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January 02, 2013

This Is What "Balanced Deficit Reduction" Looks Like?

Today’s agreement enshrines, I think, a principle into law that will remain in place for as long as I am president,” Obama said after the House voted. “The deficit needs to be reduced in a way that is balanced. Everyone pays their fair share. Everyone does their part. That is how our economy works best. That is how we grow.”

- Barack Obama

CWCID

Posted by Cassandra at January 2, 2013 07:15 AM

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Huh. It looks like my bank account.

Posted by: spd rdr at January 2, 2013 11:06 AM

"Agreement enshrines... a principle into law."

He never fails to impress. Embroidering a turnbuckle while putting the screws on.

Would a consensus immortalize a principle into diktat I wonder?

Posted by: George Pal at January 2, 2013 11:48 AM

And the spending cuts would be where on this graph?

Oh, right. They *are* there.

In any case, even a $1 reduction is a reduction. And as long as 100% of that reduction comes from 2% of the population, that qualifies as "Balanced".

Posted by: Yu-Ain Gonnano at January 2, 2013 12:01 PM

There I am! That little fulcrum just barely to the left of center under that massive debt, that makes it all balance against the incremental income.
Sing with me...He ain't heavy, he's Obama....

Posted by: tomg51 at January 2, 2013 02:18 PM

The Congressional Budget Office scores the agreement as adding $4 trillion to the national debt by 2022.

But that's balance. It's a nice, even number.

Eric Hines

Posted by: E Hines at January 2, 2013 02:51 PM

Bless you, Cassandra, for your choice of scale in the graphs. I had to scroll a whole page down thru the deficit before I could find the tax increase.

Yet some simply won't get it. (Case in point: DJIA up 2.35% today.) They would say Cassandra slewed the results by choosing the scale. Sigh.

Gonna be an interesting month.

Posted by: Roy at January 2, 2013 06:08 PM

I wish I deserved the credit, Roy. But it rightly belongs to Tyler Durden at ZeroHedge - it's his graph.

When I heard we'd come to a deal on the fiscal cliff, the first thing I thought was, "We need a graph that conveys this simply". But I didn't have time to do the hard work myself. So thank you for the kind words - I just want to be clear that I didn't create the chart myself :)

Posted by: Cassandra at January 2, 2013 06:25 PM

Well, that's graphs either created or preserved. It's a regular graph stimulus.

Is Tyler Durden a real person? Really?

I can't really decide what this means, as I have read that the "Bush Tax cuts" of 2002 have now been preserved in perpetuity for about 98% of the population (of course, that is not including the tax wonders of ObamaCare, the ACA).

But yet, the other shoe has yet to drop, and will we get budget cuts and any kind of path to a balanced budget? And will the revenue actually materialize as predicted? Will we, can we, get more revenue than ~ 20% of GDP?

Stay tuned as we have yet another episode of...."As The Budget Turns (south)"

Posted by: Don Brouhaha at January 2, 2013 07:42 PM

I'm amazed that he isn't laughed off the stage for talking about deficit reduction at all. In a sane world, he'd say, "I don't give a flip about deficit reduction. I neither know nor care what the impact of a high deficit is. To the extent I think about it at all, I subscribe to one of those arcane economic theories about Modern Monetary Funding. But all that's truly important to me is to increase the 'fairness' of the tax system, which to me is entirely a matter of punishing the rich. And I'm pretty sure voters are equally confused about the economics, and equally focused on sticking it to those rich bastards, so they're going to let me get away with it."

How to account for media (and an opposing party) that lets him get away with talking about deficit reduction in the context of a bill that increases the deficit by $4 trillion?

Posted by: Texan99 at January 3, 2013 10:58 AM

As Coyoteblog put it, "The recent tax increase on the 2% of the wealthiest Americans will be completely used up by this Sunday. In exchange for decreasing the incentives to work and invest of the most productive and successful Americans, we got enough money to operate the government for just over five and a half days"

The math, not to mention the implications, will make sense to less than half the people.

The Phants' 'supposed' gain of avoiding taxes on most people will merely provide the Donks with ammunition to argue the Phants' lack of cooperation explains what will happen. What cannot work will not work. When no compromise is possible, don't attempt a compromise.

Posted by: Roy at January 3, 2013 11:34 AM

The math, not to mention the implications, will make sense to less than half the people.

Forty-seven percent is less than half, right?
Sorry. Math is hard.

Posted by: spd rdr at January 3, 2013 06:16 PM

Does anyone really understand all the math here? Or all of the implications? I'll admit that I don't.

I've read several well written analyses during the last few days. They all focus on different aspects of the deal. They can't really be compared easily, because they don't cover the same things.

Some think it was bad. Others think it was good. Everyone's got an opinion, and opinions vary depending on which alternative scenario they choose to compare it to or what they think "the goal" was. There's no real agreement on either side.

To simplify things, let's say we opted for "no deal" and ignore all the proposals that didn't pass or didn't move beyond the suggestion stage.

We KNOW what would have happened with no deal.

The Bush tax cuts, which we didn't have enough votes to make permanent even when we controlled both houses of Congress AND the White House, go away. Taxes go up for 98% of Americans.

So here's my question to all of you: tell me why this is (or isn't) preferable to the deal that just got made. Because these are the only real alternatives: the deal that got passed, or the consequences of no deal.

Everything else is just vaporware.

Posted by: Cassandra at January 3, 2013 08:28 PM

The essay I've read that I found most useful was this one, entitled "‘Fiscal cliff’ deal falls short under three economic theories."

It points out that there are three leading theories about why the economy is not rebounding. Each of them offers a proposed road forward; this deal satisfies none of them.

Now, the first two theories are at least mostly incompatible, so a decision has to be made between them. The third theory -- that uncertainty is the chief issue -- is compatible with a resolution in favor of either of the other two, but not with a continued tension between them.

It happens that I lean strongly in the direction of the uncertainty theory. It is clear that people with access to capital and the skill of investing it well can make money even in bad economic conditions. You may not make as much, but it's possible to make money and produce growth and jobs even if things are harder than they should be.

What they can't do is plan for uncertainty. If you really have no idea what the conditions or costs or regulatory burdens will be that you face in the future, you can't plan at all. Everything you do is an unwise gamble. You may be forced to make some gambles, but they're blind gambles -- you don't even know what the odds are. That's a disaster, so the smart money stays out and the absolutely committed hedge as much as they can.

No deal wouldn't have resolved us in favor of the first or the second theory, but it would have resolved at least some of the uncertainty the government is producing (the parts associated with failure to budget properly, and questions about which taxes were going up and by how much). Instead, what we got is a continued tension between the first two theories, and a push-off of much of the uncertainty related to budgets.

The regulatory burden uncertainty, and the uncertainty associated with Obamacare's implementation, remain issues in any case. But I think the cliff deal is worse than no deal, because it has prolonged the period of uncertainty over budgetary issues. In fact, it has set a precedent for kicking the issue down the road again (why not?). That means planners really can't think with any certainty at all about the economic future they're going to inhabit.

Posted by: Grim at January 3, 2013 10:08 PM

"We know what would have happened with no deal."

Do we? I beg to differ, regardless of the "deal" people would have adjusted to the circumstances. I believe you mentioned in a past post that you might discontinue work if tax rates went up on a certain demographic.

I have no doubt you might work crazy hours for your family. But, you might not do it for a government designated family.

Isn't that we are really talking about anymore? Work, work, work, someone needs it somewhere. Taxation is no longer about government functions, but about income, for others

Posted by: Allen at January 4, 2013 12:07 AM

Cassandra, I feel your pain. I utterly sympathize with your "vaporware" comment.

Several times over the years I've been approached about considering what I immediately recognize as a variation of a perpetual motion machine. Sometimes the complexity of a given machine makes it difficult to analyze to demonstrate to myself in a precise proof that it won't work. Not to mention attempting to explain it to the poor sucker who is absolutely convinced it will work. But when the gizmo violates the First Law of Thermodynamics (read" promises some work output beyond energy input", or better still, insists that there is such a thing as a free lunch), I don't need the detailed analysis to know it will not work. It will not work because it cannot.

That's the clear message of your beautiful graphs. No matter the fancy theory, it cannot work and therefore will not.

Putting that last to answer your specific question: what about the deal that got made? It will not work because it cannot. No reason to make the deal. Especially when it cuts the ground from under making any kind of fix.

What should have happened? The Phants should have voted "present". Then, when the folks got their bleeding paychecks in Jan, the Phants could have made a defensible, politically viable case for making those two graphs have similar heights. Instead, they bought confusion.

Posted by: Roy at January 4, 2013 12:17 AM

I'm going to address your comments out of order.

First, Allen's:

Do we? I beg to differ, regardless of the "deal" people would have adjusted to the circumstances. I believe you mentioned in a past post that you might discontinue work if tax rates went up on a certain demographic.

Well of course they'll adjust. But if you're arguing that policy doesn't matter b/c "people will adjust", then what does that do to our argument that government is strangling the private sector. Won't they simply adjust?

Public policy (and taxes, and deficits) either matter or they don't.

During the Evil Bu$Hitler years, conservatives argued that lower taxes were good (and a core conservative value) in and of themselves because leaving more money in the hands of workers and businesses is the best way to spur economic and job growth.

The White House has adopted this message, which has caused some consternation. We'd like to say the argument is bogus because we neither like nor trust Obama. But that's not terribly convincing when we were saying exactly the same thing during the Bush years.

Back then, conservatives also argued (contra the DNC talking points) that the Bush tax cuts benefited the lower income brackets and the middle class. Without ever admitting that they once reviled The Terribly Unfair Bush Cuts, the Dems are now screaming, "OMG!!! WE CAN'T LET THOSE UNFAIR TAX CUTS EXPIRE! THAT WOULD DEPRIVE THE POOR, NEAR-POOR, AND MIDDLE CLASS OF ALL THOSE TAX BREAKS WE'VE BEEN SAYING DIDN'T EXIST!).

QUESTION: If lower taxes are good (i.e., conservative), then why would conservatives want the Bush tax cuts to expire? I can think of one reason: we need the higher revenue to pay down the deficit...

...Which is what the White House has been saying :p And to which we reply...

The only way to shrink government is to starve the beast (by lowering taxes!). And anyway, raising taxes won't raise revenue. And (depending on which conservative you're talking to) Congress doesn't even consider whether there's enough money to pay for the laws they pass - they just put the bill on the national credit card. This rather undercuts the "starve the beast" line, but consistency is so overrated.

Again, which argument are we to believe?

When we ask why the country isn't wildly enthusiastic about our ideas, is it possible we need to address some of the contradictions in our arguments?

Posted by: Cassandra at January 4, 2013 08:12 AM

And yes, I realize I'm being infuriating :p

And I think the Dems are even more incoherent that we are, but they have a powerful advantage in that their platform panders to the worst instincts of voters (the desire to pass the costs of their decisions on to the more fortunate/productive members of society) and ours demands something of voters (personal responsibility).

It's terribly, terribly unfair. But it also means our arguments are going to be subject to greater scrutiny b/c we're not telling folks what they want to hear. We're saying, "Eat your vegetables and quit asking government to bail you out every time you do something stupid", and people resist such requests far more vigorously than they do, "Here - have another cookie, you poor thing!".

Posted by: Cassandra at January 4, 2013 08:17 AM

I do hope that conservatives have grown out of the "Starve the beast" as being the only way to rein in spending mode. The only way to rein in spending is to---rein in spending!! I fear that until the various entitled classes realize that entitlement reform is the only, repeat only way to get the deficit curve back on the right track it ain't gonna happen. I also fear that many of the entitlement classes don't care and are happy wallowing in their taxpayer (not them, thank you!) funded largesse. The welfare of the nation be damned.And it surely will be on current track.

Posted by: CAPT Mongo at January 4, 2013 09:21 AM

I do hope that conservatives have grown out of the "Starve the beast" as being the only way to rein in spending mode. The only way to rein in spending is to---rein in spending!!

Amen, Brother Mongo! That whole "if... then" formula is flawed. We often fault liberals for making policy based on demonstrably false notions of what will happen if we do X, but in this case we're doing the same thing.

If lacking the funds to pay for new programs were really a deal killer, spending would have been cut long ago.

Posted by: Cassandra at January 4, 2013 09:53 AM

Well, lowering tax rates wouldn't starve the beast even if Congress were to worry about having the funds first. Lowering tax rates raises economic activity. This almost always leads to an increase in revenue. Raising revenue is, by definition, not starving the beast.

But to your question, if the choice is between being stabbed with a pocket knife or a kitchen knife. I'll choose the pocket knife. Just don't ask me to pretend that that is a "win" and be happy about it.

Posted by: Yu-Ain Gonnano at January 4, 2013 12:14 PM

Although, truth be told, I'm kinda with Grim. I'm not convinced that the cliff wasn't a better "deal". We have a spending problem, not a revenue problem. The cliff would have been a first step to solving the problem, while the deal we got only solved the Democrat's need to punish the rich.

That said, I'm not sure that I agree all else is vaporware. This guy found a new way to play the classic prisoner's dilemma.

That's what the fiscal cliff was designed to be. Only the game was rigged in Rs favor. The Rs liked the spending cuts, but didn't like the tax hikes. The Ds didn't like the spending cuts, but they also didn't much like the tax hikes (they only liked a very little piece of it).

I would have taken the spending cuts since that starts to solve the actual problem. The only question then would be if the Dems hate the rich so much that they would be willing to hurt everyone else to do it. Then make them own that.

Posted by: Yu-Ain Gonnano at January 4, 2013 01:03 PM

...to your question, if the choice is between being stabbed with a pocket knife or a kitchen knife. I'll choose the pocket knife. Just don't ask me to pretend that that is a "win" and be happy about it.

I hear ya :p

I'm none too happy with this myself. I want to get to Grim's comment next but I'm juggling polar bears whilst my hair is on fire today.

Posted by: Cassandra at January 4, 2013 01:11 PM

Green money is 13.28 times denser than Red money.

(OK, so the simplest answer isn't always right..)

Posted by: tomg51 at January 4, 2013 01:34 PM

I did not state my argument as clearly as I could have. Of course policy matters, and when I said adjust I meant people will react to that policy. I would suggest it will be in a way negative to what the people in DC think. I believe both parties have missed the boat. They don't recognize reality anymore.

I may be a pessimist, and a cynic, but there is no more real revenue to be had. Between the federal, state, and local governments they spend about 6 trillion dollars per year. The populace makes about 7 per year, just where in Hades is the rest supposed to come from?

You should check out the data from the BEA or BLS, I forget which one. They count both social security payments, into the system, and payments out of the system as savings or income for people.

That extends into other areas as well.

Regards

Posted by: Allen at January 5, 2013 01:26 AM

I did not state my argument as clearly as I could have. Of course policy matters, and when I said adjust I meant people will react to that policy. I would suggest it will be in a way negative to what the people in DC think. I believe both parties have missed the boat. They don't recognize reality anymore.

Thanks for the clarification :) I've always valued your comments and wasn't trying to be argumentative.

It's just that I am still working my way through what I think of all this. I don't think I'm a stupid person, but I must be, because none of this seems so blindingly self evident and obvious as the glib talking points on both sides suggest it is.

We can focus on this or that aspect of the problem and arrive at a quick conclusion, but it takes time and reflection for the big picture to become clear. You can see this in how the coverage of the deal is changing over time. People are seeing things now that they didn't see at first. That same cycle repeats every time a big event occurs - we work our way through it, usually slowly and with many false starts and dead ends. Trial and error, which is pretty much the story of human history.

We've gone from demonizing the other side to demonizing and blaming our own side, or at least anyone on our side who - in the vastly inflated opinions of Those In The Know - displays insufficient conservative ardor.

We're acting like Obama, except we are ascribing the worst possible motives to people on our own side. They're incompetent. Or dishonest. Or hypocritical cowards. Or my personal favorite - "hollow men".

I despise progressive dogma, but I am also rapidly becoming ashamed of the behavior of what I want to believe is "my side". And I'm just sick about it.

I want to be proud of my country. I want to be proud of conservatism. God help us all because we're certainly not doing a very good job of helping ourselves.

Posted by: Cassandra at January 5, 2013 10:28 AM

OK, Grim. I've had time to read and think about your link.

While I don't disagree that this deal did little or nothing about the big problem of fixing the economy, I don't understand the expectation that it would/could have. I especially don't understand this:

No deal wouldn't have resolved us in favor of the first or the second theory, but it would have resolved at least some of the uncertainty the government is producing (the parts associated with failure to budget properly, and questions about which taxes were going up and by how much). Instead, what we got is a continued tension between the first two theories, and a push-off of much of the uncertainty related to budgets.

Do you seriously believe that if the Bush tax cuts had been abolished (and, as with the deal, no spending cuts), the Democrats would not quickly have introduced legislation to put some other form of tax cuts (or tax hikes on the rich) in place?

The public outcry would have been enormous. What have you seen in the DNC or the White House's conduct that makes you believe they would have stood firm?

Posted by: Cassandra at January 6, 2013 10:06 AM

I imagine it's possible they might, but the House can stop those too. One thing that really can be done, from an Uncertainy Theory perspective, is to at least freeze the rule changes coming out of Congress. That may not be as good as having good rules, but it's far better than having unpredictable and constantly-changing rules.

The reason it's better is that there are some very smart people planning the courses of major corporations, small businesses, and even the larger government bureaucracies that interact with the economy (especially DOD). Give them bad rules and they can work with them, or around them: for example, ban 100 watt incandescent lightbulbs, and you'll find (as I just did) that there is a new 90 watt variety readily available for sale in stores.

But that all takes planning. You've got to set up production lines, for example, to make lightbulbs. DOD maybe can make do with smaller budgets, but it can't plan around unknown budgets.

It would make sense to change course if it was for a good reason. If you had a clear principle that said that doing X would make things better, doing X might make sense. The problem with the 'All three theories say this is stupid, but we're doing it anyway' course of action is that it is just the opposite. It's doing something you believe will make things worse.

I think what Congress should do is absolutely nothing. It should spend the next two years passing no laws, raising no ceilings, agreeing on nothing and compromising on nothing. That will lead to terrible policy, but we're going to get terrible policy with constant negotiation and compromise also. It will at least lead to stable policy, and a stable policy -- even a terrible one -- we can plan around.

Dig in your heels. Do nothing. Refuse every change. If anyone asks why, tell them it's because the American people have voted in such a way as to give us divided government, which means there is no clear consensus about what Americans want. That being true, it would be wrong to go off in either direction right now -- and staying in one place at least keeps things stable enough that businesses and bureaucracies can plan around it. It's the best course available in a nation that lacks political consensus.

Posted by: Grim at January 6, 2013 03:52 PM

I'm not sure that we do have unpredictable and constantly changing rules, though.

DOD maybe can make do with smaller budgets, but it can't plan around unknown budgets.

We haven't had a budget for 4 years. Hard to see how obstructionism helps. It sounds more like a temper tantrum than anything else, and I suspect it will be perceived as such.

Businesses can't "plan around" inaction because it can stop at any time. To me, it just sounds like more of the same.

What's the end game here? How do you see this ending? Why would voters put Republicans in the White House after 4 years of doing absolutely nothing except being obstructionists?

Posted by: Cassandra at January 6, 2013 06:46 PM

Hard to say what voters will do four years from now. I couldn't have predicted they'd do what they did this year: return a divided government almost exactly in the same form as before the election, when they were plainly dissatisfied with every element of it. The system is producing irrational results, and it's not clear if that's a temporary or a permanent problem.

What's important is to do what's right, with what we have, where we are. We can't make the nation agree on Keynesian or Debt oriented approaches to the economy. We can use a House majority to stop anything new from coming out of Congress. Uncertainty is the one thing we can address.

So when you say 'inactivity could stop any time,' that's not true if it's the determined strategy. The House can stop the Senate from acting on most things (excepting appointments). It can stop Congress from generating more uncertainty. It can also hold hearings into the administration's efforts to use the bureaucracy to bypass Congress, bedeviling and slowing new rules and regulations.

That seems like the right course of action, because it's the only way we have of addressing ay of the three economic theories given a political division this deep.

Nothing to do with temper here. Believe me, my temper doesn't express itself in legislative solutions. As a point of cold strategy, it is the only thing that can be done that has any chance at all of working to improve the economy.

Posted by: Grim at January 6, 2013 09:26 PM

I couldn't have predicted they'd do what they did this year: return a divided government almost exactly in the same form as before the election, when they were plainly dissatisfied with every element of it. The system is producing irrational results, and it's not clear if that's a temporary or a permanent problem.

Someone less determined to force events into a mold that matches the way they wish to see things might be tempted to point out that people are ALWAYS dissatisfied with governmnent. The question isn't, "Are people unhappy with the current scheme" as much as it is, "Do they prefer the alternative being offered to the status quo?"

Unfortunately for your argument, they clearly didn't. It wasn't even close. It may make you feel better to use words like "irrational" to describe an outcome you don't like/agree with, but it also happens to be exactly what we've been complaining about on the Dem side. As is arguing that we should adopt obstructionism as our governing mantra.

That's precisely what Nan Pelosi did in 2006.

When the end justifies the means, all means are on the table. Obstructionism doesn't end uncertainty - it perpetuates it. What I'm getting from your argument is that you don't really want an end to uncertainty.

You want to prevent things from being settled in a way you don't like. Weakening Congress is a tactic that will please Obama no end, as it gives him all the political cover he needs to bypass our elected representatives.

Is that really what you want?


Posted by: Cassandra at January 7, 2013 05:31 AM

You and I are talking about different things. You still want to win. I don't want to win the next election -- at least, not yet. I want to do what we can to govern where we are.

If it makes you feel better, Pelosi's side did win in 2008.

I'm not sure how you can read into what I wrote that I want a continuation of uncertainty. What I want is for things to get better. Washington has consistently made them worse. Every problem we've got tracks to the District of Columbia. The less we hear from them, the better. Obstructionism is just another word for 'keeping them from mucking around with it any more for a while.' That sounds good and wholesome to me, partisan politics aside.

(Two asides: irrational is not another word for 'things I don't agree with'; and it's the system, not the voters, that I said was irrational. The voters may be perfectly rational, but the system is turning out a stable government when their satisfaction with government is at historically low levels. It's not the case that people are always dissatisfied with government; if you look through the history of the Gallup Confidence in Institutions Poll, you find that numbers have sharply declined for governing institutions.)

Posted by: Grim at January 7, 2013 09:41 AM

I'm not sure how you can read into what I wrote that I want a continuation of uncertainty. What I want is for things to get better. Washington has consistently made them worse. Every problem we've got tracks to the District of Columbia. The less we hear from them, the better.

Grim, I'm sorry but I think that's a gross oversimplification.

I can't possibly cover all the things you're saying that don't make sense to me in a comment but the idea that not governing = governing is probably a really good place to start.

This will have to be a post, when I have time.

wrt to "winning", I don't think you understand my position at all.

Posted by: Cassandra at January 7, 2013 10:58 AM

I'm sure that an aphorism is an oversimplification, but I'm also sure that the sense of it is right. Washington has done nothing to help the economy. The bailout made things worse by not letting the market sort out the banks, General Motors, and others. Obamacare has made recovery impossible via uncertainty. Congressional fiddling with tax rates and crony payoffs has made things worse. Congressional nose-blowing at the budget has made things worse. Regulatory fever from the administration has made things worse.

We'd be better off without them. Where we are, we can't fix anything; we don't have the votes. But we can at least stop them from doing anything else. Let the government shut up for a while, and maybe America can fix itself. If the rules stop changing all the time, and the government stops shoving things down their throats, the people of the country are pretty inventive. They just can't get a leg up while the government is constantly jerking the rug around underneath them.

Posted by: Grim at January 7, 2013 11:22 AM

Also, since you say you want to start here:

...the idea that not governing = governing...

When you get to your post on the subject, I would ask you to consider the danger to conservatism (whether 'true' or 'moderate') of equating "governing" with "passing new laws and regulations." Choosing to enforce a moratorium on new laws is also governing: especially when, as here, it is driven by a clear principle and pointed at improvement. Here the uncertainty principle offers a road forward that is actually achievable for the minority.

That's half the problem with this fiscal cliff deal, and a major reason I cited the "three models" article. Nobody thinks this will work. In fact, according to every model it will make things worse.

We're doing it because, well, this is what we can do. Government likes to do something, even if no one thinks it will work and everyone believes it will cause harm.

That's not a conservative way to govern, moderate or otherwise. The conservative way is not to make any changes unless there's a good reason.

Posted by: Grim at January 7, 2013 01:00 PM

Choosing to enforce a moratorium on new laws is also governing: especially when, as here, it is driven by a clear principle and pointed at improvement. Here the uncertainty principle offers a road forward that is actually achievable for the minority.

It's not by any means clear to me that obstructionism is an improvement. The result of Congress NOT taking your advice wrt to the fiscal cliff deal is that taxes didn't go up by nearly as much as they would have, had Congressional Republicans taken your advice. That is the "Taxmegeddon" you were so upset about earlier.

AND the sequester would kick in immediately, as opposed to doing so (possibly) in March and the cuts not being as drastic.

Suddenly, having taxes go way up on everyone is a good outcome?

It's also far from clear that there won't be a deal on spending when the debt ceiling debate comes up again. You're treating your fears as a foregone conclusion.

Finally, it is likewise not at all clear (the opposite, in fact) that the minority party "doing nothing" does anything to resolve the question of uncertainty.

I don't understand these broad, sweeping statements you're making.

Neither "no one" nor "everyone" believes *anything*, here. Certainly "everyone" is not in agreement wrt the advisability of any particular law...nor are "all conservatives" in agreement.

If you frame the discussion with a completely false framework ("We have to NOT do something b/c "everyone" or "no one" thinks X or Y" - when in fact this is NOT the case), you're not really making decisions based on reality, but rather based upon a so far unsupported opinion that:

(a) uncertainty is the only, or even just the primary, thing holding the economy back, and

(b) a moratorium on new laws is the remedy (certainly it's not when so many laws have expiration dates).

Posted by: Cassandra at January 7, 2013 03:29 PM

Sweeping statements here merely relate to the 'three models' under consideration. No one who adheres to any of these theories believes this deal will help. Here's why.

Ask each of the three what is causing the problem, what the solution looks like, and what they think of this deal.

Keynesian:

1) "The problem is weak demand, occasioned by tight money which in turn is occasioned by inflated risk associated with the collapsing bubble."

2) "The solution is to cut taxes and increase government spending, so that demand for goods and services is driven up. This increased demand will exert a pull on supply, which means that more people will invest in becoming suppliers. That creates jobs, and pulls the economy out of the tailspin."

3) "This plan is stupid because it increases taxes and postpones a decision on the important new increases in government spending. We need to keep taxes low, and spend more now."

Debt/Spending:

1) "The problem is that the government is making investment less attractive because it is weakening the dollar's long-term prospects by inflationary policies. Massive bailouts and unreformed entitlements mean that anyone who invests in America in assets valued in dollars is setting themselves up for a loss; in addition, they know they must expect higher taxes down the line. Of course they aren't investing."

2) "The solution is to reform entitlements and get the debt/spending situation under control. Then people will feel like they can make investments that will hold their value, so that profits will be true profits and not hidden losses. Also, removing the sword of Damocles from above their heads by eliminating the need for vast future tax increases means they will be readier to invest."

3) "This deal is stupid because it increases taxes, but puts off any decisions on spending cuts. We need lower taxes to attract investment, but the most important thing by far is to attack the spending problem. Kicking the can down the road makes things worse. At least the sequester would have been a good start on the spending problem."

Uncertainty:

1) "The problem is that anyone pondering an investment faces uncertain costs. Even given bad rules, it's possible to make a profit as long as you don't keep changing the rules. Between Obamacare coming online, regulatory psychosis (especially against coal and energy, but also against the medical industries) and Congressional malfeasance, nobody has any idea what his costs will be next year, two years out, five or ten years out. Of course they won't invest in this environment -- they'd be fools."

2) "The solution is to get a grip on the amount of government meddling. Regulatory agencies need to cut back on rule-making, and concentrate on reviewing and streamlining (or, better, eliminating) costly regulations that don't prove effective. Congress needs to put the brakes on changes that alter employer costs. But the most important thing is to have a set of rules we'll agree to play by, and stop jerking things around."

3) "This plan is stupid because it doesn't settle anything. Taxes are going up, but the tax issue isn't settled -- immediately we're talking about whether to raise them again. Budgets aren't being set. Cans are getting kicked. Nobody had any idea what their costs were before the deal, and nobody has any idea after. All that has been accomplished is to increase and prolong uncertainty."

Posted by: Grim at January 7, 2013 06:15 PM

As for Taxmageddon, I think it's a dumb idea. But I think it was a better idea to just do it once than raising taxes now, and then raising them later, and then debating raising them again later.

I think the sequester is bad policy. But I think it's better policy than leaving DOD planners in limbo. I've done lots of DOD planning, as I know your husband did for many years. You can plan around bad decisions from on high. What you can't plan around is indecision.

My general thought is that we need to just lock DC down. Maybe there could be specific things that are worth doing, on specific occasions with specific reasons. Heck, maybe sometimes it would even make sense to compromise and let somebody try something that they thought might work, just so we can say that we tried it and it either worked or didn't work.

What doesn't make any sense is these "compromise" policies that produce results that no one thinks have any chance of working. That's what I mean by doing something because government likes to do something, even though the thing you can agree to do doesn't actually make any sense to anybody.

Posted by: Grim at January 7, 2013 06:20 PM

You say the House is being obstructionist. With regard to government spending/a budget, they have passed several of them, sending them to the Senate. And Harry Reid has let those budgets languish and die. If *HE* wasn't being obstructionist, we may not have reached the Fiscal Cliff yet, and may have already started moving the *right* direction...

Posted by: Miss Ladybug at January 9, 2013 11:55 PM

You say the House is being obstructionist.

Who said that? Where?

What I'm discussing is Grim's suggestion that Republican intentionally paralyze Congress by doing nothing except blocking any new legislation. That's a very different thing from passing budgets that don't make it through the Senate.

Posted by: Cassandra at January 10, 2013 09:05 AM

Maybe I should have phrased it a little differently. You're speaking from a "if they do this going forward", but the House has already been accused of being obstructionist up until now... With the Left-leaning slant of all the major media outlets (I'm pretty sure more people still get their news from on of the "Big 3" network news broadcasts than from FNC...), the truth of "if you tell a lie often enough, people will start to believe it". Too many people just see a headline/hear the 30 second news report, and don't investigate any deeper. The Republicans have a big problem with messaging and getting that across to the majority of Americans.

From my point of view, *HARRY REID* has been an obstructionist for not allowing the Senate to even *VOTE* on budgets the House has passed and sent over.

Posted by: Miss Ladybug at January 10, 2013 11:00 AM

You're speaking from a "if they do this going forward", but the House has already been accused of being obstructionist up until now...

and...

From my point of view, *HARRY REID* has been an obstructionist for not allowing the Senate to even *VOTE* on budgets the House has passed and sent over.

It's maddening, isn't it? :)

I agree with you on Reid - the man is shameless.

Posted by: Cassandra at January 10, 2013 11:04 AM

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