2 months until next budget crisis?

A prominent economist known as 'Dr. Doom' says the country's budget dispute will come roaring back soon.

By Kim Peterson Jan 3, 2013 1:14PM
Image: Washington, D.C. (Corbis)We have some breathing room after lawmakers made a fiscal cliff deal on New Year's Day. But the country is far from OK. In fact, one well-known economist says another crisis will hit in two months.

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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154Comments
Jan 3, 2013 5:40PM
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We spend 3.8 trillion (we will break the 4 trillion mark this year).    We take in 2.7 trillion in taxes, a record.

We have 80 million households....   Each one needs to pay $47,500 in taxes to the federal government in order to pay their FAIR and EQUAL share.   

Democrats of course believe Fair means unequal they want someone else to pay for their largess.
We need to ween these leeches off the government teet...

Until will get the leech class to pay their fair share we will sing into socialism like Greece.  The only problem will be who will bail out America?   
Jan 3, 2013 5:34PM
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HOW TO BALANCE OUR BUDGET IN 2013,

#1 Cut all added spending during Bush's term,

Military added  $225 billion per year

Tax cut cost     $250 billion per year

Medicare D      $60   billion per year

TARP               $70   billion per year

H L Security     $70   billion per year

TSA                  $8     billion per year

______________________________

Total annual savings about $700 billion per year,

#2 Add Universal Health care, Federal savings of over $200 billion per year, public savings of $600 billion per year.

Total Federal savings $900 billion--- 2013 projected deficit $900 billion = Balanced Budget, So easy, a Cave Man could do it.

Jan 3, 2013 5:31PM
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Its just been "kick the can". Where will you be when this house of cards collapses? The good news is the US Army is conducting excersises for when it does. And they won't be handing out MREs and bottled water.

 

Did anyone notice that this week the DOD OKd the purcahse of over 1,700 F-35s we will never need unless we are invaded by another planet?

 

I think the biggest "entitlements" are going to Boeing and Lockheed Martin :)   $719 Billion last year alone. That's a lot of welfare and food stamps. folks.

Jan 3, 2013 5:31PM
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the rich want it to break under the strain this way everyone will work for what ever they willing to  pay us...just like golden corral.. the manager was getting paid 50k a year they told him he needed to take a pay cut to 40 k a year then they came back told him to take 30k a year or leave now they have a new manager at 25k a year  where i live ....its comming all u people believe u gonna get paid more for your job think again
Jan 3, 2013 5:27PM
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In response to what tiger4u speaks of in the comment made   I recieve approx. 43.00 dollars a month in pre- SSI  grant. I support my son as well as self on that stipend. My friend helps me make everyday bills as well. I have a major hernia the size of a grapefruit and still growing, Legally blind in one eye (the other is soon to go) from a de-generative retinal disease, ruptured herniated disks in my lower back.I am 48 and fell like 80 most days. It must be nice to be able to fraud the system, over eat, over indulge on un necessary novelties and the like. My one car is soon to die, my son would like to one day own his own T.V. But, I guess it's the people that you spoke of that ruin it for people that really could use the help. My 14 yr. old son gets okay med. help through state medical...I get lousy coverage...because I am the adult. Maybe those people will have a drink for me? Ha Ha.
Jan 3, 2013 5:20PM
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Stay home from work for one week,,,no income tax going out...if the entire country would do this at the same time, I believe the numbnuts we have for politicians might get the hint.
Jan 3, 2013 5:08PM
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Didn't Ross Perot run on fiscal reform because of the budget crisis...  The people of the U.S. are numb to budget the constant budget crisis.  This nation used to be concerned about the next generation, now we are concerned with our current situation.  My hope, is we decide to focus on taking care of the next generation.  The current generation could look out for themselves... because that is what we always do.
Jan 3, 2013 4:58PM
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Stand up America arm yourself and be ready.

Jan 3, 2013 4:55PM
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ZEPA .... you're not taking into account the ratio of population of Whites to Blacks and Hispanics!! Go back and do the numbers based on percentage of population?? What a moron!

 

Plus it's spelled bridges?

Jan 3, 2013 4:55PM
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Coming to a nation near you, "GREECE" up close and personal.
What brought down the Greek economy is identical to the way our
country is run only on a MUCH larger scale.

The only way out of our economic mess is through tough austerity measures.
Interpretation: much higher taxes and a LOT of spending cuts.
It's a mathematical fact!

 How it will effect each individual depends on
whether the individual has had the brains to save for a rainy day.
As they say, when it rains it pours and we're in for a monsoon baby.

Jan 3, 2013 4:51PM
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I think that so many of us predicted that 2 years into Obama's 2nd term, this country would be a mess. His inability to create and stick to a budget and to STOP SPENDING, will be the demise of our economy. We all watched Greece and Spain spend themselves in bancruptcy and in 2 years you'll see it here. The economy will be a mess, the unemployment will be higher than ever and Barry's only solution to any problem is to spend his way out ..... but unfortunately there won't be any more money to spend??? So for everyone that voted for Obama, welcome to the 3rd world and to all those who looked for a solution in Romney .... I'll welcome you to the Caymans!!
Jan 3, 2013 4:40PM
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Self sustainable property...110 plus acres. Solar power and well water, barter crops and food source, animals to hunt, and money placed where Obama and the Democrats can't touch it. Basically, the leeches of the world will have to suck someone else dry.
Jan 3, 2013 4:32PM
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I suspect that many if not all of you, think that the majority of the people receiving welfare (entitlement) money are blacks and hispanics.  It really irks you to see these people receiving that money (help).  What you do not realize is that when you look at the raw numbers, there are more white people receiving welfare and other entitilement funds.  I worked in the IRS for over sixteen years as an agent. Let me tell you that the wealthy people in this country do not need the middle class to defend them.  They are represented by the best people money can buy, including congress.  The wealthyess(corporations) even write tax laws and have them introduce in congress by congressmen that they own.  Why do you think they donate soo much money to have congressmen elected.  Do you think they do it out of the kindness of their heart.  It you think this " I will sell you all the bridgest in New York city for a dollar each." 
Jan 3, 2013 4:29PM
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How relevant is "Dr. Doom" when he isn't predicting doom? This is a guy who makes a living saying the same thing all the time whether it's true or not. He can't do anything but predict doom because if he did he wouldn't be Dr. Doom anymore.

 

And what the hell is "medium-turn fiscal consolidation," anyway?

Jan 3, 2013 4:26PM
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The fix is quite simple. Leave the middle class alone, as they are the backbone of this country. Tax the rich a bit more, and close up some of the tax loopholes that allow tools like Mitt Romney to pay a 15% tax rate. Then, perform a massive overhaul of welfare and food stamps and make it embarrassing for people to have to use them again. When I was a child, there was a designated section that those using food stamps had to shop from, and they had to use the actual stamps at the cash register. Now, they have debit cards, can shop from nearly any section of the store barring cigarettes and alcohol, and have the audacity to flaunt it in the shopping lines. We have taken the embarrassment of being on an entitlement program, and replaced it with pride? Listen, I understand that sometimes people need a little assistance, and we need programs like this to sustain life in this great country, but there are way too many people that are taking the system for the proverbial ride, and need to gain back the pride of making their own way in this life. 
Jan 3, 2013 4:25PM
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Government exists to grow itself and as long as you people so damned stupidly continue voting for the Democrat-Republican duopoly we will continue to have the status quo.  At some point, however, government will collapse under its own weight and I look forward to that day because then is the only time people will almost be ready to deal with it.

Jan 3, 2013 4:23PM
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Readings on the DOW(monthy basis) going back to 1992...appx.

 

In Mid 1995...........We crossed the 5,000 mark.

Spring of 1999.......We broke through 10,000

Mid Summer 2007...We pushed through 14,000, then fell back.

By October 2007.....We crossed through 14,000 again, then steadly declined again.

In the Spring of 2009...We started uptrending again.

By October of 2009...We crossed 10,000 for 2nd. time.

Rising ever since...We broke 13,000 in 2012, pushing to the mid/highs of 13,000s.

Remains to be seen if we break all-time highs in 2013 under Obama ?

And eventually push through to 15,000 during his next 4 years...?

I suspect we will... 

Jan 3, 2013 4:22PM
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2 months from a budget crisis. are you freaking kidding? this country has been in a budget crisis since 2000. when are you people going to stop walking around with blinders on and see what is really going on? the government lies and the media says what it wants and sensationalizes the rest.
Jan 3, 2013 4:16PM
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Why do they want us all to be so scared?  We already know it will result in our pockets emptying more, and theirs filling more.

 

 

Jan 3, 2013 4:14PM
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Time for people of fiscal sanity to take a stand against against this spend first ,spend more later President. Show some backbone take a stand now and don't backdown!!  This is as good a time as any given that the pres. shows no interest in any kind of meaningful reform. Let this be our Gettysburg if we fail it will be our Waterloo
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