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Wednesday, July 20, 2011

Republicans insist on sucking $800B out of US Economy Facing Sticky Wicket

So, the US Economy faces a serious sticky wicket. Even shuffling Harvard economists are talking about a 'jobs deficit'.

Quick: What's the first thing you do when you are in a serious situation like this?

Well, of course, you do tax reform, right? (Especially so that corporate dividend income to the wealthiest, from companies flush with cash, increases and is taxed at lower rates).

Don't laugh. That's what is going on in "the gang of six", right now.

Even the punditocracy insist that good politics implies that we need to be acting now with regard to worries that are 20 years and 75 years down the road, when the next 24 months could turn really ugly. Early action is to be praised, but you don't try to fasten your seat belt just when the car is skidding off the road, do you?

"Really ugly" means potentially catastrophically ugly. Recall that it is not just U.S. banking system is exposed to Europe, who are on a race against time to right themselves of dreadful unemployment, before the waters come in.

Anyway, even the best of proposals seem to want to go from circa $300B, say, in stimulative, emergency war spending, to -$500B in spending cuts. That's a swing of $800B, potentially. Slap a multiplier on that and you're talking real turkey. More lost jobs, more troubles with housing.