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Debt Deal Puts U.S. on Austerity Path as Economy Falters

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posted on Aug, 2 2011 @ 07:40 AM
Debt Deal Puts U.S. on Austerity Path as Economy Falters

The federal government looks to be getting out of the business of trying to spur the economy just as the U.S. expansion shows increasing signs of faltering.

A deal struck over the weekend to cut $2.4 trillion or more off budget deficits over a decade marks the beginning of a prolonged effort to put the government’s finances into better shape. While the immediate economic impact from the agreement is likely to be small, it will add to a reduction in growth next year of 1.5 percentage points coming from the expiration of past stimulus programs, according to economists at JPMorgan Chase & Co. and Deutsche Bank Securities.

“Over the next 10 years, there will be further spending cuts and higher taxes, and that’s not good for economic growth,” said Paul Dales, senior economist for Capital Economics Ltd. in Toronto. “It is the start of a meaningful move toward fiscal consolidation.”

The shift from stimulus to austerity coincides with a slowdown in the two-year recovery. A report last week showed that gross domestic product grew at an annual rate of 1.3 percent in the second quarter of the year following 0.4 percent in the first three months, prompting economists to warn of possible relapse into recession.

And I wonder what the revised GDP for July will be once it is made known, given the revision down from 1.9 per cent to 0.4 per cent for June.

The economy will suffer another blow next year with the expiration of a temporary 2 percent payroll tax cut, an end to extended unemployment benefits and completion of the $830 billion stimulus program that President Barack Obama signed into law more than two years ago. Obama will press Congress to extend a cut in payroll taxes before the end of the year, White House press secretary Jay Carney said yesterday.

So now that the debt ceiling has been raised (well assuming it will pass the Senate today) and it brings some level of assurance that crisis has been averted, I wonder now if things are really going to start heading downhill with adverse economic developments outside the immediate control of congress? That is, we'll begin to see a cascade of bad economic news particularly in the US and Europe, and throughout the global economy, creating what is often referred to as 'the perfect storm', a continual slowing and demise of the world economy until it falters.

Should such a scenario unfold, sooner or later, it would remind me of the movie The Titanic (I know a little lame but hey) where it finally becomes apparent and dawns upon everyone that this is no long just an unsinkable ship that has sustained damage from hitting and iceberg and filling with some water until such time a rescue boat or some other fix is implemented, but this baby is really going down and there's SFA we can do about it! Well, of course, time will tell.

posted on Aug, 2 2011 @ 08:01 AM
Sooner or later, we as consumers will get to actually feel the pain. A lot of us are already feeling it, but it is but a twinge. The pain is on its way.

The austerity measures are needed. We have been living the high life on borrowed dollars for far too long.

It is time to pay the piper.

posted on Aug, 2 2011 @ 08:05 AM
will it become fashionable to write off debts soon ?

I could see one country doing this, then another and another etc.

I mean at the end of the day some one will have to grow some balls and say enough is enough.

posted on Aug, 2 2011 @ 08:22 AM
This government would never allow the general public to write off their debts because that would help main street and hurt wall street. This government has backed the financial elite on every turn so what makes you think they will stick up for the little guy? The only reason the demoncraps were calling the tea partiers terrorists is because they like their 600 dollar hammers and 1000 dollar toilet seats that are funded by the little guy. One day the greed will destroy the economy and more than likely we will fight amongst ourselves because some people are too stupid to realize the coorporate media serves the rich elite....

In a way im looking forward too it because a little suffering might wake up the stupid masses of brain washed idiots that watch fox and cnn.

posted on Aug, 2 2011 @ 08:28 AM
sorry for the mis-understanding.

I was thinking if the governments of various countries started writing off debts.

They could even do deals with other countries, I write of a few billion here and you do a few billion.


posted on Aug, 2 2011 @ 11:53 AM
We are so screwed as the house members smile, laugh, and pat themselves on the back for a job well done. Things are going to go from bad to worse fast! The money printing will have to start up again and when inflation pops up from the 11.7% its at now to 25%, then you will see pain

edit on 2-8-2011 by camaro68ss because: (no reason given)

posted on Aug, 2 2011 @ 12:19 PM
Congress passed the bill. yay.

2.4 trillion (CBO estimates less.. real economist estimates even less than the CBO) comes to approx 1-2% spending reduction when it's all said and done.

We are heading back towards negative GDP growth, and the Real Economy is showing signs that decline is progressing .. personally I see no way around another 1+ trillion dollar stimulus package before 2012. Unless this "austerity" is a sign our Government is resigned to let us have the Depression and be done with it..

posted on Aug, 2 2011 @ 01:23 PM
The writing is on the wall....has been for a while. This debt deal is like trying to fix Fukushima by spitting on it.

posted on Aug, 2 2011 @ 02:40 PM
reply to post by jkm1864

This government would never allow the general public to write off their debts because that would help main street and hurt wall street.

No it would hurt main street as well.
Main street works for all those companies listed in Wall street.
Main street has their retirement invested in Wall street.

If no one pays their debt to company X then company X could well go belly up. WHich puts all the workers in the street.

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