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 4:07PM
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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.

 

Jan 3, 2013 4:00PM
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jimc in cinnci......It's been going on in Japan for 20 years, Bud.
Jan 3, 2013 3:59PM
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Roubini is a weenie, Roubini is a weenie....And that is only the first two lines of the song...

 

Our blind pig found an acorn in the yard, last year....She ate it.

Jan 3, 2013 3:57PM
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Anyone who was watching the other countries last year, and didn't think it was coming here, are in for a rude awakening. It went well in other countries, after a bit of protest, so expect the same here. Reason, politicians know the people in this country don't even protest at all. And come election time, the people have no memory of what happened, so govt. is at a free reign to do as it pleases. The one thing you won't see is, govt. downsizing like every other industry in this country did. Can't leave any of their cronies behind.......
Jan 3, 2013 3:53PM
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almost all welfare should be eliminated. but we need to provide education and jobs to get people out of the welfare cycle. the republican position of, just hate people on welfare and call them names will not solve anything. putting people into despair will only cause a revolution against the 1% and they will all be slaughtered no matter how benevolent they think they are. boner and his cronies in the house need to build this country from the bottom up. did you ever see a skyscrapper being built from the top down?
Jan 3, 2013 3:50PM
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Dr Doom is a total and complete FRAUD ,It's a mystery to most credible economists and business analysts why the media pays any attention to this quack. His claim to fame was a lucky guess on a stacked deck.
Jan 3, 2013 3:45PM
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There are steps we can take. Just we neither have imagination, guts and leadership qualities at any level of Government , business , religion or society at large.

 

(1) Put a cap on medicare after age 75  or 80. At some point one as to think meeting good lord.

(2) Tell poor to stop making babies. In nature if you cannot afford babies do not survive.

(3) People can live healthy life on rice and beans, peanut butter sandwiches and eggs. If you are poor you are poor and until you can make better life yourself, it is poor life. Mother Theresa even says so.

(4) Rapist , Killers, mentally sick that cannot be fixed with reasonable expense have their life over.

(5) Export prisoners and prisons to Mexico and operate at 20 % of the cost or even better export them to remote tropical island and drop daily food and forget the rest..

(6) Very poor, very old, very sick can be sent out of city at less expenses.

(7) Crook business people, bankers, real estate people. do not coddle them. Keep them in the slammer and take away their entire fortune. If they commit crime against society, good life is over.

(8) Politicians, Government employees if they violate the trust of office and take bribe or harass make sure there is enough punishment that they call their mommies for water.

Let us be tough on those who are bad guys and who are too much burden on hard working Americans and we will have better society.

Last one stop being fearful and go to all these foreign wars that we cannot win and costs us arm and legs. If congress wants to go to war, let them go three months every year to fight and pay for them by additional taxes just for it.

Jan 3, 2013 3:43PM
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I just wonder how bad things have to get before the public refuses to re-elect any member of Congress.
Jan 3, 2013 3:33PM
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Illinois Senate Democrats advanced legislation late Wednesday to restrict semiautomatic weapons and high-capacity magazines, pressing forward with new gun control measures in the waning days of the session over the objections of firearms groups. 

Amid the developments, the Illinois State Rifle Association issued an “urgent alert” to its members warning them that Democratic legislators were trying to push through last-minute anti-gun legislation.

“There would be no exemptions and no grandfathering,” the group stated in its alert. “You would have a very short window to turn in your guns to the state police and avoid prosecution.”

A Senate committee approved two bills, one dealing with the weapons and the other with magazines. Democratic supporters could face a tough sell in the full Senate. 

One measure would ban the possession, delivery, sale and transfer of semiautomatic handguns and rifles. People who currently own such weapons could keep them but would have to register them. The bill would allow semiautomatic weapons to be used at shooting ranges, but those facilities would be regulated. 

National Rifle Association lobbyist Todd Vandermyde told lawmakers the bill would restrict about 75 percent of handguns and 50 percent of long guns in circulation today. He also said it would treat law-abiding gun owners like criminals, and is in conflict with Second Amendment rights upheld by the courts. 

"I've never seen a piece of legislation that tramples on so many court decisions," Vandermyde said.

The other bill, introduced by Democratic state Sen. Dan Kotowski, would limit ammunition magazines to 10 or fewer rounds. 


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Jan 3, 2013 3:31PM
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  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.  

Jan 3, 2013 3:29PM
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How simple can it be? We are spending way more than we can ever, ever pay back in our lifetimes. And for what? Those that will  be saddled with the debt will be salves to it since they will not see the benefit of the spending but will be forced to pay for it. This president and this congress are not serious about taking responsibility, making sacrifices, and planning ahead for our children's future. You see their future being squandered right now. If you are fine with this then you are indeed a thrid-world minded human being and will get what you deserve-a country in ruins, a dictator, and a world wide economic collpase. Oh, not to mention a worldwar. Inflation, no jobs, and continued debt will be the legacy of 2013 and those in control. Rich guys got  their breaks already through corporate sweetheart deals with DEMS-GE, Hollywood, special interest groups that pander to th dems all got big breaks we never will. 
Jan 3, 2013 3:27PM
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I work for Federal.

I will see so many old folks more than 75 years old work in the offices, they will come around 9:30 AM to work with the coffee and there house problems. After 3-4 hours they leave and travel to all meetings on GOVT expenses. This is waste of GOVT  $$.

Why can't OBAMA introduce  a mandatory retirement age for Federal workers. GOVT can replace 2 employees with 1 old federal employee. That can solve at least some un employment issues and economy should be on right track.

Jan 3, 2013 3:17PM
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The democratic party will tax the people no matter what takes place, for they have wasted everything for 4 years and now it's Bushes fault that we are flat broke and printing money that has no real value.
Jan 3, 2013 3:16PM
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The FISCAL CLIFF, 2012 movie was well played out and well rehearsed.  Congress played us again like a fiddle. We were supposed to be in FISCAL CLIFF at midnight on December 31, but they changed their own plays in the middle of the production.  And, now we've got a sequel.  If they insist on a second version, maybe they will include a bit more drama and have a good ole country style fist fight on the Congressional floors.  It would be more entertaining if they would fight out into the streets and onto the roof tops.  If we have to watch FISCAL CLIFF, 2013 at least let us have some funny scenes in it.  We have seasoned players.  Im sure Beaner and Obummer could write the script to include some good Western action with the female actresses cheering them on, maybe getting in a hit or two themselves. Bikinis or bra and panties flashes would probably pick up the sperm count a bit.
Jan 3, 2013 3:16PM
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8 minutes ago
lets start with flat tax 1% if you make under 50,000.00 - 2% if you make 50,to 100,000.00 - 3% if you make 200,000.00, 4%300,00. - to 500,000.00,5% up to 1 million.6% 1million to 5 million.7% on any making over 5 million per year.NO DEDUCTIONS FOR ANY ONE.you want 10 kids fine on your dime not the u.s.a.,people.you want jets to play with fine on your dime not u.s.a.people,NO DEDUCTIONS FOR ANY THING.(YOU MAKE IT YOU PAY IT).the u.s.a.would have so much money they wouldn't know what to do with it.they built vegas on 2 cents on the dollar what does that tell you.
This is first flat tax that i can agree with...but do not see how it will raise enough cash,  of course 7 % for millionaires does not exactly seem fair,  go from 39 % to 7 %...a big tax cut.....
the other flax taxers talk about like 15 to 20 % for everybody,  seems the working poor and the middle class would take a tax hit more than the wealthy,  as theirs would drop from 39 % to 20 %.
On the coporate rate,  only lower it for companies that hire and manufacture in the U.S.  cannot see giving companies that outsource and work out of tax havens like the cayman islands a tax break so that they can continue to do so.
Jan 3, 2013 3:15PM
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With the needs of so many, the need will be high.  Please visit fair trade agreements and get Americans back to work.  It's the only way out of this mess.  Basically, a free political move. 
Jan 3, 2013 3:15PM
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If you are of the mindset that believes the teabaggers are all about fiscal responsibility and a smaller more responsive government, where is the harm in that? Having  over 500 representatives in DC of the people is getting little positive done and costing plenty. In this age where the average worker is being pushed down and out by technology and imports, this same technology could be applied to make a leaner government. Whats good for the goose is good for the gander. If we the people have to do more with less, so should the government. How special do they think they are?
Jan 3, 2013 3:01PM
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lets start with flat tax 1% if you make under 50,000.00 - 2% if you make 50,to 100,000.00 - 3% if you make 200,000.00, 4%300,00. - to 500,000.00,5% up to 1 million.6% 1million to  5 million.7% on any making over 5 million per year.NO DEDUCTIONS FOR ANY ONE.you want 10 kids fine on your dime not the u.s.a.,people.you want jets to play with fine on your dime not u.s.a.people,NO DEDUCTIONS FOR ANY THING.(YOU MAKE IT YOU PAY IT).the u.s.a.would have so much money they wouldn't know what to do with it.they built vegas on 2 cents on the dollar what does that tell you.
Jan 3, 2013 3:01PM
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Sounds like a case of "Euro envy".
Jan 3, 2013 2:56PM
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I concur the Tea Baggers must go in 2014
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