From Spending to Cuts, While the Economy Stalls

[OhioChick]

Published: Monday, 1 Aug 2011 | 10:06 AM ET

The nation’s political leaders agreed on Sunday to spend and invest less money in the American economy, a step that economists said risks the reversal of a faltering recovery, in the hope of improving the nation’s long-term prosperity.

The emerging outlines of a deal to cut spending by at least $2.4 trillion over 10 years, with a multibillion-dollar down payment later this year, would complete an about-face in the federal government’s role from outsize spending in the immediate aftermath of the recession to outsize cuts in the future.

Last week brought the disconcerting news that the economy grew no faster than the population during the first six months of the year, in part because of spending cuts by state and local governments. Now the federal government is cutting, too.

“Unemployment will be higher than it would have been otherwise,” Mohamed El-Erian, chief executive of the bond investment firm Pimco, said Sunday on ABC. “Growth will be lower than it would be otherwise. And inequality will be worse than it would be otherwise.”

More: http://www.cnbc.com/id/43970621

[Hawkowl]

1. From Pimco!!

For fucks sake! When the biggest bond holding companies' economists are telling you this is a bad deal, it is a VERY BAD deal!

Obama's drive for compromise blinds him to the fact that the actual deals he does get do more HARM than good.

El-Erian is no whiny progressive economist, but an establishment, Wall Street bond market masters of the universe guy.

This deal should be voted down before it fucks the world.

[Kolesar]

2. So, Congress should let the US bonds go into default?

Is that your preference?

[Name removed]

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[AndyTiedye]

3. Default Would be Worse

And the kind of "deals" we would have been forced to make after that you don't even want to think about.

[bhikkhu]

6. No actual cuts until 2013

That's what the deal is, according to the white house. And at that point, the bush tax cuts will also have expired - also part of the deal not so publicly made before the vote.

The deal is supposed to be that the expiration of the tax cuts is figured as a part of the expected revenue stream, so that if they are extended that will "book" as a new expense, which will have to be offset by other new revenue. Basically it guarantees they will expire.

[saras]

7. Default is worse than a sane economy, it's not necessarily worse than what we've done

[blkmusclmachine]

8. Why assume they want a better economy (for us)?

n/t