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By Mr. Curmudgeon:
The fiscal cliff is getting more attention than it did during the 2012 presidential campaign. According to the Congressional Budget Office (CBO), the Budget Control Act of 2011 will cut discretionary federal spending by $607 billion in early 2013; end the temporary extension of the Bush tax cuts, raising middle-class taxes by $26 billion; drop the nation’s Gross Domestic Product (GDP) by 4%; spike unemployment; and cause the inflation rate to fall to 0.5%.
For me, the most interesting data points in the CBO report are the dramatic drops in GDP and inflation. That means the 2% GDP projected for 2012 is a fiction. Without government “stimulus,” U.S. GDP would stand at -2%; and without the Federal Reserve’s never-ending quantitative easing, America would be in the grips of a deflationary downward spiral.
This means that America has been in an economic depression since the financial collapse of 2008; that the so-called “sluggish recovery” is merely a Band-Aid designed by Washington to mask this uncomfortable fact; that the current level of federal spending, coupled with desperate measures taken by the Federal Reserve, mitigate the effects of Great Depression II but cannot be sustained.
With the press assuring the public that the White House and Republican leaders in Congress will likely reach a “grand bargain,” the test of the deficit reduction plan’s credibility sits with the credit-rating agencies.
I believe America will likely suffer another credit downgrade because it’s unlikely Democrats will cut entitlements to any significant degree, and Republicans have assured the public of their commitment to save FDR, LBJ and O’s landmark social programs.
Whatever deficit agreement is reached will siphon more money from the middle-class, cause investment capital to flow from the U.S. to developing markets in Latin America and Asia, and begin the exponential contraction of our private sector as our nation’s economic and political energy is dedicated to one thing – saving entitlements. The so-called fiscal cliff, ladies and gentlemen, is the beginning of the end.
We are entering a new economic era in America – the age of Pelosinomics. According to Democratic House Minority Leader Nancy Pelosi, “Unemployment insurance … returns $2 for every $1 that is put out there for unemployment insurance. It injects demand into the economy, it creates jobs to help reduce the deficit.”
If Pelosi is right, the dramatic rise in unemployment in the decades to come should light the way to prosperity and government solvency.
Happy days are here again!