Thursday, January 3, 2013

Truth Telling 101 About the U.S. Economy and 2013 Political Situation

In concise language, the views of economist Nouriel Roubini are worth considering. He's long been bearish on the economic situation, and he's also been accurate.

Nouriel Roubini is not an optimist lays out the political and economic situation clearly and succinctly:

"Nouriel Roubini doesn’t think much of this week’s fiscal cliff deal.

The NYU prof and chairman of Roubini Global Economics wrote in the FT late Thursday that another Washington crisis will arrive shortly, when the debt ceiling has to be raised and the spending cuts deferred by this week’s deal are slated to kick in.

But even a resolution of those disputes won’t end Washington’s agony.

“Later in 2013, and not before time, a bigger debate on medium-term fiscal consolidation will begin.

This will lead to another dispute between Republicans, who want to shrink the size of the federal government, and Democrats, who want to maintain it but are unsure how to pay for it.”

And the expiration of the payroll tax cut is likely only partly offset by tax hikes on the wealthy and putative cuts in spending, meaning there’s now likely a 1.2% drag on GDP this year. “So the US could quite easily come perilously close to stall speed this year – or worse, if the eurozone crisis worsens.”

And that’s all before Washington even attempts to address the longer-term crisis because “The reality is that America is yet to wake up to the full extent of its fiscal nightmare.”"

Summing Up

In the interest of brevity, suffice it to say that I share his concerns.

Thanks. Bob.

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