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Thread: Congress Said to Delay Automatic Budget Cuts Until March

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    Congress Said to Delay Automatic Budget Cuts Until March

    From Bloomberg.com:

    Republican and Democratic congressional leaders are weighing whether to delay automatic federal spending cuts until March 2013, according to a House aide and industry officials who were briefed on the discussions...

    Leaders in both chambers are discussing whether to propose a catch-all bill that would delay the automatic cuts, fund the government through March or later and temporarily extend the George W. Bush-era tax cuts and other tax laws, said the House aide and industry officials, who asked to speak on condition of anonymity.
    Congress Said to Delay Automatic Budget Cuts Until March - Bloomberg

    When confronted with the possibility of having to make some tough choices, the bipartisan consensus to avoid fiscal discipline appears to be holding fast. Despite political rhetoric articulating a powerful commitment to fiscal restraint, it appears that yet again such rhetoric rings hollow. Washington still lacks the appetite for fiscal discipline and that lack of appetite is one of the few areas in which there is strong bipartisan agreement. Perennial campaign pledges to reduce the nation's budget deficits remain little more than rhetorical flourishes.

    If Congress were to postpone the spending reductions/tax changes temporarily until the economy grew stronger, but put a credible plan for medium-term (5-10 year) fiscal consolidation on the table, that would be one thing. I believe that approach would probably be reasonably prudent at this time. However, no such plan is likely to be offered, much less adopted. A credible fiscal consolidation plan would include discretionary spending reductions, mandatory spending reforms (possibly starting with a macroeconomically painless increase in the Social Security eligibility age), and tax policy changes.

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    Re: Congress Said to Delay Automatic Budget Cuts Until March

    Quote Originally Posted by donsutherland1 View Post
    From Bloomberg.com:



    Congress Said to Delay Automatic Budget Cuts Until March - Bloomberg

    When confronted with the possibility of having to make some tough choices, the bipartisan consensus to avoid fiscal discipline appears to be holding fast. Despite political rhetoric articulating a powerful commitment to fiscal restraint, it appears that yet again such rhetoric rings hollow. Washington still lacks the appetite for fiscal discipline and that lack of appetite is one of the few areas in which there is strong bipartisan agreement. Perennial campaign pledges to reduce the nation's budget deficits remain little more than rhetorical flourishes.

    If Congress were to postpone the spending reductions/tax changes temporarily until the economy grew stronger, but put a credible plan for medium-term (5-10 year) fiscal consolidation on the table, that would be one thing. I believe that approach would probably be reasonably prudent at this time. However, no such plan is likely to be offered, much less adopted. A credible fiscal consolidation plan would include discretionary spending reductions, mandatory spending reforms (possibly starting with a macroeconomically painless increase in the Social Security eligibility age), and tax policy changes.
    I agree with your last paragraph, but I think it makes sense to delay this into early next year to take election politics out of it (to some degree), and to give newly elected lawmakers a chance to get their bearings. Same applies to Romney if he wins. If the cuts go into effect Jan. 1 as scheduled it would stick the new president with a deal he had no chance to negotiate. He would also have to deal with the expiration of the Bush tax cuts in his very early days.

    Of course the wisest course would be cancel these cuts and institute a medium/long range plan of spending cuts and tax hikes NOW. Republicans complain that the markets are spooked by amorphous fears of Obama regulation or tax changes, but the truth is that markets really are spooked by the upcoming Jan/Feb fiscal cliff.
    "The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. ... 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."

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    Re: Congress Said to Delay Automatic Budget Cuts Until March

    Quote Originally Posted by donsutherland1 View Post
    From Bloomberg.com:



    Congress Said to Delay Automatic Budget Cuts Until March - Bloomberg

    When confronted with the possibility of having to make some tough choices, the bipartisan consensus to avoid fiscal discipline appears to be holding fast. Despite political rhetoric articulating a powerful commitment to fiscal restraint, it appears that yet again such rhetoric rings hollow. Washington still lacks the appetite for fiscal discipline and that lack of appetite is one of the few areas in which there is strong bipartisan agreement. Perennial campaign pledges to reduce the nation's budget deficits remain little more than rhetorical flourishes.

    If Congress were to postpone the spending reductions/tax changes temporarily until the economy grew stronger, but put a credible plan for medium-term (5-10 year) fiscal consolidation on the table, that would be one thing. I believe that approach would probably be reasonably prudent at this time. However, no such plan is likely to be offered, much less adopted. A credible fiscal consolidation plan would include discretionary spending reductions, mandatory spending reforms (possibly starting with a macroeconomically painless increase in the Social Security eligibility age), and tax policy changes.
    I hope the rats in office do not succeed in weaseling out of the cuts. They were trying talking about weaseling out those cuts at the end of last November.

    http://www.debatepolitics.com/breaki...r-bargain.html
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    Re: Congress Said to Delay Automatic Budget Cuts Until March

    Im kind of contrary, I think it takes the politics out if the cuts take place no matter who is President and who controls congress.

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    Re: Congress Said to Delay Automatic Budget Cuts Until March

    I think that the cuts need to occur, but instead of doing it all at once, they need to be gradual. An actual plan to get spending and revenue under control that is truly fair wouldn't hurt.
    "And in the end, we were all just humans, drunk on the idea that love, only love, could heal our brokenness."

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    Re: Congress Said to Delay Automatic Budget Cuts Until March

    Quote Originally Posted by donsutherland1 View Post
    From Bloomberg.com:



    Congress Said to Delay Automatic Budget Cuts Until March - Bloomberg

    When confronted with the possibility of having to make some tough choices, the bipartisan consensus to avoid fiscal discipline appears to be holding fast. Despite political rhetoric articulating a powerful commitment to fiscal restraint, it appears that yet again such rhetoric rings hollow. Washington still lacks the appetite for fiscal discipline and that lack of appetite is one of the few areas in which there is strong bipartisan agreement. Perennial campaign pledges to reduce the nation's budget deficits remain little more than rhetorical flourishes.

    If Congress were to postpone the spending reductions/tax changes temporarily until the economy grew stronger, but put a credible plan for medium-term (5-10 year) fiscal consolidation on the table, that would be one thing. I believe that approach would probably be reasonably prudent at this time. However, no such plan is likely to be offered, much less adopted. A credible fiscal consolidation plan would include discretionary spending reductions, mandatory spending reforms (possibly starting with a macroeconomically painless increase in the Social Security eligibility age), and tax policy changes.
    The Democrats would like very much for this to happen. 1) They promised cuts that never materialized........again. 2) They can blame the Republican controlled Congress. We need a balanced budget amemdment to the Constitution.
    Last edited by Prof. Peabody; 06-26-12 at 05:43 PM.
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    Re: Congress Said to Delay Automatic Budget Cuts Until March

    This was a pretend deal anyway, just like all gov't "promises" are. The stupid committee has no authority to do anything, it was only a show to put a new "game show" like twist on the always ignored "pay go" rules. They need a giant wheel in the senate and house labeled with every excuse/exclusion allowed by the "pay go" rules, then when anything spending realted comes up, they just give the wheel a spin, whatever it lands on is announced as the "reason" for the "pay go" execption; emergency... crisis... its Tuesday... election year... hurricane... UFO sighting... national security... month name has an "R" in it... fairness... bipartisan agreement... ;-)
    Last edited by ttwtt78640; 06-26-12 at 05:53 PM.
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    Therefore all progress depends on the unreasonable man.” ― George Bernard Shaw, Man and Superman

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    Re: Congress Said to Delay Automatic Budget Cuts Until March

    Quote Originally Posted by Prof. Peabody View Post
    The Democrats would like very much for this to happen. 1) They promised cuts that never materialized........again. 2) They can blame the Republican controlled Congress. We need a balanced budget amemdment to the Constitution.
    Neither side wants the cuts to happen. Democrats know that it's stupid to cut spending when the economy is weak and Republicans don't want to PO their defense contractor friends.
    "The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. ... 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."

    -- Adam Smith

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    Re: Congress Said to Delay Automatic Budget Cuts Until March

    Quote Originally Posted by AdamT View Post
    Neither side wants the cuts to happen. Democrats know that it's stupid to cut spending when the economy is weak and Republicans don't want to PO their defense contractor friends.
    You mean the Democrats don't want cuts to their Public Service Union friends don't you?
    "Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passions, they cannot alter the state of facts and evidence." - John Adams

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    Re: Congress Said to Delay Automatic Budget Cuts Until March

    Quote Originally Posted by AdamT View Post
    I agree with your last paragraph, but I think it makes sense to delay this into early next year to take election politics out of it (to some degree), and to give newly elected lawmakers a chance to get their bearings. Same applies to Romney if he wins. If the cuts go into effect Jan. 1 as scheduled it would stick the new president with a deal he had no chance to negotiate. He would also have to deal with the expiration of the Bush tax cuts in his very early days.
    IMO, U.S. fiscal credibility is on the line. If Congress keeps postponing implementation of difficult choices, how can one be sure that future fiscal legislation will be implemented, especially if such legislation promises to tackle far more difficult structural issues?

    Much as I think the sequester is imperfect and the timing is inconvenient, I believe carrying through is better than doing nothing. Given recent past experience, there are no assurances that Congress would suddenly reach agreement on a credible package in March. Indeed, odds are probably against such an outcome, especially as Congress already had ample time and opportunity to do so via its "Supercommittee."

    My strong preference, of course, remains what I described in my last paragraph. In any case, I believe the most likely scenario is, in fact, a postponement of the spending and tax changes. Odds of a "grand bargain" of sorts during spring 2013 are also fairly low--triggers or sequestration mechanisms might be offered, but the credibility of such devices would be questionable, as odds might again favor Congressional action to avert difficult sacrifices. Consequently, the U.S. could see its credit rating downgraded by other ratings agencies in 2013 or possibly 2014, and perhaps by more than one notch. If Europe has begun to stabilize, some of the "safe haven" benefits that have insulated the U.S. from its worsening credit position might be starting to dissipate. If so, a near-term modest increase in interest rates consistent with the added risk premium could follow.

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