- On November 20, New York Times writer Eric Lipton headlined,
"Lawmakers Trade Blame as Deficit Talks Crumble," saying:
- Hours away from their self-imposed deadlined, "Congressional
leaders conceded Sunday that talks on a sweeping deficit agreement were
near failure and braced for recriminations over their inability to reach
- Republican aides said lawmakers will end their negotiations
with a whimper, not a bang. Expect no final news conference, just a quietly
issued joint statement and follow-up comments.
- By law, automatic $1.2 trillion in cuts over 10 years
will start in 2013. They're to be equally divided between defense and domestic
programs. Don't bet on it.
- Expect sustained military spending at the expense of
what people value most. Either way, lost purchasing power means less spending,
fewer jobs, and greater public anger than today's high levels.
- Both sides blamed the other. Democrats said Republicans
wouldn't yield on tax hikes. They pledged none, no matter what.
- Republicans called Democrats inflexible, especially on
Medicare, Medicaid and Social Security cuts.
- The Congressional Budget Office (CBO) estimated that
domestic programs, including education, transportation and immigration
would be cut by 7.8% in 2013 and Medicare would lose 2%. Defense would
be reduced 10%.
- For now at least, Medicaid, Social Security and veterans'
benefits are spared, but that could change. Members of both parties oppose
defense cuts. Expect "entitlement" reductions instead, despite
exemptions under the automatic "trigger" procedure.
- Failure complicates extending end of year expiring payroll
tax cuts, unemployment benefits, and other tax breaks experts say could
shave over a percentage point off already weakening growth.
- Troubled Eurozone economies are crumbling. Nonetheless,
ECB president Mario Draghi says it's "heading toward a 'mild recession'
by the end of the year."
- He knows the truth but suppresses it. So does Wall Street.
They've seen Eurozone bond yields rise, in some cases to alarming levels.
Across America and Europe, millions are raging against policies they want
- Economist David Rosenberg asked if Italy is another "Lehman
event?" Not exactly, but they're similar. Confidence lost is tough
restoring. Italy has to roll over $500 billion of maturing debt next year,
$800 billion through 2014.
- At 7% yields or higher (the same tipping point that drove
Greece to default), it's impossible to meet fiscal targets markets demand.
Italy faces a classic Catch-22 dilemma. The difference is Lehman had $150
billion in outstanding bonds. Italy has $2.5 trillion, the Eurozone's largest
bond market by far.
- Wall Street banks are called too big to fail. Italy's
too big to save, and without monetary and fiscal sovereignty, it can't
print money, add fiscal stimulus or devalue its currency to boost exports.
- Italy's financing needs are so huge, it'll have to hold
near weekly bond auctions for many months or years. One or more failures
seems likely followed by severe repercussions.
- Other troubled Eurozone sovereigns face similar problems.
So does America. Its annual deficit approaches 11% of GDP. Weakening economic
conditions next year will drive it higher.
- Total government debt (including US agencies) as a percent
of GDP exceeds 118%. France's borrowing costs surged 2% above Germany's,
more than triple the worst 2009 level.
- Whatever steps America takes to curb debt won't work.
Unlike Eurozone measures, they're slowdowns, not reductions. Either way
assures failure when stimulus is needed.
- Key also is congressional paralysis to address financial
crisis conditions too grave to ignore or delay. Major credit rating agencies
plan "negative outlook" US Treasuries downgrades.
- Merrill Lynch believes they're coming, saying:
- "The credit rating agencies have strongly suggested
that further rating cuts are likely if Congress does not come up with a
credible long-run plan. Hence, we expect at least one credit downgrade
in late November or early December when the Super Committee crashes."
- Ahead also, expect higher defense spending, lower corporate
taxes or no hikes, Bush era cuts for the rich untouched, and major reductions
to Medicare, Medicaid and other social programs to make people pay, not
Wall Street, other business favorites, and America's super-rich already
with too much.
- Progressive Radio News Hour regular Bob Chapman says
Supercommittee members plan billions of dollars in secret farm bill handouts
to prop up failed agricultural policies. Now passed their self-imposed
deadline without agreement, expect Congress to do it.
- At the same time, automatic triggering will impose cuts.
Congress must vote them up or down without amendments, debate or delay.
- Expect more benefits for corporate favorites, higher
deficits despite reductions, America's fiscal mess increasing, and economic
conditions becoming worse than ever.
- Bad policies produce failed results. It's just a matter
of how bad, how soon.
- Stephen Lendman lives in Chicago and can be reached at
- Also visit his blog site at sjlendman.blogspot.com and
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