Thursday, January 19, 2012

Bowles, Simpson still push debt plan - National -

In response to, Bowles, Simpson still push debt plan - National -

$1.2T in automatic cuts are going to go into effect in 2013 unless Congress acts, Obama wants the Bush tax cuts extended to end of his current term in office. We're four years into the Great Recession that began in 2008 with the Global Financial Crisis, that has turned into the Global Soveriegn Debt crisis, because losses on Wall Street were absorbed by Central Banks.

I attended the Terry Sanford Distinguished Lecture series event last night, and was quite impressed with both Erskine Bowles and former Senator Alan Simpson. The failure of Obama to enact the Bowles - Simpson Plan and the failure of the Super Committee to agree on the same reforms that are the in the Bowles - Simpson Plan has effectively kicked the can down the road to 2014, as it has been pointed out it would take a year for Congress to pass any reform. By failing to act in a timely manner, it's more likely that we'll see a government shutdown, when the debt ceiling is breached once again by the end of 2012. A temporary spending authorization by Congress to extend the debt ceiling debate until 2013 when a new Congress is sworn in will have kicked the can as far as it can be kicked.

Bowles suggested last night that given this scenario, he expects across the board cuts to be implemented, which he feels is the wrong way to enact cuts. I'm not sure any cuts will be forthcoming, as the US slides into another recession as stimulus spending expires and interest on the debt begins to draw against the stimulus effect of public spending, more and more spending will be needed, with the debt piling up with negatively reinforcing vigor, a black hole of sorts. The end result could be a full blown depression, with millions starving in the streets, all brought about by the federal government's failure to act, or rather, acting out of self interest and special interest.

Bowles also stated he believes the current recession is structural, not cyclical, which is a correct statement. I would be interested in his opinion of how we grapple with this issue. It could be the recessionary slide in which we find ourselves can be addressed with fiscal reform. What will be the catalyst that forces Congress to act? One can only hope it doesn't happen too late.

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