Democrats? No one, says Roubini. Even typical Republican voters don't want to gut the welfare state, and "Tea Party extremists are more noise than signal."
He says that maintaining a basic welfare state "is right and necessary" in our age of globalization, rapid technological change and demographic pressure. But doing so means higher taxes for the middle class along with the rich.
It will probably take years for the U.S. to confront the reality of its fiscal position and raise revenues to a level sufficient to fund a reformed -- but not gutted -- welfare state. Large fiscal deficits will remain the norm for the next few years, at least so long as the bond market remains quiet, as I believe it will.
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We've gone way past "basic welfare state" when we have people on the dole who don't have to share a bedroom, or who get to eat steak and ribs and shrimp and weigh 400 pounds. Having a car and a big screen TV and a gaming system and a blue ray player and an i-Pod and a closet full of clothes and a 2-pack a day habit is a bit more than "basic welfare".
The Salvation Army provides "basic welfare". The United Way and Red Cross and churches and food pantries provide "basic welfare". The gov has gone way past "basic welfare", to the point that people are lining up to get as much as they can so they can keep doing nothing for as long as they can. This is unacceptable and unsustainable.
I have neighbors across the street, one example, they are a family of seven including obese members. The son-in-law works so that keeps their welfare margin to a maximum and the rest are collecting on it. I overhear them talking on summer days from their yard saying my doctor this and my doctor that. The Patriarch smoked in excess until a few summers ago and now carries around an oxygen tank. The Matriarch is a taxi service for the younger who do not drive but are old enough and from observances able to work. How much medicare/medicaid being doled out here????? They have three although not new albeit not junker vehicles.
Another neighbor faking a back problem ( he rides a scooter and plays a beautiful drum set from his basement ), has a Miller Lite can glued to his palms, is overweight. How much SSD being doled out hear????? This is just a small example from a six home area in one neighborhood in our country.
things are going to get very interesting very soon folks
There has been a not ending crisis since 08.Its been eased with continuous debt.
I see no spending cuts at all.Neverending wars and crys about any cuts to military spending.
Get rid of unconstitutional agencys and put tariffs on foreign goods and lower taxs to bring companys to the usa.
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