Skip to comments.Are We Going Over a Cliff?
Posted on 05/26/2012 4:10:44 AM PDT by Kaslin
Did you know the economy is going to fall back into another recession in the first half of next year? Thats the sad news coming from the Congressional Budget Office (CBO), in a report released this week.
If current law remains unchanged, on January 1, 2013 American taxpayers will be hit with a whopping tax increase (mainly the expiration of the Bush tax cuts) and a major decrease in government spending (the result of last years budget deal) as well.
All told, were looking at a $500 billion double whammy. But arent economists recommending the opposite medicine? Wont higher taxes and reduced spending dampen economic activity and slow down the current recovery? Exactly. You can think of the January 1st fiscal tsunami as a New Years Day "anti-stimulus" package. The CBO is predicting that the price we will pay for that package is a "double dip" recession.
But here is something even more disturbing. It turns out that uncertainty not knowing what Washington is going to do about all this is worse than the reality. Will President Obama and the Congress agree to put off the tax increases? Will they agree to delay the spending cuts? Not knowing the answers to those questions appears to have more impact on the decisions of businesses and consumers than if everyone simply agreed to go ahead and let the bad things happen.
Historically, "uncertainty" has been a slippery concept in the vocabulary of economists. Everyone kind of knows what it means. But a precise definition has been impossible. Until now.
Economists at Stanford University and the University of Chicago have actually created an uncertainty index and they have tracked it over time for several decades.
Heres what they found. Their measure of uncertainty soared during the Obama years, where it has been at its highest levels over the past 30 years. Its not just uncertainty about what will happen next January thats a problem. In many ways, the entire Obama presidency is the problem. Public policy uncertainty alone is the apparent cause of a peak decline of 2.2% in real GDP, a 13% decline in private investment and the loss of 2.5 million jobs over the past five years.
Put yourself in the position of a small business owner who is considering hiring additional employees. And remember: hiring full-time employees is not a short-term decision. Youll probably lose money on them for the first 6 to 8 months (while they are in training) and hope to make it back over the following 2 to 3 years.
So peer down the economic landscape for the next few years and what do you see? For starters, you have no idea what your labor costs are going to be. You know that Obama Care will force you to buy expensive health insurance for you employees. But you have no idea what will be required or how expensive it will be. And because the Democrats in Congress were so sloppy in drafting the legislation, the entire health reform bill may be declared unconstitutional.
You have no idea what you non-labor costs of production will be because of another Obama legacy regulatory agencies pushing the envelope to exceed the authority previous regulators thought they had. Environmental regulations deserve a special uncertainty category of their own. (We still dont know if the Keystone pipeline will ever be approved.)
If you need a loan to help finance new equipment to provide to your newly hired workers, you have no idea if, or when, you will ever get it because Dodd/Frank financial regulations are putting a damper on business loans almost everywhere. And since those regulations are not even finalized, expect mattes to get worse, not better.
As for your cost of capital, do you know what the tax rate on dividends or interest income or corporate profits will be next year? No? Well, no one else knows either.
As for your personal tax rate, there is a lot to worry about there too. Democratic politicians almost never make a speech about the economy these days without mentioning the need for higher taxes. And the likely targets of this quest for more government revenue? Job creators, of course.
More than one commentator has noticed that our current "recovery" has been one of the slowest on record. Going back 60 years, we have had 11 recessions. The one we are in is at the bottom in terms of the speed at which we are getting back to normalcy.
Barack Obama doesnt deserve all the blame for public policy uncertainty, of course. He has to deal with recalcitrant Republicans and unreliable Democratic allies in Congress. Still, I would give the president an "F" on his stewardship of the economy.
The only cuts he can be referring to are Entitlements (SSDI, Welfare, Social Security, Medicare, Medicaid, Section 8, AFDC, etc).
Those direct deposit checks and EBT cards eat up a whopping 71% of the Federal budget, and the number is going up exponentially.
Congress has so far been cowardly and ineffective at controlling this, but to be fair, our Community Organizer is a disaster.
The ONLY thing he has proposed "cutting" is health care to our nations veterans.
With everything else, he is "giving it away" with both fists.
What needs to happen are massive cuts to Food Stamps, unemployment checks, complete cut off of money to illegal aliens, and about 10 million people needed to be kicked off the Social Security "Disability" lottery rolls.
Are you still killing your unborn?
Better take the keys from our reckless driver.
Better take the keys from our reckless driver.
When I called, they did not listen;
so when they called, I would not listen,
says the Lord Almighty.
... we are SO! screwed.
Did you know the unemployment rate in DC is over 51%?
Thanks for reporting this, Drudge. Now pulled
Mitt will give America a 'hand up'.
(We know what Obama is compelled to do; to assure full 'change'. . .) Only one Morally Reasoned choice; for whom we vote to have 'on scene' for rescue.
“Did you know that we are in a full blown depression . . .”
You are correct. The media doesn’t show us the “Obamavilles” spread around the country. Many older RV parks are filled with the permanent unemployed in dilapidated old travel trailers. Tent communities of unemployed exist in wooded areas near many southern cities. Soup lines would be long in every city and town were it not for the food stamp program which keeps us from seeing the 40+ million Americans who are either part of the permanent non-working population or the unemployed whose benefits have expired.
Our government and industry leaders made the decision to outsource much of America’s industrial capacity and over 20 million middle class manufacturing jobs over the last 20 years. Each of those manufacturing jobs would have another 3 private sector jobs in services and distribution associated with it for a total loss of 80 million private sector jobs. The consequences of the grand experiment in “free” trade are now plain to see:
1) Gutting of the American industrial infrastructure
2) The emergence of China as an economic and soon to be military rival of the United States.
3) Unprecedented debt throughout the US economy and an effectively bankrupt US government.
4) The permanent loss of tens of millions of middle class jobs and millions of workers dropping out of the workforce.
5) More than a decade of declining incomes for the majority of Americans for the first time in our history.
6) The emergence of a super wealthy elite class which controls the government and a significant amount of the economy. This elite class has more in common with the elites of other countries Its members prefer to invest America’s resources in social engineering and giveaways abroad instead of domestic economic expansion.
The benefits from the opening up of the US markets to mercantilist competitors have gone to other nations, Wall Street bankers, and Wal-Mart. The American middle class has paid the cost of this experiment in the form of lost opportunity, declining living standards, and less freedom.
The Democrat party, controlled by a small faction of communists/socialists, is in a full out sprint for the cliff where they can leap into that factions oh so glorious utopia. The media, screaming and wetting their panties in excitement, cheering them on. The GOP-E and rinos, with Romney in the lead, are five yards back and mad as L that they wont be able to jump at the same time as their friends.
Both parties are well to the left of the political spectrum when they belong to the right of center. The Democrats slightly right of center and the Republicans further to the right.
> “I am no Romney fan, but the most positive thing he has said was that if he wins, he will probably be a one term President because there are some drastic cuts he has to make.”
He said this to Rush Limbaugh and it was exactly made to order.
Romney can look you in the eye and say exactly what you want to hear.
Those who put any belief into what Romney says are fools.
Your post is perfect. Spot on.
No. We've gone over - we're just waiting for impact.
I don’t know about no cliff. I don’t know where we’re headed. But I’m curious as hell about that handbasket.
They do not want America to know the truth until it is too late.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.