Courtesy of Mish.
The amount of worry over something that needs to happen is staggering.
I actually hope the fiscal cliff triggers. Better now than what is 100% certain to hit in a more severe way later.
Ideally, I would prefer no tax hikes and massive budget cuts. Senator Rand Paul’s plan to balance the budget would have me jumping for joy.
The next best thing would be a small tax hikes in return for deep cuts in spending. However, Republicans foolishly killed that idea last summer, even rejecting plans that would cut spending over tax hikes in a ratio of 10-1.
Republicans refused that deal based on the foolish belief that Obama could not possibly win the election.
Well, Obama did win. And now, nearly everyone is screaming in shrill voices about a “fiscal cliff” that really could have and should have happened long ago.
Shrill Voices and Economic Nonsense
Heading up the list of shrill voices is none other than Ambrose Evans-Pritchard who writes World cannot afford second Fiscal Cliff after Europe’s failed attempt.
The story is by now well-known. Unless there is a deal in Congress by the end of the year, the Bush-era tax cuts and the payroll cuts will reverse automatically; extended jobless benefits for the long-term unemployed will be cut off; defence spending will be cut; so on. Everybody’s sacred cow is sacrificed. The combined austerity would be around $700bn over 2013, or 4.5pc of GDP.
The youth jobless rate is 58pc in Greece, 54.2pc in Spain, 35.1pc in Italy, and 25.7pc in France.
Labour economist and Nobel laureate Peter Diamond says the life trajectory of these young people will be damaged. There is almost nothing worse you can do to the productive potential of an economy – and therefore to debt ratios – than locking a great chunk of the future workforce out of the system during their formative years.
“They have a debt problem and an unemployment crisis, but they think it is the other way round,” he said.
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