We Don’t Have A Long-Term Deficit Problem | The New Republic

But there isn’t, in fact, a “long-term deficit problem.” So long as interest rates stay below the growth rate, as they are, debt-to-GDP levels eventually stabilize and even decline. The notion that there is a big problem is pure propaganda based on a pseudo-debate, pitting two viewpoints that nevertheless converge on the practical issue.

via We Don’t Have A Long-Term Deficit Problem | The New Republic.

Debt deal darkens fragile US economic outlook – FT.com

Nothing to add here.

The writer is a major international finance operator who knows more than any economically illiterate US politician that our radical right have shot the US  in the foot.

It is discouraging that several months of disruptive political bickering and posturing failed to deliver a well-defined medium-term fiscal reform effort. Instead, the legislation signed into law by president Obama on Tuesday is terribly unbalanced in design, lacks proper operational details, and leaves key issues to at least one more round of political brinkmanship.

This incomplete endeavour could be dismissed as business as usual in Washington except for one important consideration: it materially darkens an already fragile outlook for economic growth and job creation.

Business and household confidence has been hit at a time when recent data releases – including weak gross domestic product growth, virtually flat manufacturing activity, and declining consumption – all confirm that the US economy is struggling after last year’s stimulus-induced growth spurt.

via Debt deal darkens fragile US economic outlook – FT.com.

Summers on Post-Deal Budget Policy

Local and State governments will need help in the coming months to keep them from adding too much to unemployment.


…the single largest and easiest method of deficit reduction is the non-extension of the Bush high-income tax cuts. The president should make clear that he will not accept their extension on any terms. That, along with modest entitlement reform, will be sufficient to hit current deficit reduction targets. Second, it is essential the payroll tax cut be extended and further measures, such as infrastructure maintenance and unemployment insurance extension, be taken to spur demand. If so, there is still time to confirm Churchill’s maxim that the US always does the right thing after exhausting all the alternatives.

via Relief at an agreement will give way to alarm – FT.com.

Follow the Unemployment

Another  not-so-good jobs report today shows that unemployment is still rising.  The debt ceiling deal just adds to job destruction in the coming months.

More From Krugman–Macroeconomic Folly – NYTimes.com

You may not favor his progressive politics, but he is a first rate economist who reflects very basic and accepted economic analysis.

All of a sudden, people seem to have noticed that policy is moving in exactly the wrong direction. We’re getting headlines like this: Debt Deal Puts U.S. on Austerity Path as Economy Falters.

via Macroeconomic Folly – NYTimes.com.

Mark Zandi Thinks The Deal Will Be Great–Is He Lost In Space

Mark Zandi, Chief Economist of Moodys in a CNN interview, stated that the “debt limit deal” is amazing and really great and will solve all of the economic worries of our country and get our economy back on track. According to his effusive rant he said that all the private sector needs in order to restart hiring is the “deal.”

He ignores that consumers have cut back on spending, the government spending cuts have a negative impact on the economy and state and local governments and the housing market is in the tank.  Unbelievable, but true.

Most economists and prinicipal financial leaders agree that immediate reductions in spending will have a bad impact on our economy.

My friends, prepare yourselves for a multi-year stagnation in unemployment and growth in the US economy.

What Economists Are Saying About Today’s Bad GDP Numbers

In other words, pushing more spending no matter what.  The Fed such pump out more money into the economy.

Balancing the budget or cutting spending will hurt the economy even more than it is now.

In the first six months of 2011 real GDP grew at an annual rate of only 0.8% per year. At that growth rate, unemployment will rise at about 1 percentage point per year.

I need to see the guts of the numbers, but unless there is something very odd in them, the chance that the unemployment rate will be above 9% in November 2012 just crossed 50% heading upward.

A rational Federal Reserve would:

Begin QE III today.

A rational administration would:

Announce a technical fix to the debt ceiling today: the economy does not need the risk.

Abandon all long-term budget negotiations with anybody who requires cuts to the deficit over the next eighteen months to come to the table: the economy needs stimulus, not contraption.

Take every single uncommitted TARP and TALF and whatever dollar, leverage it up, and throw it at the economy to boost aggregate demand.

via Much Worse GDP Numbers than I Had Expected.