Senate Fiscal Cliff Doomsday Countdown Thread

In Krugman we trust

The GOP might be giving hints that they will cave but I keep hearing that they might just vote "Present" but not actually go yay or nay.

 

no duh krugmans, so let's get some pro-growth policies going so we can grow the economy (maybe even BOOM IT!!!) and create jobs and broaden the tax base. how about that? no? we have to print money and spend it so that the gubmint can "create jobs"? oh ok, let's try that some more.

 

Talk on Capitol Hill seems to be that Boehner is stalling because he doesn't want to concede until AFTER he's re-elected as Speaker... on January 3rd, 2013. That will only put Republicans in an even weaker position than they are now, but Boehner is putting his Speakership ahead of both party and country, it seems. Oh well, it will just make Obama's policy and political victory that much bigger. I'm sure the eventual deal will apply retroactively too, so I don't think we have too much to worry about.

 

i don't get it, i thought that blubbering mound of orange jello was already confirmed - that's why he's been consolidating his power behind the scenes. and yeah, he's definitely putting his speakership first, because he knows he has no leadership qualities, no balls and no brains, and that the only way he managed to get to where he is today is through gladhanding, backdoor deals, and careful plotting. unless his plan is to fall on the sword like some kind of orange, invertebrate jesus. but i don't think he even has the strength of will to do that!

 

Depends on how badly world financial markets convulse at the idea/reality of going over the cliff.

A drop of 1000-1500 points in the Dow, which is likely to occur if no deal is in sight by the end of next week, and certainly by December 26th, will severely weaken both parties, although I think the GOP will take the bigger hit. This is very, very stupid on Boehner's part. If they were to cave on tax rates for the top 2%, it would then be up to President Obama to feel real pain next time around, and would give the GOP more leverage to demand tax and entitlement reform. It may even provide some cover for them to use the debt ceiling fight to leverage the issue.

However, given where public opinion currently is residing on the issues, Boehner's holding out-for any reason-may backfire really badly on him. If we go over the cliff, and all hell breaks loose, the Democrats' talk of "anything after that will be a tax cut" may actually end up becoming something else. I can just see the President riding a wave of anger with the GOP over the whole mess to insist that the top 2% rate remain at 39.6% out of spite-and public pressure forcing the Republicans into it.

Yes, everyone wants to cover their butt and preserve their authority (not to mention please their constituents), but Boehner is misreading the psychology here. If they cave now, they strengthen their hand far more going forward.

No-one likes higher taxes, but the public is coming to see them as a necessary evil. The Republicans should give in on this one, and then press the message home about the need for spending cuts, using the President's own words-"balance"-against him.

The way they are going about this is pretty much guaranteed to produce the opposite result.

Peace,

V-03

 

Boehner has apparently offered raising the tax rate (but only on millionaires) and on raising the debt ceiling for another year without putting up any fight. We'll see...

 

Time to resume this discussion.

Looks like the chances of "cliff-dive" are now being pegged at 90% by Washington insiders. Boehner has completely lost control of his own party, and the markets-worldwide-are beginning what will likely be a sharp correction.

The question becomes: what happens now?

If we go off the cliff, nothing less than a $4 trillion dollar minimum "grand bargain" will reassure markets; Fitch and Moody's has already said if we go over, they will downgrade the US. S and P has also threatened to cut America's credit rating by at least another two notches, will may very well collapse the bond market and pop the Treasury bubble. At the very least, hundreds of pension funds and money markets that are only allowed to invest in "AAA-rated" debt by law will be forced to sell their positions.

Mr. Boehner had gotten close; rumor has it that Obama was willing to go to as much as $800,000 for the higher taxes, and give even more on entitlements, but like last year's debt ceiling fight, the Tea Party won't allow it. Also according to insiders, it was Boehner calling the White House and saying "Plan B" that brought the negotiations to a halt.

In other words, this is the Republican's failure. I am left wondering just how bad the damage will have to get before the House becomes willing to negotiate with the President. It's as if the election never happened and it's business as usual.

Unbelievable. The other problem is, if we go over, even if a deal is reached, unless it's something spectacular, investors will likely be spooked out of stocks for months, if not a couple of years, and businesses will also likely freeze hiring and investing.

Right back into recession. It's amazing how much damage they are doing, and how much foresight is lacking here. By not compromising with the President, they are handing him all the power. A post-cliff deal will be much, much worse for Republicans than allowing Boehner to compromise. If we go over, they will likely be forced back into negotiations by market shocks and public outrage, and Obama will be able to move back to the left, dropping his willingness to go higher on rates and instead retreat back to the $250,000 threshold that he has drifted away from. His leverage? Leaving things the way that they are.

On a personal note, physicians are getting ready for a 30% cut in Medicare reimbursement, permanently, this time. Many are doing so by basically planning to limit further acceptance of Medicare patients and/or charging a "recoupment fee" to those carrying private insurance. In the worst cases, many doctors are leaving practice or going to retainer-medicine, also known as the Concierge Model.

So all in all, a gloomy, Grinchy Christmas, courtesy of Washington, D.C. How bad does everything think it has to get before they'll do something?

I say it's 10:1 we go over. I'm putting the drop in the Dow before they sign a bill at 2000 points, minimum. I also think we'll see downgrades of US debt again, just like the fight from last year.

Gold, anyone?

Peace,

V-03

 

As I said in the other thread:





What I don't get is, why not just allow the Senate bill (that lets the tax rates for those earning over $250,000 a year expire while keeping the lower rates on everyone else) come to a vote in the House???

Republicans say it HAS the votes to pass. So why not pass it?

Why can't Boehner allow a Democratic-Republican coalition to form?

He doesn't even have to vote for it, just allow the vote to take place.

Being Speaker is more than a partisan position like "majority/minority leader," it's a nonpartisan and consitutional position. Be a Speaker of the whole House, for once.

 

He's following Dennis Hastert's "majority of the majority" rule-he will only bring a bill to the floor that gets the "majority of the majority" of votes.

In other words, House Republicans.

Not looking good.

Peace,

V-03

 

Obama to speak any minute now. To think I almost went out for dinner.

 

Which is stupid, because Republicans had control of the Senate and White House too when Hastert was Speaker.

All he has to do is let the bill come to a vote on the floor. That's all. It's in Boehner's hands now.


And in the press thing, Obama just said he was still talking with Boehner.

 

Except the House Republicans won't listen to Boehner anymore. If they wouldn't pass a $1 million dollar tax cut that he proposed, they certainly won't pass a $250,000 one that comes from the president.

It's a real shame, because Obama, and Boehner, really want to compromise, but they just can't get it done because of the tea party.

I wonder how bad it ends up getting before something finally gets hammered out.

Like I said previously, it's as if the election never happened, and it's business as usual. Unbelievable. And also like I said, since Boehner can't cut a deal, Obama is retreating from his concessions right back to the lower numbers. It amazes me that the GOP can't seem to grasp the fact that if we go over the cliff, they will be forced to take something that they will be much, much more unhappy with.

Peace,

V-03

 

Well, it's a good thing their malfeasance didn't help get us into this mess in the first place. Oh, wait.

 

How does this even begin to make sense. Instead of a normal raise of the debt ceiling, the ratings agency's responded to Republican intransigence by threatening a credit downgrade if there wasn't a major deficit cutting measure tacked on. Now that said measure--which, mind you, they specifically requested--is about to go into effect, they threaten to downgrade the US if we don't undo the legislation?

. . .

 

they're looking for a long-term comprehensive plan, not a quick fix. the obama plan of raising the top two tax brackets is a parlor game and does nothing by itself to address our debt problem. nothing. the jan 2nd trigger raises revenue (in theory) and cuts a bit of spending but is more like a punch in the gut and not a long-term debt-reduction plan and because of its punitive nature, does not exactly fill investors with confidence. i don't know what kind of plan would satisfy them enough to avoid downgrading our credit, but i don't think it's going to appear anytime soon. we are going to be downgraded.

 

Um. No.

US was running a deficit long before the GFC hit. And, with the interbank rate effectively nil, there was almost-free debt available and risk was to thinly tranched across multiple asset classes it would only have been possible with hindsight or prescience for a ratings agency to have seen the systemic risk and raised the alarm.

But, soundbytes are lovely, I agree.

 

This. Because I';m not sure the gap between laws being mooted and then ratified by both houses is, but let's say it's done before EOFY, then you're still looking at 12+ months from July 2013 to see the net benefits of a tax hike.

At what point, btw, does the debt level become actually unsustainable for the US? I know it's not now, but does someone know when?

 

Point is already made here, but after everything that's happened with the economy in the last few years, it astounds me that we're still as blindly attached to what the credit rating agencies say. They should, in theory, function as effectively some sort of objective analyst, but they've been anything but. They were a key reason why the economy fell apart like it did, and they lag behind more useful indicators of the state of a country's economy/government budget. Both the documentary Inside Job and this 538 post both come to mind. Bringing them into this discussion seems to muddy the discussion with an additional factor that, imo, has already been discredited.

 

Since America holds the reserve currency, the answer to your question-in real terms-is whenver America's creditors lose confidence in the US dollar, and stop buying Treasury debt. It could happen quickly, with a debt auction producing no buyers, or, more likely, continue to happen slowly, with large creditors like China simply de-leveraging their dollar-denominated debt into gold, for example, and American real-estate, which has tangible value (like precious metals).

I'm willing to bet though, that the shell game will continue as long the Fed can continue printing. In practical terms, I think we'll see debt hit levels of roughly 200% of GDP (or higher) before the world "gangs up" on America and pulls out of the dollar. The main reason it hasn't happened yet is that there is no real safe alternative place for large investors and sovereigns to put their money.

Depending on how paranoid one is willing to be, one can read such financial analysts as Porter Stansberry, who initially back in 2008 predicted a massive deflation, but then, since Ben Bernanke's "QE Infinity" program, have changed tune and now feel that the United States will continue to print massive amounts of cash in attempt to monetize the debt.

Eventually, the jig will be up, since slow, plodding growth won't continue forever. By forcing real interest rates negative, Mr. Bernanke is driving American investors-both individual and institutional-into stocks, and slowly but surely, back into real estate. The result will likely be the driving of those two assett classes-as well as commodities and precious metals-to insane heights, thus creating a new series of bubbles. This time though, when the crash occurs, the only solution will be to print so much money that America ends up in hyperinflation.

There are also whispers that China is quietly planning to challenge the US dollar for the title of reserve currency, perhaps as soon as 2016. They are already on track to become the world's largest economy in terms of economic output and purchasing power, and it would not take too much of a stretch to imagine making a play for the throne. How would they do it? By backing the yuan/renminbi with gold. Think about that for a second. They would suddenly have the strongest currency on earth; if US debt is still climbing into the stratosphere, there will suddenly be a new, sound monetary system in which to park one's wealth. This could result in a capital flight from the US dollar the likes of which have never been seen, although in reality, it would likely create a fair amount of chaos for China, as well. A gold-backed yuan would crush their export market, not to mention sharply devalue the dollar amount of their US Treasury reserves. However, China appears to be heading in that direction; they are on track to surpass India as the world's largest purchaser of gold in 2013, and they encourage gold ownership by their private citizens. So, maybe it will happen, maybe not.

Alarmist? Perhaps. But I think the idea that "it can't happen here" is far more destructive when it comes to finding a long-term solution to the debt than any wrangling over what amounts to a miniscule tax increase and spending cut package. The US is now trapped in a vicious cycle. It can either a) continue to monetize the debt, eventually leading to massive inflation which will necessitate raising interest heights to monstrous levels (think 30% + here) or b) sharply cut spending and send the country, and the world economy, reeling back into recession.

Take home message? This is why you don't put two wars on the credit card, expand an entitlement, and cut taxes at the same time. And don't come back at me saying that "Obama exploded the debt with his stimulus package" (you know who you are )-the stimulus was basically spitting on a fire when it comes to its contribution of red ink, and the simple fact is, a President McCain or President Romney would not have had any other options (let the entire financial system collapse? Yeah, right. Whatever party did that would be out of power-permanently).

So...hard times ahead, ladies and gentleman. I think a Third World War is how this ends, personally, probably starting in the Middle East.

Peace,

V-03

 

Not all of them, but I'd say at least a couple dozen Republicans would side with Boehner and the Democrats. About 20 have already said they would vote for Obama's plan, if Boehner allowed them to vote on it. It's not like ALL Republicans would have voted against Boehner's "plan B."

I also don't think it's purely Boehner's fault, I think the problem is structural. There really is nothing you can entice or threaten the Tea Partiers with (and some of the older conservative fanatics too). I really don't think Cantor would be that much better as a Speaker, or anyone else.

 

To some extent, yes. But Boehner was having trouble locking down votes from House members in Ohio. That he campaigned for. Hard. That's pretty incompetent.

 

You realize Obama has only ever released comprehensive plans in excess of $2 trillion in savings? And that the only person ever to release a plan about taxes to the neglect of everything else was the first version of the "Plan B" proposal that John Boehner put out and which most recently failed to pass muster with his own party?

 

How many politicians are going to kick this can down the road, for somebody else to deal with ?
The only politician I have seen in recent years who was serious about taking this on was Ron Paul, with his 1 Trillion cut.
This can't end well.
http://www.usdebtclock.org/

How are other countries doing let's see, some better some worse.....
http://www.usdebtclock.org/world-debt-clock.html

 

that's nice woggie, but all that matters is what's on the table right now, and right now obams is saying tax hikes before the end of the year, spendin' cuts later, and i don't think he's even talking numbers anymore at this point. which leads me to believe that no significant cuts are forthcoming. smoke 'n' mirrors. and i figured bains only dealt with revenue in plan b because obams had put off talk about spending cuts, and maybe they were rushing and just wanted to try to get that piece of it settled or something. i'm guessing here because i've never understood blub-face's "strategy".

and all the cuts that obams has ever talked about are spread out over a decade, aren't they?. if they're going to do a long-term deficit-reduction plan they should shoot for larger than 2 trillion or they are just diddling about with baby toys. his budget for 2013 alone is like 3.8 trill isn't it? even if he gets his tax hikes for the "rich", they still project a near-trillion dollar deficit for the year! so basically the machine grinds on and stuff.

 

1. All the deficit reduction plans proposed by both Republican, Democrats, independent commissions and think tanks have spread out cuts over at least a 10 year period. Trying to concentrate huge cuts into a small period would do more harm than good. Case in point, after adhering to austerity, Great Britain is now in danger of a triple dip recession. Similarly, Greece has only spiraled into a progressively worse economic situation after passing Draconian austerity budgets. This is why Ron Paul's idea of trillion dollar budget cut in a single year is patently insane. Anyone who suggests something like that doesn't deserve to have a voice in serious discussions about economic policy.