Looming Big Fiscal Tightening Will Complicate Fed's Exit Plans

Investor's Business Daily ^ | 4/26/2010 | Scott Stoddard

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The government and the Federal Reserve are winding down massive stimulus programs as the economy recovers. But can they both exit at the same time without sending the economy back into recession? The Fed has ended most of its emergency lending programs but likely will reiterate Wednesday that it plans to leave interest rates near 0% for "an extended period" to support the budding recovery. Policymakers also will likely take no action on the Fed's

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The budget deficit, which soared to 9.9% of GDP in fiscal 2009, is slated to fall to 9.2% in 2010, 6.5% in 2011 and 4.1% in 2012 as stimulus and Bush-era tax cuts expire, according to the Congressional Budget Office. So the U.S. economy faces almost unprecedented fiscal head winds over the next few years, making the Fed's job even harder.

[kabar]

Those figures seem suspect. I thought the CBO estimated a cummlative $10 trillion budget deficit over the next 10 years. 4.1% in 2012 seems like pie in the sky especially when Obamacare really kicks in.

[LibLieSlayer]

“The government and the Federal Reserve are winding down massive stimulus programs as the economy recovers.”

We are in a depression and any article that starts with such a huge lie in the first sentence, adds insult to injury... a lie such as this absolute lie... makes me discount any other content in this article. I quit reading at the first sentence.Not your fault... just my opinion of this article and author.

LLS

[Bean Counter]

And since most states exhausted their unemployment funds some time ago, the Federal borrowing will continue unabated in order to keep propping up unemployment as well as to get their hands on enough money to keep operating day to day.

Those deficit reduction numbers are pure fantasy. All they do is lay the groundwork for more “unexpectedly” bad news further down the road.

[ClearCase_guy]

My belief is that the "recovery" will suddenly get into serious trouble over the summer. Things will "suddenly" go very, very bad.

Obama will ask for, and get, extraordinary powers.