Spiritworks said:
John, if more politicians had your take on economics, we'd be in much better shape.
Re: Fiscal Cliff - aren't they threatening another shut down again? I think that will become the status quo.
The "fiscal cliff" was an exaggerated threat about consequences of reducing federal government spending. While opinions surely vary, it looks like we have generally benefited from reduced spending (or reduced rate of increase). A new flap has started about talk of mothballing the carrier George Washington. People like talking about reducing our military footprint, but don't like to actually do it. If you look at the data coming out of Afghanistan as we reduce our troop presence there, the rate of civilian casualties (from Taliban attacks) is up huge. This will not likely end well.
Yes we are due for yet another borrowing authority increase. Treasury is already making short term changes to last as long as three weeks from now before running short of funds. (Feb 27 is current crisis date). I actually had a hard time finding out what the actual current debt ceiling is, but it looks like $17T, that is a bunch.
As usual this is a ginned up argument since the money has already been committed to spend in other legislation, so the borrowing is just to support that already decided upon spending. That said it is fair to not treat this too casually, but shutting down the government is arguably extreme. Apparently it is required to be extreme from time to time to get the other side's attention. The status right now is that the house wants concessions to raise the spending limit. The senate and WH are refusing to negotiate for now. The congress has a one week recess coming up so we do not have much time for a deal. I have heard rumors about a longer term deal to remove this as an issue for a while. I suspect any deal to push this after the nov elections.
I do not like making political predictions but I doubt either side has the stomach for high profile political hardball now. The public does not pay attention until this somehow appears to involve them.
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The real budget issue IMO is all the new spending that has been added in recent years and still sluggish economy which means less tax receipts than spending. As the nominal unemployment rate approaches 6.5% which would normally be a decent number, we are experiencing a 35 year low in labor participation rate. If we had pre-collapse labor participation rates the unemployment rate would be more like double digit. So we always need to be careful about looking at single metrics in isolation.
This nominal unemployment number is one of the metrics the fed is supposed to monitor to gauge the nation's economic health. I'd say it too early to claim mission accomplished, but some probably will. I appreciate that this may read like me trying to spin numbers to look worse than they are, so draw your own conclusions. A few percent lower labor participation rate can have a similar impact on unemployment rates.
The recent headline from the CBO that some 2.5M workers will withdraw from the work force is another glass half-full half-empty metric. Perhaps nice for them that many low paid workers will not feel the need to work, the economy suffers from less workers, engaged in gainful employment creating wealth, and paying taxes.
Of course opinions vary.
JR
PS: Just yesterday a neighbor told me I should run for mayor... nah... I'm too honest to be in politics. People do not want to hear that much truth.
Perverse and just nutz. 
