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Old 02-14-2013, 07:14 AM  
Direckshun Direckshun is offline
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The austerity policies of the past two years is threatening a double-dip recession.

It's time for some of those among us to come to two uncomfortable truths on this forum.

1. The Obama administration has overseen the sharpest decline in deficit spending just about every single one of us have seen in our lives, thanks in part to austerity demanded by Tea Party Republicans.

2. This radical reduction in the deficit is risking to stop our recovery growth dead in its tracks.

I've made this point over and over and over and over on this forum: deficit reduction retards growth.

So when you slash into the deficit as severely as we have, you will slow growth with the same severity. And what do you know? We ended up with negative growth in 2012's fourth quarter. Two quarters in a row, of course, is the legal definition of a recession (assuming the original assessment of 2012's 4th quarter holds where it is).

We've learned nothing from Europe, which has seen huge unemployment numbers, languishing recoveries, and double- and triple-dip recessions because they embraced austerity during a financial crisis while we embraced (albeit limited) stimulus.

In comes the Tea Party, and by the conclusion of the past Congressional cycle of radical austerity policy, we're now on the verge of a double-dip recession.

This is not random, folks. This is happening for that specific reason.

http://news.investors.com/blogs-capi...icit-hawks.htm

The Deficit Chart That Should Embarrass Budget Hawks
By Jed Graham
Posted 02/12/2013 08:05 AM ET



Here's a pretty important fact that virtually everyone in Washington seems oblivious to: The federal deficit has never fallen as fast as it's falling now without a coincident recession.

To be specific, CBO expects the deficit to shrink from 8.7% of GDP in fiscal 2011 to 5.3% in fiscal 2013 if the sequester takes effect and to 5.5% if it doesn't. Either way, the two-year deficit reduction — equal to 3.4% of the economy if automatic budget cuts are triggered and 3.2% if not — would stand far above any other fiscal tightening since World War II.

Until the aftermath of the Great Recession, there were only three such periods in which the deficit shrank by a cumulative 2% of GDP or more. The 1960-61 and 1969-70 episodes both helped bring about a recession.

Far steeper deficit cuts during the demobilization from World War II and in 1937-38 both precipitated economic reversals.

Now the deficit is shrinking about 50% faster than it did during the booming late 1990s, when the jobless rate was falling south of 5% and tax revenues were soaring — without tax hikes.

That's not to say that a recession is in the cards now, as the Federal Reserve applies its might to keep housing on a recovery path and helps propel the stock market higher. But growth is likely to be disappointingly weak yet again.

The Congressional Budget Office projects just 100,000 jobs will be added per month this year, the jobless rate will remain stuck around 8% and the economy will grow 1.4% if the sequester takes effect, but that may be too optimistic.

There was certainly no good economic reason for policymakers to risk the hit to growth that came with the roughly $200 billion fiscal cliff tax hike. Now they risk compounding the fiscal drag with poorly targeted budget cuts.

History suggests that there's little good to be gotten from cutting the deficit much faster than 1% of GDP per year. That's especially true at the moment, given the nature of our related demographic and budget challenges.

Both of those challenges suggest that growth should be our paramount concern, far ahead of near-term deficit reduction, even as we work to improve the intermediate-term budget outlook.

As far as the budget goes, it makes no sense that Congress remains focused on cutting discretionary spending. The danger clearly comes from entitlement programs, particularly health care, and the prospect that interest on the debt will spiral if we don't better align spending promises with revenues. These are programs that need to be reformed gradually and with great care, but there's no good reason to delay.

As for demographics, this was supposed to be the decade in which the leading edge of the Baby Boom generation began to ease out of the workforce and pass the baton to the next generations. Instead, there are not enough jobs to go around to allow for a seamless transition and Baby Boomers are hanging on longer as they try to recover from the financial damage inflicted by the housing bust.

There has been plenty of economic pain to go around, but younger workers have borne the brunt of three crises — jobs, housing and student loans. Since January 2000, the number of full-time jobs is up 10.5 million among workers 55 and up but down close to 8 million among the under-55 population.

In the speeches of Washington politicians, deficit reduction is all about being fair to the young and not leaving the next generation with ungainly debts. That might be true if deficit reduction came through smart changes to entitlement programs, but that's not the case.

In effect, the overly rapid fiscal retrenchment is giving younger workers a deal that none of them should want: We'll slash the deficit now, so that you will have a harder time getting good jobs and paying back your personal debts. We'll cut critical government spending on education, infrastructure and science so that new college graduates for whom job prospects remain discouraging can put their futures on hold for a little longer.
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Old 02-15-2013, 12:17 PM   #106
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Quote:
Originally Posted by DementedLogic View Post
"In economics, austerity refers to a policy of deficit-cutting by lowering spending via a reduction in the amount of benefits and public services provided."

I'd like to know how this applies to us.
What do you mean? All of it applies to us.
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Old 02-15-2013, 12:27 PM   #107
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Amazing how Obama has this great record of decrease in deficit spending while every year the deficit grows at a greater rate than any other President in US history.

Political spin is not actual results. Figures don't lie, but liars figure.
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Old 02-15-2013, 12:49 PM   #108
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Quote:
Originally Posted by Chief Faithful View Post
Amazing how Obama has this great record of decrease in deficit spending while every year the deficit grows at a greater rate than any other President in US history.

Political spin is not actual results. Figures don't lie, but liars figure.
Even more amazing is how his supporters say he's a great deficit cutter, but also knows the value of deficit spending unlike the GOP. He's 2-in-1. All thigns to all people.
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Old 02-15-2013, 01:11 PM   #109
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Originally Posted by FD View Post
What do you mean? All of it applies to us.
Spending hasn't been lowered at all.
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Old 02-15-2013, 01:12 PM   #110
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Originally Posted by mnchiefsguy View Post
I think that statement by Obama is going to haunt him and his legacy. It was his "No New taxes" moment.
Don't think so...unless the media turns on him. Otherwise, he is covered.
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Old 02-15-2013, 01:34 PM   #111
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Quote:
Originally Posted by DementedLogic View Post
Spending hasn't been lowered at all.
Real government spending has been falling for over 2 years:



The number of government employees has been falling for 4 years (excluding the census spike):

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Old 02-15-2013, 01:48 PM   #112
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Quote:
Originally Posted by FD View Post
Real government spending has been falling for over 2 years:



The number of government employees has been falling for 4 years (excluding the census spike):



Federal spending has not decreased. Spending stagnation does not equal lower spending. Especially when we are coming out of 2 wars and a federal spending spree the moment Obama took office.

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Old 02-15-2013, 01:51 PM   #113
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Old 02-15-2013, 01:58 PM   #114
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Quote:
Originally Posted by DementedLogic View Post
Federal spending has not decreased. Spending stagnation does not equal lower spending. Especially when we are coming out of 2 wars and a federal spending spree the moment Obama took office.
Stagnant nominal spending equates to falling real spending, and real spending is what matters.
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Old 02-15-2013, 01:58 PM   #115
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Fun making charts. Makes true lies into a game
Whats the lie?
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Old 02-15-2013, 03:08 PM   #116
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Originally Posted by FD View Post
Stagnant nominal spending equates to falling real spending, and real spending is what matters.
Can you tell us what year this falling spending actually falls to a point where we take more money in than w spend so our debt actually falls, say, a dollar?
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Old 02-15-2013, 04:36 PM   #117
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Can you tell us what year this falling spending actually falls to a point where we take more money in than w spend so our debt actually falls, say, a dollar?
Not for a very long time, if ever, I'd say. But that doesn't mean spending isn't falling and that we've been dealing with austerity the past two years, either.
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Old 02-15-2013, 05:26 PM   #118
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Real government spending has been falling for over 2 years:
Well I would hope so, since we're winding down the stimulus. Why would it stay the same?
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Old 02-15-2013, 05:32 PM   #119
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Well I would hope so, since we're winding down the stimulus. Why would it stay the same?
It amazes me that people think they can sell us on the idea that they are wonderful for "cutting spending" after blowing it up so immensely. Come back and talk to me when your average deficit is even CLOSE to what it was under the last two presidents.
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Old 02-15-2013, 06:26 PM   #120
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