CBO warns politicians not to ignore coming fiscal cliff

The Congressional Budget Office warns that if the spending cuts and tax hikes go ahead as scheduled next January there will likely be a recession in the U.S. However they predicted that by the second half of the year there would be a rebound to an annual 2.3 growth rate. For the full year growth would be just .5 per cent.

While there is plenty of worry about the debt situation in Greece, the so called fiscal cliff facing the U.S. at the end of this year seems to be conveniently ignored. The political deal arranged last year would see an immediate cut of 1.2 billion from government spending while billions in tax cuts also expire. Consumer demand for many items would obviously contract.

Most analysts expect a new deal will be reached by the two parties yet it seems that both parties are concentrating on the coming elections rather than facing up to the issue. If the scheduled policies are removed or offset the CBO estimates the U.S. economy could grow at 4.4 per cent a respectable growth rate given the U.S. situation.

Ben Bernanke warned back in April::“The size of the fiscal cliff is such that there is, I think, absolutely no chance that the Federal Reserve could or would have the ability whatsoever to offset that effect on the economy,” The politicians should get moving on this issue or they will find they are faced with a crisis in November. For more see this article.

Automatic cuts to defense budget will castrate Uncle Sam

Brett Lambert is one of several officials who recently have warned about the dangers of cutting the defense budget any further. Lambert must be important given the length of his title. Lambert is deputy assistant defense seretary for manufacturing and industrial base policy!

The failure of the Super Committee to agree on spending cuts of 1.3 trillion by the deadline on Nov. 23 triggered automatic spending cuts(sequestration) across the board. This would include 600 billion to be cut from the defense budget over the next 10 years. These cuts would be added to the 489 billion already to be cut over the next decade.

Republicans hope to reverse the cuts even though they also constantly harp on the need to cut the deficit. Lambert talks about the matter using powerful sexual imagery. The deficit cutters are out to castrate Uncle Sam. Lambert says:"When I think about it from an industrial base point of view, I think about sequestration more as fiscal castration. It truly will emasculate the industrial base ... if we implemented it as it exists," For more see this article.  No doubt the planned budget cuts will castrate the health care system and other parts of the social safety net but that is much less important than the care and feeding of the military-industrial complex.