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 5, 2013 3:47PM
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Every single Government Seat Holder from, Mayors, Senators all the way to the President.  Has an OBLIGATIONS to the OATH they Swore to before entering office. They snore to Serve and Protect the Constitution of the United States of America.  From all enemies Foreign and Domestic. All of the Constitution includeing ALL of the 2nd Amendment. Not bits and pieces or how any of them interpret, manipulate of otherwise try to reword this Document.  If must be Protected as it was written by law.

Anyone who violates that OATH is subject to TREASON and thus should be held and charges accordingly.  They only get away with Anti Constitutional acts if we choose to let them. It is time ti fight back with the Federal Law! So you are on notice! Continue to defy the Constitution. You will be willingly be violating  your Oath you took and Federal Law .  Now we need a Very Good Group of Attorneys to Step up yo the Plate.

Jan 4, 2013 1:18PM
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WASHINGTON (AP) — The House has overwhelmingly approved $9.7 billion to pay flood insurance claims for the many home and business owners flooded out by Superstorm Sandy. The vote came more than two months after the storm hit and days after Northeast Republicans erupted over House Speaker John Boehner's decision to delay an earlier vote.

 

Friday's 354-67 vote sends the bill to the Senate, which expects to pass the bill later in the day. All of the no votes were cast by Republicans.

The bill gives more borrowing authority to the National Flood Insurance Program to pay about 115,000 pending claims.

 

Northeast lawmakers say the money is urgently needed for victims of one of the worst storms ever to strike the region. Boehner set Friday's vote after sparking controversy with a decision to delay House action on a broader Sandy aid package.


67 compassionate Republicans said FUKE YOU PEOPLE!
Jan 4, 2013 12:58PM
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Only way to improve economy unfortunately is a major war.We are headed that way fast. A lot of young men killed for nothing.Seems the American way. Very sad. Problem is we may not win next one.
Jan 4, 2013 12:04PM
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Looking past and through all the Right Wing smoke-and-mirrors, fog, fart gas, what have you, here is what the Right Wing is striving for: The United States run by an Aristocracy: "control of affairs by the hands of a minority who have risen to a higher plain of fortune and instruction" and removal of voting and other democratic rights from the majority.

 

This "American Aristocracy" complains that there has been a "degradation of suffrage (the right to vote) to lower and lower strata of intelligence". If you can understand this, you can understand why Republicans hate democracy and majority rule. That is why they are digging their heels in and insisting that they (the minority) should rule our country. However, Republicans omit that wealthy high-rollers playing "Casino Economics" ruined our economy - some of whom received bailout money.

 

The Republican Right Wing continues to spend a great deal of time convincing their own voting block and supporters - who they could not care less about except for their vote - to continue their support. These "supporters" are continually being duped and purposely confused and purposely riled by the Right Wing toward hate for those whom the "American Aristocracy" despises – which is pretty much 98% of this countries citizenry. In other words, "conservatives" end up voting against their own financial security and other interests.

 

This too, is why the Republican-Tea Party Right Wing is willing to put our very prosperity, domestic security and national security at risk for political gain. They are destroying America, economically, socially and democratically so they can "control the affairs" of the United States via creating a Third-World workforce with no money, hence, no political power. Your standard-of-living is being purposely destroyed by the Republican elite and others – so they can hold sway over all power, property and wealth in America. Put another way, under the Republican "plan", you will NEVER be able to prosper; you will always be under their control and manipulation - I am sure you can figure out the rest of this Republican "plan" for yourself…

Jan 4, 2013 7:25AM
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The dollar dies in 2013

http://www.presstv.ir/detail/2013/01/03/281591/us-dollar-to-collapse-in-2013-analyst/

Jan 3, 2013 9:49PM
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lets cut spending now!.....starting with YOUR benefits........dead silence.
Jan 3, 2013 9:28PM
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All anybody has to do  to get a good idea of what's wrong with  this country today  is read a few of the many nit-wit comments posted  here. The ignorance and poor reasoning  is mind-boggling. The preamble to the US constitution states that one of it's goals is to establish a government that will  "provide for the common welfare", but for some reason some of the people here are opposed to that, ie they hate the Constitution. They compound that error by implying that we are not entitled to things we as individuals have paid for, like social security and medicare but that it is ok for our  government to spend 1/2 of all the money spent on the military in world each year here in the U.S. People that think like  these clowns caused both the Great  Depression  and the Great Recession. Hopefully the country has learned its lesson and  won’t let  these people take charge again for another 50 years. If these people don’t like it they can emigrate to a country that has a government more to their liking. I suggest Haiti or Somalia. 

Jan 3, 2013 8:11PM
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America must never "reform" to a welfare state. Socialism and communism steal individual spirit and drive. Shall we all become the couch veggies that are robbing this country blind? How many so called unemployed simply have it better on food stamps, welfare checks, free phones and the duplicative social distribution programs? Our world competitors and enemies do not rest. When they see a weak America, they see opportunity for advancement - and they are boldly and mockingly taking it.

 

Here we are, considering equality in the US. That is IMPOSSIBLE in a free and democratic society. How shall we gain equality? It cannot be by making everyone as rich as the richest. Middle class automatically denotes a top and bottom layer. So, we get it be making every American equal to the lowest, most pathetic, laziest one. What wonderful reform!

 

Jan 3, 2013 7:09PM
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This isn't a prediction. Another debate over the debt ceiling and the 2 month extension on the automatic cuts are known dates on a calendar. It doesn't take Dr. Doom to figure this out. We would have been better off going over the cliff than continue with the uncertainty that will continue for at least 2 months but most likely 2 years as both sides continue to spend more time blaming the other side than negotiating. I mean seriously in the 2 months after his election, Obama met with people around the country more than with Congress leaders. How do you negotiate a deal when there isn't a real leader in the room leading negotiations? Right now the White House and Congress are leadership-free.
Jan 3, 2013 6:56PM
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Why are we sending money overseas? To protect our national interest? Where's the imminent threat? Nation building doesn’t work. Use covert ops to flex American muscle, less lives lost, less expensive - keep those dollars here where they are needed to boost the economy.

Jan 3, 2013 6:54PM
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1st

Congressional action to start spending more on US small buisness, and other US job's is a Must!

 

How the US was saved from the Great Depression

 

More Job's by Americans More tax's to collect - It's not rocket science but most Republicans and Democrats in office are not financial guru's :)

 

2nd

In terms of the absolute value of aid given, the United States is the world's top donor by far. So where is all that money going?

 

Check this link out:

 

Some of these countries protest against the US and killing our diplomats!

 

let cut - this funding Like ASAP!

Jan 3, 2013 6:40PM
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I dunno ONLY 21 down on the DOW........Pretty nice day..

None of the Indexes/indices were even down a half a percent...Far from it.

Along with that, a FMV dollar increase on all the investments....Woooohooooo!!

 

Still about +450 upside for DOW this week....We'll see...

Jan 3, 2013 6:19PM
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It sounds scary until you realize that 'Nouriel' is a Yucatec name...
Jan 3, 2013 6:13PM
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I can hardly wait for the DYSFUCNTION to start again.   What a joke this has all become.
Jan 3, 2013 6:09PM
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2 months ?   Just in time for the Butcher of Benghazi's Spring Break.  I can't hardly wait to hear about this meager vacation?  How much it is going to save me from those evil Rich People !  LMFAO
Jan 3, 2013 6:04PM
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I could see the reinstatement of protective import tariffs and protective majority percentage of production value laws to protect American workers and our living standards too, like so many of our trading partners have too!
Jan 3, 2013 6:03PM
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>>>your all wasting your breath, donations and time on the Republicans, We all need to go somewhere else? tea party, Libertarians, a new third party? whatever it takes, and however long!<<<

 

Yes, please do that.  The sooner you do, the sooner the you'll be right where you belong, in a fringe, lunatic, splinter group of morons.  Then the majority of sane adults can get back to running things without obstinate obstructionists making a theatrical mockery of our system of government.

Jan 3, 2013 5:52PM
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This all could have been fixed by going over the cliff, cuts and tax increases, long overdue given the lack of productivity of our economy over the last 10 years, but they all caved and coward at the prospect, there will be NO cuts, your all wasting your breath, donations and time on the Republicans, We all need to go somewhere else? tea party, Libertarians, a new third party? whatever it takes, and however long! The demonrat approach will crater sooner than later, and we need to be positioned to offer a choice and make a difference. I for one have no use for the Repubican party after 40 years. Of late they are just like demonrats, worse, they cry and whine but do the same things.
Jan 3, 2013 5:49PM
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Why is Congress, Senate etc getting pay increases? Why don't we start with this problem? And then their benefits?

Jan 3, 2013 5:48PM
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Get ready for the worst! with the Republicnas and the Speaker of the Farce we will get a lot of blathering and bombastic pontification, and then they will cave! there will be more taxes, more fees, no cuts, no reductions, NO NOTHING, but more of the same! A recession at the end of 2013. When you put the speaker of the Farce together with Southern comfort over in the Senate you have a cave and choke combination.
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