It’s hard to tell whether this opinion piece by Robert Shiller was put up by the Financial Review to remind us of just how stupid some people are or whether it is there because the editors think Shiller gets it exactly right. This is the bit they put on their editorial page:
During the US election campaign, opinion polls consistently showed the economy, especially unemployment, was voters’ No. 1 concern. The Republican challenger, Mitt Romney, sought to capitalise on the issue, asserting: ‘The President’s plans haven’t worked – he doesn’t have a plan to get the economy going.’
Nonetheless, Barack Obama was re-elected. The outcome may reflect the economy’s slight improvement at election time (as happened when Franklin Roosevelt defeated the Republican Alf Landon in 1936, despite the continuing Great Depression). But Obama’s victory might also be a testament to most US voters’ basic sense of economic reality.
It’s depressing, just depressing.
Basic sense of reality = basic sense of entitlement.
Oh, and blind ideology
The guy has no plan, no policies, has done nothing and will do nothing except destroy the economy and bow down to evil world powers making the whole world more vulnerable for it. This guy is the Poser-in-Chief.
Shall we blame the Bilderberg Group?
They voted for more depression in 1936, so why wouldn’t they vote for more debt in 2012?
Look ma, no parachute!
This fiscal cliff thing…. Why are economists saying it will be so bad? I understand the tax hikes will mean less consumption, ok – jobs lost there. But the spending cuts seem to be mostly handout reductions (and I include their massively bloated defence industry in that). Why the hell would economists care about that? That’s a good thing, as eventually that money will be returned to enterprise.
Ok, so it’s bad politically, but who cares about that.
Hahahahahaha. Winston takes a deep breath.
HAHAHAHAHAHA!!
You’re taking the piss, Steve.
Really….
If we are following US history. When does WWIII start?
“When does WWIII start?”
Not for at least 50 years, if ever.
When the Chinese want to start cashing in their billions of dollars of increasingly worthless US bonds.
Steve,
Perhaps they were facing up to the reality that having the Republican control the White House would not have made much of a difference – so they went for the party with the more liberal social agenda.
Dot posted some comments from Peter Schiff this morning about the fiscal cliff. He actually made a lot of sense. Maybe this so-called cliff is actually a good thing? I don’t like the tax increases but the spending cuts are a good thing aren’t they?
When does WWIII start?
Dunno.
But the End Times start when the US creates an ‘overseas bond dollar’ that has little other use than to pay Chinese creditors.
Honestly officer, no defaults around here.
The entire Schiff rant about the fiscal cliff I got in my inbox today:
Now that President Obama has been re-elected, the media is finally free to focus on something besides the clueless undecided voters in Ohio, Florida, and Colorado. The brightest and shiniest object that has attracted its attention is the “fiscal cliff” that we are expected to drive over at the end of the year unless Congress and the President can agree to turn the wheel or apply the brakes.
Fresh from his victory, the President took time today to let the nation know how he proposes to avoid the cliff: to raise taxes on those Americans who make more than $250,000 per year. He made clear that no one making less than that will be asked to pay any more. The two percent of taxpayers that the President is targeting earn 24.1% of all income and pay 43.6% (as of 2008) of all personal federal income taxes. Sounds like a fair share to me. But the four or five percent tax increases on those earners that are being proposed would only yield around $30 to $40 billion per year in added revenue, a drop in the federal bucket. Even if they were to double the amount that they pay our deficit would only be cut by about one third (even if those increases did not trigger an economic slowdown).
So what exactly is this looming menace, and why is it so dangerous? Stripped of its rhetorically charged language the fiscal cliff is simply a legal trigger that will trim the deficit in 2013 by automatically implementing spending cuts and tax increases. In other words, the government will spend less, and more of what it does spend will be paid for with taxes rather than debt. Isn’t this exactly what both parties, and the public, more or less want? The fiscal cliff means that the federal budget deficit will be immediately cut in half, shrinking to approximately $641 billion in 2013 from the approximately $1.1 trillion in 2012. What is so terrible about that? I would argue that there is a greater danger in avoiding the cliff than driving over it.
If you recall, the cliff was created by a deal last year when Congress couldn’t find ways to trim the deficit in exchange for raising the debt ceiling. When they failed to reach an agreement, Congress knew they had to raise the debt ceiling anyway. The resulting Budget Control Act of 2011, signed in August of that year, offered the pretense that they were dealing with our long-term fiscal crisis and not simply raising the debt ceiling with no strings attached. This was done not only to appease some House Republicans, who had threatened to vote against a debt ceiling increase, but to satisfy the bond rating agencies that had threatened a down-grade if Congress failed to act.
Now the focus turns to how Congress will dismantle the structure it created just 16 months ago. There can be little doubt that they will as economists are assuring politicians that driving over the fiscal cliff will immediately bring on a recession. The expiration of the Bush era tax cuts for all taxpayers will cost Americans an estimated $423 billion in 2013 alone. Hundreds of billions of across the board spending cuts, including the military, have been delineated. No politician would allow that to happen.
It is amazing that members of Congress can keep a straight face as they claim to want to address our long-term deficit problem while simultaneously working to avoid any substantive action. No doubt an agreement will be reached that will replace the looming fiscal cliff with another one farther down the road (which they can easily dismantle before we actually reach the precipice). Will the rating agencies buy this bill of goods a second time? If we lack the political courage to go over this fiscal cliff, why should anyone think we will be able to stomach going over the next one? Especially since each time we delay going over the cliff, we simply increase its future size, making it that much harder to actually go over it.
Many currently believe last year’s S&P downgrade resulted from the same congressional dysfunction that resulted in the fiscal cliff agreement. The truth is that the downgrade would probably have been much greater, and more rating agencies would have likely joined S&P in taking action, had it not been for the fiscal cliff agreement. If further downgrades fail to be issued when the lame duck Congress inevitably comes up with another can kicking deal, then the agencies themselves could lose any remaining credibility. In my opinion, the only explanation for inaction by the rating agencies would be for fear of regulatory retaliation by a vindictive U.S government.
I do not think it is a coincidence that while the banks are suffering a regulatory backlash as a result of their perceived culpability for the mortgage crisis, the credit rating agencies have been relatively untouched. But the credit agencies played a key role in catalyzing the mortgage crisis by giving questionable ratings to the mortgage backed securities. My guess is the government simply does not want to open up that can of worms as similar mistakes are being made with respect to the agencies’ ratings of government debt.
The truth is that regardless of what you call it, going over the fiscal cliff is not the problem, it is part of the solution. Our leaders should construct a cliff that is actually large enough to restore fiscal balance before a real disaster occurs. That disaster will may take the form of a dollar and/or sovereign debt crisis that will make this fiscal cliff look like an ant hill.
I think it’s time to reconcile oneself with the reality that it’s impossible to stop large swathes of the population from inflicting economic destruction on the country.. Those of us who understand enough where the road leads are too few in number to do anything but occasionally slow them down.
I wonder if it’s better to assist the acceleration process so that we may eventually live to see some sense and rational thought return.
Another garbage article from the supposedly business friendly newspaper.
I’ve always thought Robert Shiller was more of a clown than an economist. He got big press in the 90′s because he made an observation suggesting the stock market could exhibit reversion to the mean. When it happened people thought he was god.
I’m with you david. A wise sage referred to it as the era of the idiot.
In 1987 at the Sante Fe Institute prominent physicists and economists were brought together … .
The physicists were shocked at the assumptions the economists were making – that the test was not a match against reality, but whether the assumptions were the common currency of the field. I can just see [Nobel physicist] Phil Anderson, laid back with a smile on his face, saying, “You guys really believe that?”
—
Which assumptions?
It’s bizarre, isn’t it? If the deficit is what’s important, then you raise taxes and reduce spending. That’s it, problem solved. Of course, the Democrats want to raise taxes without reducing spending, and the Republicans want to reduce spending without raising taxes. Ideally, the US would reduce spending AND taxes, but that won’t help the deficit in the short term.
So they have to decide what matters more – short-term deficit, or long-term prosperity.
But they have taken option 3: long term deficit and increased borrowing.
“But they have taken option 3: long term deficit and increased borrowing.”
Stupid statist fuckers.
Exactly right and it will come sooner rather than later.
Peter Schiff is spot on. An increase in taxes and a reduction in spending is EXACTLY what the US needs right now. If the Republicans in Congress understand this and stop any action that would stop this from happening, it will be a good thing for the US.
It’s more nuanced Abu.
The Chinese understand they can’t collect any sort of parity purchasing power USDs from their Treasury bond holdings as cash, instantaneously, too much supply too little demand…….
So what to do? Attempt to buy US real assets like Japan did?
They will get barred.
Sony nearly bankrupted itself walking the walk with Columbia Pics
Frankly, the USA can survive permanently “without cheap Chinese shirts,” yet China can’t survive without demand and access to US and other Western consumer markets.
The US has massive tariff leverage on bulk low status Chinese imports, bring it on….China does not sell aerospace, vehicle manufacture, original IT of any sort, financial services , military hardware, resources, pharma or education to the US.
The US can piss China off tomorrow morning and survive….China cannot.
But of course…
Dot, I forgot to thank you for posting that. So, thanks!
And Schiff is right, cutting the deficit is the right thing to do for the long term prosperity of the US. The same applies here.
In places like NY State and other high taxing states the tax rate for those earning over $250,000 will be around 60%. they are slugged with state and city taxes in addition to the
feralfederal tax.The real problem is that nearly all small private firms lodge taxes as sub s corporations which offer some relief because the corporate tax rate is higher at around 35%. So the kenyan really wants to slug small business. Add in the cost of Kenyancare and you will the tax rate hit between 50 and 60%.
For all those wankers supporting the Kenyan here in Australia, this is what they are cheering.