If a fiscal response cannot be constructed and implemented adequately (meaning that we go into recession after tax cuts in 2013), perhaps it shouldn't be done at all? My faith in Washington D.C.'s ability to address the economy as it requires continues to reach new lows.
It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.
"Wealth of Nations," Book V, Chapter II, Part II, Article I, pg.911
Eurozone unemployment at record high 11% - Jun. 1, 2012The 17-nation eurozone's unemployment rate reached the highest level since the creation of the common currency 13 years ago, climbing to 11% in April as employers slashed 110,000 jobs.
The unemployment rate in the broader 27-nation area that makes up the European Union rose to 10.3% in April, as employers trimmed 102,000 jobs from their payrolls. That was highest EU unemployment rate on records that go back to 2000.
The "May" report we received here from the BLS on the first of June, which reflects conditions from the second week in April through the first week in May, and is thus mostly about April ..
.. Reflected an increase in the labor force itself by 635,000 people, meaning not that just more young people entered the work force than older people filed for retirement, but that, as reports are saying, some people, "hopeful" from all the hype of "recovery is happening", set their more justified discouragement aside and started actively looking for work again.
The very fact that they started actively looking for work again, a number of whom were apparently among the household survery conducted each month by the BLS, caused these people to be categorized as being part of the labor force, and thus, because they weren't working, unemployed.
That caused the unemployment rate to tick up a notch.
Imagine if all of these people, these "discouraged workers", as they're called, were rightly counted as being unemployed that they truely indeed are.
That's right: 13.5% unemployment rate when the accurate count of them is included.
But, sadly for these people, the jobs added in the previous two reporting periods was greatly overstated -- that's why they call it "hype" with regard to the recovery "hype" -- and that number was, as the reporting states, revised downward.
No, we are not that far from a critical mass downward economic spiral .. which is going to take a lot of very angry Americans down with it.
Without heroic action on the part of the executive and congress, especially as we now go into the summer doldrums, we can truly only rightly expect the horrific inevitable.
When the election is over and we open our eyes, it will sadly be too late to wonder what the hell just happened.
"We ain't a sharp species. We kill each other over arguments about what happens when you die, then fail to see the ******* irony in that." - Justin Halpern
Its not backwards, we aren't losing jobs. Its just not keeping up.
“Tyranny is defined as that which is legal for the government but illegal for the citizenry.”
― Thomas Jefferson
What I said is that the onset of a recession in the US before the end of 2012 will not hinge on whether new fiscal stimulus is enacted, as no one expects it to happen. As I see it, the most important short-term headwind to US/Global growth is political and financial instability in the Eurozone. I have no doubt the Federal Reserve will continue to employ accommodative monetary policy in coordination with the ECB. However, I find the likelihood of an unsterilized QE in 2012 to be slim to none. The most likely policy action would be renewed purchases of MBS by the Federal Reserve with short-term repo operations to prevent a marked increase in reserves. Operation Twist surpassed has already surpassed it's duration target months before target, and the Federal Reserve is running low on short-term Treasury securities to sell. With rates long rates so low, additional curve flattening would do little to stimulate private credit expansion.Averting the fiscal cliff will require renewal of significant portions of tax-side stimulus packages that were adopted in 2001 and 2003, among some other changes. Also, he didn't necessarily predict new rounds of fiscal and monetary policy stimulus. He suggested that a recession would "most likely emerge in the U.S." without such stimulus.
If I were to venture a guess, the Fed will not change its interest rates (repeatedly indicated by the Fed) and would probably try another "Operation Twist"-type arrangement rather than full-fledged quantitative easing if things remain on the current trajectory. Additional significant deterioration in Europe and the threat of spillovers/contagion would likely lead the Fed to take additional action that could include QE3, substantial swap agreements to assure liquidity in U.S. and international markets, temporary facilities, and other coordinated measures with the ECB and perhaps other international central banks. The recent notable deceleration in Chinese growth offers another possible macroeconomic shock, but developments in Europe appear to have the greatest possibility of triggering more aggressive monetary policy stimulus.
In terms of fiscal policy, 2012 campaign dynamics preclude any additional meaningful fiscal stimulus. I also expect that the U.S. will largely avoid the "fiscal cliff," but there will likely be no meaningful medium-term fiscal consolidation. Some smaller stimulative measures might be considered e.g., another renewal of the current reduced payroll tax rates, but those measures would likely be modest and relatively insignificant overall in macroeconomic terms.
As for fiscal policy, I agree, there will likely be continued deadlock going into the November elections. Any measures passed to prevent the fiscal cliff at the end of the year will be short-term in nature as both parties await the outcomes of the election. As you said, the measures would be relatively insignificant and will not seriously affect short-term economic growth. That was my point. The US won't dip into recession this year simply because there is no new stimulus. The only new stimulus that is expected will be inconsequential. Global economic conditions such as the ones you mentioned will be the deciding factor for US growth in 2012.
Last edited by Rhapsody1447; 06-01-12 at 10:29 AM.
"There is an excellent correlation between giving society what it wants and making money, and almost no correlation between the desire to make money and how much money one makes." ~Dalio