Hey, guess what? Its time for one of our patented new & improved Open Threads.

Let’s get right to the good stuff, with these 5 questions:

What is going to happen with the sequester?

If it occurs, will it cause a recession?

Who is going to get blamed for the economic repercussions?

Is there a reasonable solution to this?

What should Congress & the White House, Democrats and Republicans, actually be doing?

What say ye?

Category: Politics, Taxes and Policy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

58 Responses to “Open Thread: Sequester/Deficit/Spending/Taxes?”

  1. Iamthe50percent says:

    1. What is going to happen with the sequester?
    It will be repealed. Whether before or after March 1, I haven’t a clue, but I would bet on Feb 28.

    2. If it occurs, will it cause a recession?

    Who is going to get blamed for the economic repercussions?

    Is there a reasonable solution to this?

    What should Congress & the White House, Democrats and Republicans, actually be doing?

  2. RW says:

    The sequester was just another dodge needed to kick the can further down the road because Republicans refused all revenue increases and would only accept spending cuts.

    I have said before that I think many Republicans are under the illusion that, unlike the fiscal cliff, they can make the sequester stick to Obama and will test the thesis by allowing it to begin in March.

    I think the market has priced in the expectation the Republicans will blink before March 1 but I don’t think it has fully priced in the possibility it will be after, much less the possibility it may be weeks after.

    I expect the interval between Feb 28 and when the Republicans do back down to be …interesting but I do not expect a recession.

    Alternatively, if Obama blinks, then I do expect a recession or at least a significant cut to what little GDP growth we might reasonably expect if the government were actually doing something close to its appropriate work; e.g., more infrastructure spending.

  3. Iamthe50percent says:

    2. If it occurs, will it cause a recession?
    Only if people panic. The dollar amount is too trivial.

    3. Who is going to get blamed for the economic repercussions?
    Republicans will blame Obama.
    Democrats will blame the Tea Party.
    The General Public will blame whoever their TV set tells them to blame.

    4. Is there a reasonable solution to this?
    Yes, just forget the whole thing and return to the normal budget/appropriation process.

    5. What should Congress & the White House, Democrats and Republicans, actually be doing?
    Besides preparing for the next election, as the always do?
    Well, they could try addressing the return of manufacturing to the USA, reform of archaic patent laws, address income inequality in the US, review our bloated military, hold hearings on arbitrary proscription by the executive branch, reform health care (single payer), increase SS and get old people to retire, fix the postal mess, deal with Mexican immigration in a fair and lasting way, eliminate the dark pools, HFT and other market distortions. But why go on? They will just go back to posturing for the next election.

  4. James Cameron says:

    “Just about every interest group wants to stop the sequester and just about none wants to see it take effect. Aerospace and defense companies, along with universities reliant on defense research funding, have launched Second to None, a coalition battling the defense cuts. A group of almost three thousand organizations, including the NAACP, AARP, Children’s Defense Fund, the Wilderness Society, Greenpeace, Human Rights Campaign, the Innocence Project, and many, many more, have warned about the impact of the non-defense discretionary cuts in the sequester. Physicians and medical research organizations, including the American Medical Association, the American Pediatrics Association and many others, are resisting the discretionary cuts to medical research, and in particular the National Institutes of Health. Liberal groups like MoveOn and the Working Families Party are also getting in on the action.”

    The Sequester: Absolutely everything you could possibly need to know, in one FAQ

    http://goo.gl/9px5n

  5. Frilton Miedman says:

    Fiscally, the ONLY thing that matters is the knowledge that the crisis of 2008 removed massive quantities of wealth & income from the group that consumes the most in an economy that’s 70% consumption.

    When any policy is introduced to reverse that, we hear cries of “class warfare” and “Socialism”.

    A decade ago I considered myself a conservative, I voted for McCain in 08.

    Now, at the insistence of the vegetative Fox crowd, I’m apparently a Liberal.

    I went straight down the “D” column in November, so did most of my friends and family.

  6. Iwasframed says:

    Both parties claim that jobs are number 1. Start there and make no cuts that reduce jobs. Austerity does not create jobs!
    Spend as much as needed to update our dated and dangerous infrastructure.
    Government rewards to individuals or businesses that solve technology issues such as the reward for the first private spacecraft. If we had done this before NASA’s space shuttle imagine how much money that would have saved.

    Long term solutions to avoiding these situations would be:
    Term limits
    Publicly financed campaigns with equal access to media
    Retirement and health benefits of a Congressman should match those of private individuals. I don’t think it is legal but it should be. Imagine the dialogue on Social Security and Medicare if this was so.

  7. Apinak says:

    It is interesting to see how seamlessly the media and GOP make the transition from

    1) spending and the debt are totally out of control, we need to cut everything now, the debt is an existential threat to the country, government cannot create jobs, government spending doesn’t help the economy, only fixing the debt will help the economy, to

    2) the sequester cuts spending too much and will destroy the economy.

    In a “we’ve always been at war with Eastasia” manner, they just switch from one argument to the polar opposite with no explanation and no acknowledgement that these two positions are in any way conflicted.

    There are reasonable alternatives that increase investment now while lowering the debt in the future with smart choices. http://cpc.grijalva.house.gov/the-peoples-budget/
    But as Ezra Klein points out, when it comes to cutting entitlements, “reporters are permitted to openly cheer a particular set of highly controversial policy solutions.”
    http://www.washingtonpost.com/blogs/wonkblog/wp/2013/02/20/the-problem-with-alan-simpson/

  8. Haigh says:

    What should DC be doing?

    Driving toward Simpson-Bowles II.

    What will DC do?

    Nothing but posture.

  9. WickedGreen says:

    Where is the modern-day CCC? Un-freaking-beleivable that so much time has gone by without a program to match needed repairs/upgrades with needed jobs.

    We’ve been in a recession since the crisis, with stock market “gains” = merely back to previous levels. The cultural psychology of the 800 lb. American consumer remains muted.

    New rule: all high-level government (administration, Congress, etc.) portfolio management actions, self-directed or 3rd party administered, publicly posted in real time.

  10. Init4good says:

    Sequester just the latest faux crisis to keep masses emotionally charged and watching the (non) news, so networks can sell advertising. Latest I hear is the all Navy civilian activities now have concrete plans in-place; Army specifics due soon. DoD always leads the way. If it does happen, (knowledgeable folks still say it won’t, but there’s always a chance) and govt contracts are more severely threatened (they’re already laying off) it will cripple the FAA and when commercial flights are adversely affected, suddenly we can’t live without the feds.

    If it occurs, will it cause a recession? Yes, but see above.

    Who is going to get blamed for the economic repercussions? Republicans are playing “let’s just test the waters” game; will find out they will be squarely faced with blame.

    Is there a reasonable solution to this? Sure, but the reasons for this kind of crap are much deeper than a normal person would think, therefore reasonable solutions are nowhere within sight of those who are pulling the strings behind the charade.

    What should Congress & the White House, Democrats and Republicans, actually be doing? Spending money on roads and bridges. The simplest fix is the best.

  11. jcallip says:

    What is going to happen with the sequester? No kicked down the line for a year.

    If it occurs, will it cause a recession? Yes.

    Who is going to get blamed for the economic repercussions? Everyone!!!!!

    Is there a reasonable solution to this? TERM LIMITS!!!!!!!

    What should Congress & the White House, Democrats and Republicans, actually be doing? Working together to keep this the greatest nation on earth!!!!

  12. S Brennan says:

    “Government rewards to individuals or businesses that solve technology issues such as the reward for the first private spacecraft. If we had done this before NASA’s space shuttle imagine how much money that would have saved.”

    In 2008 dollars, the whole Apollo program Mercury to Skylab was 124 Billion. TARP government bail out of unsupervised private companies by comparison was ~800 Billion in 2008 dollars…so when I “imagine how much money that would have saved”…my first response is “not a penny”.

    The private spacecraft, now on the government dole, seek to recreate what NASA did decades ago. Of those, I will tip my hat to Evan Musk, but even he stands on the shoulders of Government spending, further, most his guys got their chops on other US government funded space programs. So who is kidding who here?

    To end, let me say, without government spending on developing technologies, the USA would have been overrun by it’s enemies. The explosion of technology we now enjoy is a result of our response to challenge, the USA spliced private enterprise with wise government investment in future technologies.
    It was this willful marriage of the US Government taking the long view and the energy of US entrepreneurs out to make their mark in life that “crossed a diamond with a pearl and turned it on the world”

  13. Theravadin says:

    Best thing they could do would be to commission a global strategic review to cut defense spending by 25% over 5 years. So many of the current defense expenditures are aimed at threats that are extremely low probability (when was the last time the US needed stealth fighters/bombers?), while ignoring threats that are immediate and real (cybersecurity, for instance). I know that the boys with lots of braid like their toys, but this is ridiculous.

  14. Bridget says:

    Sheesh. It’s 85 billion lousy dollars, hardly enough to counteract the proposed Hurricane Sandy relief bill of $60 billion. No, it’s not enough to cause a recession, although you can be sure it will be blamed for the recession, should we find ourselves in one.

    What will Congress do? They will take the path of least resistance. I just don’t happen to know what that is.

    What should Congress do? Suck it up and find 85 billion of stupid government spending and cut it.

  15. CD Sorensen says:

    My guess is the sequester will happen just like the fiscal cliff; they’re deadlines set by, well, themselves. And I’m not as upset that this is the way we govern as it seems most are, why do we expect the horse-trading and negotiations about the future of the world’s only remaining superpower to be neat and orderly? We’re not all British aristocrats, we don’t have to act like them.

    Recession is now such an ugly word. After this period since 2008, two quarters of GDP contraction that aren’t massively hemorrhaging jobs aren’t so bad. I hope we can keep perspective. I’m trying to say I think recession is already happening, and the sequestration might be blamed, but we already had our first quarter of GDP contraction.

    Is the blame really important? I think anyone reading your blog can say they know the blame is usually assigned by the party who should be blamed to anyone standing close enough. If you look at the sequestration-created Debt to GDP ratios, it is suspicious that the lowest ratio is in 2016…

    I think the reasonable solution is surprisingly close to the current spending cuts in sequestration, roughly $100b of spending a year over ten years. It really isn’t going to solve any spending problems on its own anyway, and it does go right to the heart of both constituency’s “prize possessions” — so it wouldn’t surprise me to learn in a book ten years from now that party leaders on both sides rooted for the sequestration so they could turn to their donors and say “Aww, look, we broke it but it wasn’t my fault, so you shouldn’t stop funding my re-election, I fought like a tiger to get it stopped”

    This is what we pay them to do — we may not realize that it was a hard choice to ever put these cuts on the table to begin with now, but they never had to agree to any of this in 2011 to begin this process, but they chose this particular form of negotiation because it DOES have a historical precedent and our congressional leaders do not lack guile when it comes to getting the job done in a way that lets them keep their power.

    First post, want to say thanks for all of the reading from Mr. Ritholtz and all of my fellow readers/commenters. Had to jump in on this one though, too much pessimism masquerading as cynicism about this topic.

  16. Herman Frank says:

    What is going to happen?
    - All various departments have had pre-warning, pre-advised their staff, have put in place the draft letters putting staff on furlough, have re-assigned budget sums, have set up priority lists, have battened down the hatches – and will just ride out the storm. No skin of their back, business as usual. “Lots of drama, lots of posturing, lots of talking heads saying one thing and doing another”. Once again, “the man and woman in the street will get the impression they’re watching a soap-opera from another planet”.
    If it occurs, will it cause a recession?
    - It’s more like “take your medicine now or later, when you’re even sicker?” There’s a divergence in paths taking place between the real economy and the blah-blah-posturing of “how this is and that is going to affect the economy”. The economy has been crawling along the floor of the abyss for long enough for “the man in the street” to know that in reality “a Dollar can only be spent once”. De-leveraging will continue. We’re just going to slog on at anywhere between 0.5 and 2.5% growth. A dip here evened out by a rise there. (Note: keep your eyes on the next move of the Fed “taking care of the debt by means of a healthy dose of inflation!” – TIPS/TIPS/TIPS!)
    Who is going to get blamed for the economic repercussions?
    - The administration will see to soften any blow as much as possible. Obama-care being one of the best softeners. Instead of the administration being blamed, they will be seen as “the ones trying to do their level best to make the economy tick.” The shouters, posture-rs, ranters and loonies who promise the “magic bullet medicine” will be left for what they are “noise”.
    Is there a reasonable solution to this?
    - Any family who needs to balance the monthly budget knows how to juggle the demands of their existence. You postpone, safe, repair, agree, conform, talk, decide and mature together. You manage to do it together. Whatever kind of rabies is infecting “the governing class” is making them sick to the core. Of course there’s a reasonable solution, see above! As long as we don’t get the voters to demand “mature-adult”-attitude from their “chosen” then it is and remains “money calls the tune and they’re slaves to special interests”. (To call them w—s would be an insult to the ladies of the night, who make up their own mind about a john.)
    What should Congress & the White House, Democrats and Republicans, actually be doing?
    - How about “govern”, as in “government”? More than anything “be held accountable for their mindless merry-go-round”. What do you do with slackers who don’t produce anything but are ensconced in their bubble of “make-believe wrestling federation”? We let the pampered sugar-addicted adolescents free reign in the store. More political parties would be a solution, but the two present ones would fight tooth and nail to protect their entitlements. Educate the voting public so that a discussion is possible, instead of “a shouting of slogans”.
    The above is rational. Emotionally I believe we have to go for another 10 -12 years of dysfunction and degradation before these adolescent years are over and we look around and see one big mess to clean up.
    Apologize for the lengthy answer.

  17. MidlifeNocrisis says:

    What is going to happen with the sequester? I would not be surprised to see a last minute delay implemented next week. I would bet we won’t see it take affect on the 1st.

    If it occurs, will it cause a recession? I would guess it will not trigger a recession. Cuts are not big enough… although my wife has already been notified that she will get (at least) 5 non-paid furlough days if it is enacted.

    Who is going to get blamed for the economic repercussions? Nothing new. D’s blame R’s. R’s blame D’s and Obama. My step-father (76 years old) will blame Obama. He watches FOX News constantly. My mother is continuously dismayed. He voted for Romney, my mom voted for Obama.

    Is there a reasonable solution to this? The R’s need to lighten up a bit with regards to tax increases. That’s my personal opinion. After all, taxes (Federal) are currently some of the lowest in recent past. The party can’t last forever.

    What should Congress & the White House, Democrats and Republicans, actually be doing? As some of the others have stated… infrastructure, Civilian Conservation Corp (great idea!), financial industry re-regulation, putting pressure on Israel to compromise more with the Palestinians.

    Snow and wind all afternoon and all night tonight….. moving your way for the weekend. Get your snow shovel out (again!).

  18. Oral Hazard says:

    1) Extension, then partisan theater during the extension until public polling shows Americans blame GOP 60-40, then 11th hour compromise to keep spending at current levels until full budget is passed.

    2) Yes. 800,000 civilians in Pentagon alone on furlough? But again, not gonna happen.

    3) If recession, both parties blamed at current levels — 52-48 GOP blame, +/- 2.

    4) Of course

    5) “Should” in the sense of objective moral good? Campaign finance reform and congressional ethics reform. Otherwise there’s truly no long-term hope.

  19. bear_in_mind says:

    1) My suspicion is that the sequester will be implemented for a few weeks, long enough for those whose income dries-up and get mad enough to call their elected representatives (esp. Tea Party-flavored ones) and demand they put people back to work. Then lather, rinse, repeat until November 2014.

    2) Combining the +2 pct SSA payroll deduction + gasoline prices going through the roof + 15-30 day long “sequester” probably = minimal 2-3 quarter recession.

    3) Blame will be heaped on all politicians, but mostly the Republicans who can’t fathom returning to Reagan or Clinton tax rates.

    4) Solution? Here’s my idea in six parts:

    a) Use CHEAPEST INTEREST RATES IN OUR LIFETIMES to INVEST IN AMERICA. Budget $2-$3 trillion and revamp critical infrastructure that will propel the next 1-2 generations.

    b) Phase-in $1 trillion of income tax increases and tax deduction decreases over 60 months to increase gov’t revenues. Implement with sliding-scale: 5 pct coming from $95K-$150K earners; 8 pct coming from $151K-$275K earners; 12 pct coming from $276K-$425K earners; 15 pct coming from $426K-$675K earners; 20 pct coming from $676K-$850K earners; 40 pct coming from $851K+ earners.

    c) Increase SSA max. contribution by 2 pct annually until the cap reaches $175K-$200K.

    d) Increase taxation on dividend income from 15 to 25 pct phased-in annually over 60 months

    e) Commence Medicare Part D negotiating prescription drug prices with Big Pharma

    f) Limit extraordinary medical procedures for Medicare recipients in the last 30 days of life to only procedures that would benefit the harvesting of organs for donation (assuming organs are in viable condition)

    5) Begin acting like responsible adults!

  20. techy says:

    Divided house….I wonder how long before the world will take advantage of the situation here. Fortunately everyone else is in more shit than us. From where my vantage point, its going to be politics as usual, dont blame the politicians they are just following the wish of their people.40% of the country wants the liberals to fail even if it means another recession.

  21. call me ahab says:

    After all, taxes (Federal) are currently some of the lowest in recent past. The party can’t last forever.”

    what party? Does not paying more taxes equate to a party?

    maybe the party ends when the government can raise no more taxes to pay for the benefits that it has promised (it seems to always be the end game)

    parties don’t last forever- and neither do nations . . .it’s all temporary in the end.

  22. call me ahab says:

    “Yes. 800,000 civilians in Pentagon alone on furlough? “

    OMG- the horror . . .the horror . . [Colonel Kurtz got nothing on me]

  23. papicek says:

    Sequester represents about 2% of GDP. Intellectually, it’d be interesting to its effect, but perhaps someone can extrapolate from the ongoing cuts in government spending and employment we have witnessed over the last few years, after having lost about 120,000 government jobs (2010-2012, BLS).

    Government employment drops. Contracts cut, delayed or eliminated => drop or delay in private sector employment growth => marginally lower pension plan contributions & more redemptions.

    Never mind secondary effects lower government revenues generate: fire, police, ambulances, teachers (and Wayne LaPierre’s armed school guards), defense, food & drug safety, etc . . . .

    All at a time of steadily rising energy costs affecting defense, fire, police, home heating oil, natural gas prices (rising, not falling – EIA: http://www.eia.gov/dnav/ng/ng_pri_sum_dcu_nus_m.htm) etc . . . . (Again, BLS. Energy prices have roughly doubled in the last 10 years – BLS – which is the only thing making shale oil “miracle” feasible – http://www.theoildrum.com/node/9506).

    All at a time when healthcare costs (full disclosure. I support the single payer, “Medicare-For-All” model) are sky high, and will next year’s exchanges solve that? No. We’ve exchanges in Massachusetts and providers are still behaving as a cartel (just try and prove it though, providers know how to pass the hot potato around like they do in Congress). Maybe, with that TIME story (http://healthland.time.com/why-medical-bills-are-killing-us/) we’ll get some real discussion on healthcare costs, which are now 20% GDP (up from 17% when ACA was passed and now matching government spending levels, please note). That’ll be a long, long haul, though.

    All while commodities prices (energy price effects) cannot help but rise more (World Bank – http://blogs.worldbank.org/category/tags/commodity-price-data). The only cheap commodity left is credit from the Fed.

  24. Molesworth says:

    Pretty much ditto Bear in Mind except I see no recession and no need to cap SSA. I was always surprised when I got a pay raise and then dug through my paycheck deductions to learn that I’d simply reached the SSA cap. To me, iIt is a simple and easy way to raise taxes on the wealthy without them noticing.

    I expect these NYT headlines may foretell the winners and losers:
    * Rick Scott Accepts Reality: Like Florida, all states will eventually agree to expand their Medicaid system
    * WHITE HOUSE MEMO: For Obama Team, Calm, Not Crisis, in Latest Fiscal Battle
    and these WSJ headlines:
    * GOP Splits Over Pressure to Slash Defense Budget
    * GOP Seeks to Ease Spending Cuts’ Blow
    Long run, O is in the cat bird seat. It’s just a matter of whether he has the grace and forgiveness to give Boehner an honorable out or whether he jams the Reps.
    And if he does soften the blow, the Reps may likely jam themselves. I’ve read when asked about policies, Reps overwhelmingly support O policies. When informed in advance that those policies are O’s, they overwhelmingly oppose them.
    When you are simply opposed to something, you lose. In the long run, you lose.

  25. kurtwestphal says:

    What is going to happen with the sequester?
    GOP is as blind as in Nov’2012, the national (70% consumers) and demographic trends are running counter GOPs, trajectory. GOP has little remaining credibility, massive infighting, no self control. they’ll probably let the sequester go forth, wrongly thinking anyone believes them and markets will tank.

    If it occurs, will it cause a recession?
    No. Not unless GOP does nothing for a few quarters.

    Who is going to get blamed for the economic repercussions?
    GOP, hands down. they’ve done truly nothing to avert, quell, compromise. just more of the same from Boehner and sons.

    Is there a reasonable solution to this?
    sure, close loopholes on off shore, cap gains, reintroduce Glass Steigel and derivative reserve requirements, examine risk to the system, and ‘non combatants’ and charge a penalty fee of doing business, to discourage. HFT transaction fees for high speed users put into a ‘reserve fund’. Exec order by president.

    What should Congress & the White House, Democrats and Republicans, actually be doing?
    Building infrastructure, physical and digital and update energy systems, jobs jobs jobs,

    What say ye?

  26. Molesworth says:

    Ditto kurtwestphal

  27. James Cameron says:

    “House Democrats, led by Budget Committee ranking member Chris Van Hollen, proposed replacing the $85 billion in 2013 sequester cuts with a mix of tax increases . . . Senate Democrats, led by Budget Committee Chairwoman Patty Murray, introduced the American Family Economic Protection Act, which replaces the 2013 sequester with $110 billion in spending cuts and tax increases, spread out over the course of a decade . . . Both the Senate and House Democrats’ plans allow the sequester to take effect at the beginning of 2014.”

    From the WAPO Sequester FAQ above. The January 1, 2013 sequester was the consequence of a fiscal strategy that went awry. The March 1, 2013 sequester is the consequence of a fiscal deal that delayed it two more months. It is utterly amazing that any new dates would be pronounced with a straight face.

    I imagine they will cobble together a deal of some sort before too much damage is done – and that could be after March 1 – because we’ve seen it all before.

  28. BoKolis says:

    1. Whatever happens- roughly the same ending as the last episode- it will be portrayed as high drama. Feb is sweeps month, isn’t it? Do they still have sweeps months? The fiscal cliff (hanger) was the dry run for this. Remember, the media were pitching the sequester even before the cliff was resolved; how much more WWF can it get?

    2. No recession for the people that matter to our actors. For those that are intellectually lazy enough to paint us all with the same brush and color, I guess, no recession at all.

    3. It depends on who is doing the blaming; notice what is not asked: who will take the blame?

    4. Doesn’t a reasonable solution require reasonable men? Regardless, we don’t have time to do it right.

    5. {deep breath} That would take a manifesto. Execute the for the people part? I’ve gone to meager lengths to put approximately as much thought into this as our leaders have. I struggle to see how more can be expected out of the readership than our leadership.

  29. leveut says:

    What is going to happen with the sequester? It will go into effect, unmolested.

    If it occurs, will it cause a recession? It will occur. It will not cause a recession. There will be a recession, but it will be unrelated to sequester.

    Who is going to get blamed for the economic repercussions? The Republicans, because Obama and the Democrats will throw any kind of happy horse manure out there and the media will propagate it. First responders will be out of work? Small business loans will end? Really?

    Is there a reasonable solution to this? No. Obama and the Democrats want the issue and the Republicans control only the House.

    What should Congress & the White House, Democrats and Republicans, actually be doing? Working and passing federal budgets through the normal legislative process. Senate Democrats, however, have even less interest in that than Obama. When was the last time there was a passed federal budget anyway.

  30. t3rse says:

    What is going to happen with the sequester?

    * Remember that scene in Tombstone from the OK Corral? Someone’s going to wink at Boehner.
    http://www.youtube.com/watch?v=E1vsmpGfB9Q

    If it occurs, will it cause a recession?

    * I’m not an expert but no recession, just take a bite out of already anemic GDP growth.

    Who is going to get blamed for the economic repercussions?

    * I hope the Republicans and for their own benefit. The quicker it can be rid of the nihilistic and destructive mentality of the Tea Party the better. I hope some blunders like this can be a catalyst for that. At that point I can consider voting for the level headed moderates in the GOP who are hiding out until these repeated debacles are over. I should note there is a relatively large group in the Republican party that get information from talk radio. These people will continue to hate and blame everything that is wrong in their lives on Obama.

    Is there a reasonable solution to this?

    * Governing with the best intents toward the American people as opposed to just trying to fight Obama and make people hate him. He has already won his last term in office and it’s not worth trying to wreck the economy with repeated high stakes games of chicken. Coalition building in the Republican Congressional ranks to isolate and marginalize the Tea Party members who aren’t really interested in governing.

    What should Congress & the White House, Democrats and Republicans, actually be doing?

    * The “balanced approach” – cut some loop holes (aka Tax Reform) and delay draconian cuts for something a little bit more fine grained. Repeat over and over phrases like “tax reform” or “broaden the base” so that things aren’t framed as tax increases for the simple minded.

  31. razdoctor says:

    Up until the deadline I think Obama continues to try to paint GOP as hurting the country because they won’t close tax loopholes for the rich.

    GOP eventually offers a plan to keep same overall spending decrease but with more discretion in how it is applied.

    In the 11th hour Obama offers to include the medicare cost savings he talked about in his SOTU. GOP happy to get a medicare scalp accepts closing some tax loophole. Start of spending cuts delayed to 2H13.
    1. less risk of 2013 recesion
    2. less crudeness in the cuts
    3. some improvement on medicare outlook
    4. some additional revenues
    economy should stay on track and will achieve primary balance by 2015

  32. Lvis says:

    Over taxing the rich is not the SILVER BULLET to fixing our DEFICIT problems or our ECONOMY..

    In order to start or grow a business.. One has the option of finding investors or by borrowing (loans).. The rich don’t keep their money in their mattress.. They invest their money or save (deposits which traditionally gave banks the funds to make loans). You displace those funds in the form of taxation and you take away the funds needed to invest in growth and job creation…

    Government doesn’t INVEST they SPEND… We can all agree that CONGRESS is DYSFUNCTIONAL and our consistently GRIDLOCKED and SLOW to make decisions or to fix issues, so why would we want to give them more POWER and more of our TAX DOLLARS???

    We have put a big emphasis on education in the last few years, which made many of us (me included) and our young dependent on someone else providing us with a PAYCHECK… Students spend $$$$$ for a college degree burdened with DEBT and with no guarantee that they will work in that field. Then of course we have politicians making promises tax payers can’t afford..

    We need more entrepreneurs (job creators).. Not everyone needs a college education to start their own business or to invent a new product or concept (mom& pop businesses, Steve Jobs, Bill Gates, Mark Zuckerberg, etc….) If manufacturers and companies need skilled workers? What’s wrong with the concept of “on the job training”?

    Bottom line every single American should share the BURDEN… President Obama should stop new spending and have the Republicans come up with the list of tax loopholes that need to be closed and have the Democrats come up with the list of spending cuts….If they aren’t capable of doing that then the trigger is to have an independent (non-political) group such as Simpson-Bowles come up with the plan for tax revenue and spending cuts……

    If the SEQUESTER occurs, will it cause a recession? There will be lots of whining, a brief pull back, some discomfort… But naturally, agencies/ departments/ people will figure it out, adjust, come out stronger.. Possibly spark AMERICAN INGENUITY..

  33. Pantmaker says:

    The sequester will not be cancelled, postponed, negotiated etc. and the decade of cuts will officially begin. It’s a bit like when you were a kid and you blew the whole ten bucks your Grandmother gave you for your first Communion on Candy Cigarettes and Big League Chew and your Mom threatens, “wait until your Dad gets home!” and you know she’s right…he comes home every night… and yes you may get lucky and your Dad might need to take a crap first…and heck he might even take the newspaper in with him …and then you’re thinking man… another 20 minutes…maybe…and then your legs are feeling weak and your head is spinning a bit and you shout at the top of your cracking, prepubescent voice, “God why have you forsaken me!”

  34. Singmaster says:

    Obama ought to do what Johnson did to Wallace:
    Careful not to let the governor play the martyr for states’ rights, he cajoled and flattered him.
    In the end Johnson questioned Wallace’s place in history: “George, you and I shouldn’t be thinking about 1965; we should be thinking about 1985…. Now, you got a lot of poor people down there in Alabama… a lot of people who need jobs, a lot of people who need a future. You could do a lot for them. Now, in 1985, George, what do you want left behind? Do you want a great big marble monument that says `George Wallace: He Built’? Or do you want a little piece of scrawny pine lying there along that harsh caliche soil that says `George Wallace: He Hated’?”

    And if Cantor interrupts, do what Johnson did to Wallace’s AG:
    At one point Wallace’s Attorney General interjects that they have to be tough because “communists have taken over the civil rights movement” at which point Johnson grabs a pencil and pad of paper and throws it over to the Alabama attorney General and says, “Here…why don’t you take notes.”

    Here’s the script:
    Careful not to let the House Speaker play the martyr for spending cuts, he cajoles and flatters him. In the end Obama questions Boehner’s place in history:
    “John, you and I shouldn’t be thinking about 2013; we should be thinking about 2033…. Now, you got a lot of unemployed people in this country and in your own district, a lot of bridges and roads that need fixin’… a lot of people who need jobs, a lot of people who need a future. You could do a lot for them. Now, in 2033, John, what do you want left behind?
    Do you want a great big marble monument that says `John Boehner: He Built’? Or do you want a little piece of scrawny pine lying there along that harsh caliche soil that says `John Boehner: He did nothing’?”

    And if Cantor interjects that they have to be “tough because deficits are out of control and spending must absolutely must be stopped, but taxes can absolutely not be raised and they need to stop this Socialist agenda for America”, Biden grabs a pencil and pad of paper and throws it over to the Cantor and says, “Here…why don’t you take notes.”

  35. PeterR says:

    This should be required reading every morning, and especially before posting a comment here!

    http://www.ritholtz.com/blog/2013/02/ecri-parody/

    Followed up by:

    http://www.ritholtz.com/blog/2012/07/the-most-honest-3-12-minutes-of-tv-ever/

    Thanks, Barry, for these very important aspects of this site.

    What fools we mortals be . . .

  36. romerjt says:

    What is going to happen with the sequester? – 60-40 won’t happen, b/c Reps will discover it could kill them.

    If it occurs, will it cause a recession? . . . . . 80-20 no, not that much $$$ but how it all goes down could have a bigger effect.

    Who is going to get blamed for the economic repercussions? . . . .60 – 40 Reps at first, if it lasts while 75-25 the Reps

    Is there a reasonable solution to this? . . . Probably not unless Reps come to realize how pissed O is about the first 4 yrs. Having done everything they could to make him fail . . he freakin won! I don’t think they fully yet understand this yet. He IS out to destroy the Rep Party and who could blame him?

    What should Congress & the White House, Democrats and Republicans, actually be doing? . . The White House would begin a national dialog that reexamins some fundamental questions,

    Tell me again why:

    Taxes – all income isn’t taxed the same and how GE pays no taxes and why Bermuda has so many corp.

    Education – why should we put more money in a system that graduates about a third of the students, why is college for everyone when only half finish?

    Defense – why do we need a military this size and what are the threats we a defending, like who are we protecting Europe from? Europe?

    And on, and on . . . Chances of that happening = zero

  37. stonedwino says:

    First of all, Frilton Miedman nailed it. Ditto.

    What is going to happen with the sequester? Unless the Republicans actually realize and make moves to counter it, the vast majority of Americans will blame them. I vote that the Cognitive Dissonance reigns and they stay intractable. The GOP does not realize it, but the way they are going, the Democrats will win a super majority in 2014.

    If it occurs, will it cause a recession? The economy seems to be around stalling speed and the sequester cuts may indeed take us over the edge…again.

    Who is going to get blamed for the economic repercussions? The GOP. Look at the polls…the jig is up man. Even halfway ignorant Americans are finding out what cognitive dissonance, that it prevails on the right and how dangerous it is to our democracy, economic and political system. Even the MSM is finally calling out Republicans on the constant stream of nothing but BS.

    Is there a reasonable solution to this? No. Haven’t we learned that you cannot negotiate anywhere even near good faith with the GOP. Cognitive Dissonance is taking the entire party the way of the Whigs. It is impossible to negotiate with people who are not dealing with factual information and base all their politics on ideology. The Democrats keep trying to negotiate…with themselves…

    What should Congress & the White House, Democrats and Republicans, actually be doing? Obama is still playing a 3 level chess game, while the GOP still thinks its a game of checkers. The check mate move is coming in 2014 (The Republicans obviously have no clue what’s coming). After the 2014 election, Democrats will own the chess board outright.

  38. Old Rob says:

    What is going to happen with the sequester? NOTHING SIGNIFICANT.

    If it occurs, will it cause a recession? POSSIBLY, BUT AGAIN, NOT SIGNIFICANT.

    Who is going to get blamed for the economic repercussions? CONGRESS.

    Is there a reasonable solution to this? LET IT PLAY OUT.

    What should Congress & the White House, Democrats and Republicans, actually be doing? STOP SPENDING SO MUCH AND INCREASE THE NUMBER OF TAXPAYERS AND ALL THAT THAT MEANS.

  39. key-bit says:

    The sequester will happen, it will appear very badly for a month and then some kind of resolution will happen.

    I have volunteered to be furloughed, the last time this happened all employees received back for the time they were sent home. I am looking forward to a few days off.

  40. ruetheday says:

    The sequester will be postponed at the 11th hour. However, it won’t be your ordinary kick-the-can type straight up delay. They will frame it as a “replacement” of the sequester with a set of more targeted but equivalent cuts, without actually specifying any real details. As I have said since last Fall, when the fiscal cliff talk started heating up, the real battle will be over the expiration of the CR on March 27, the fiscal cliff and sequester were just sidechows.

  41. craig.r.jackson says:

    “Is there a reasonable solution to this?” I think the sequester alone is a bad idea because it is indiscriminate. I have read that the Pentagon will choose to cut civilian defense. Why? Why not cut foreign bases? I have noticed over the years that when government cuts, it tries to make the cuts hurt voters as much as possible. In order to mitigate this, I think Congress should allow the sequester, but add a directive that budgets should be cut abroad first. Along the same lines, I think IT budgets should be cut. I don’t understand why a government employee would ever need a Blackberry or a paid car. All of that fluff hidden in the nondiscretionary spending can go.

  42. techy says:

    Republicans are not going to lose big in 2014, not with a black liberal causing recession ever since he took office. If anybody is thinking that repub politicians will get punished by voters, I will say lets wait till 2014 and we can all act surprised. The house is theirs due to the gerrymandering.

  43. Jim67545 says:

    What is going to happen with the sequester? It will happen.

    If it occurs, will it cause a recession? Not by itself. But watch for other factors such as softening of consumer spending here and accellerating melt down in Europe. Synergy is a bitch.

    Who is going to get blamed for the economic repercussions? Congress. Obama will float above.

    Is there a reasonable solution to this? Many. Take your pick above. Unfortunately, so long as a dialogue like this: “Last election I donated $250k to your campaign. Vote to take away my tax breaks and next time that $250k will go to your opponent in the primaries.” exists gridlock will be virtually assured.

    What should Congress & the White House, Democrats and Republicans, actually be doing?
    Although off target entirely, something needs to be done about campaign finance. That is the sand in the gears.

  44. Arequipa01 says:

    What is going to happen with the sequester? Seems unlikely. Repubs have demonstrated over the last few years a complete unwillingness to go to the wall. At any rate, why would they? Out of principle? Please. So, were sequester to happen, it would have to align with White House goals. What could the administration gain by throwing a wrench in the works? I don’t know.

    If it occurs, will it cause a recession? Deficit spending is providing nearly 8% of GDP, so in real terms the US economy continues to contract in real terms. Immiseration is the watchword. Positive GDP growth numbers are fictitious and must be read in that frame.

    Who is going to get blamed for the economic repercussions? The poor, the powerless, widows and orphans, African-Americans, immigrants, freeloaders, gold-brickers, the 47%, Obama, Boehner, Reid, McConnell, everybody but the bankers.

    Is there a reasonable solution to this? No, but the Jacobins put some good ideas on the table.

    What should Congress & the White House, Democrats and Republicans, actually be doing? Dismantling the authoritarian mechanisms that have been designed to protect the interests of the rentier class. Oh, and begging for forgiveness, repenting, etc, it is lent, after all.

  45. jbay says:

    What is going to happen with the sequester?
    The senate will decide that it wasn’t bad enough and so raise the stakes by threatening to dissolve the union and pushing the deadline back tell June. June will come and the republicans will block any solution.

    If it occurs, will it cause a recession?
    No. Stocks will sell off a bit until they realize Ben has written a blank check to every American for the purchase of tulips. Realizing what BB is doing, investors will dig out there books on the history of the dutch tulip bubble and there will be a shortage of tulips sending DD, POT and DE along with the gas producers sky high. Everyone loves a tulip bubble.
    http://en.wikipedia.org/wiki/Tulip_mania

    Who is going to get blamed for the economic repercussions?
    The republics, Hank Paulson and…. and…. and…. John Stewart!

    Is there a reasonable solution to this?
    Tar and Feathers

    What should Congress & the White House, Democrats and Republicans, actually be doing?
    Well… Golfing with Tiger Woods was probably a good idea.

    What say ye?
    All I know can be summarized thusly:
    http://en.wikipedia.org/wiki/Major-General%27s_Song#Lyrics

  46. AHodge says:

    heres my thoughts on the first three, actually they are Rudy Penner’s thoughts
    just figuring out what will happen is hard enough for me.
    in any caseas you will read
    no good ideas, including all those here, are likely to be applied soon

    My second fiscal cliff lunch with Rudy Penner Feb 21, 2013

    In brief we will get a sequester—it will likely be applied promptly–by detailed line item and program.

    1. There will likely be much more discretion likely allowed later in March, as part of the Continuing Resolution CR for government spending (this year’s budget) due to be passed by March 27, which he thinks likely.

    2. at that point much more cutting can be moved from across the board to traditional targets like consultants, contracts etc

    3. There is not much prospect for a bigger deal or substitute for sequester, more general spending ceilings could be passed and said to substitute for sequester, but unlikely. he notes while there is surprosing amount of agreement on basics its the detail thats the hard work as usual

    4. The sequester law runs to 2021, but after end of this fiscal year in Sept, it reverts to a top line spending limit only (nominal dollars) But this grows but only by about 2/3 of the assumed nominal inflation rate, and eventually bites hard, unless new law amending is passed.

    5. His base scenario is nothing really done for a big package, at least till the end of fiscal year in Sept, so we get sequester lite, as amended by CR

    6. Tends to agree with the economic forecasts that impact is limited to further 0.2 to 0.3% of GDP. He notes there is 2 months grace that makes rest of this year impact permanently less. Economy can probably can absorb this plus the yearend payroll tax reversion, grow at perhaps 2%

    7. Notes the two parties actually agree on much of the rhetoric of what’s needed—but the actuality is hard

    For political bargaining or the lack of it, he sees no sign there are any active negotiations going on. House Budget head Camp who Rudy likes, is working on a big package and is “infuriated” at talk of piecemeal loophole closing or other moves, but no traction there or big package yet. Thinks the left has said in effect US debt at 70% of GDP is ok. On the right there is “austerity fatigue.” So both sides have formed around digging in. In particular Democrats avoid ANY entitlement or retiree benefit reforms as part of big deal, even the Social security inflation indexing mentioned or “offered” by Obama earlier. These programs all unaffected by sequester.

    For how sequester gets applied, Rudy thinks the detail line item, program/ department limits will bite and right away. Then get eased with more departmental discretion as part of the CR budget later in march. But even maximum discretion will maintain all the Department targets. He notes that these are for budget authorizations only, there is no separate direct outlays controls like in the 1980s sequester.

    Rudy had a number of stories about that. He is a true sequester expert. He ran that program as head of the Congressional Budget Office, until the Supreme Court ruled that unconstitutional, and turned over sequestering to OMB. He sees this stall in talks as part of a general non-communication between parties in DC. Notes his friend– a former Boehner Chief of staff never got any White House calls. Says Obama doesn’t like talking to congress, even to Nancy Pelosi. He contrasts this with Lyndon Johnson working congress incessantly, descending on opposition Speaker Dirksen’s office till he talked to him (in the Caro history)

    Rudy also notes there is talk of temporary furloughs, but they can only be temporary if there is a replacement for sequester. Unlikely as noted above. Otherwise they run at least till October, when there can be major changes including possibly easing up on defense, cutting more somewhere else.

  47. carleric says:

    There is absolutely no chance that Congress will let the sequester happen….cut spending? Oh my God, not in this country and not by this Congress…..lets just skip over all the posturing and the fear of a recession….if we need government spending to prevent a recession or no cuts in public spending to avoid an economic catastrophe we have more problems than one can imagine

  48. AHodge says:

    Correction to above Dave Camp is house Ways and Means chair, means mainly about taxes.
    and like Rudy i think he is a well meaning good guy in congress
    not that they will have much influence in the scenarios we see.

  49. vanrcamp says:

    bring on the sequester. I’m center-left, but the sequester is the only way to bring down military spending.

    It makes zero sense to spend so much on the military now when the US spends more than Germany, the UK, France, Russia, China, Iran, Japan, North Korea, South Korea combined.

  50. VennData says:

    The GOP Splits Over Pressure to Slash Defense Budget

    http://online.wsj.com/article/SB10001424127887323864304578318571638725986.html

    The GOP clown car crashing into itself. Everyday they delay they drop farther in the polls. One day, they may figure it out:

    Obama Rated at 3-Year High in Poll, Republicans at Bottom

    http://www.bloomberg.com/news/2013-02-21/obama-rated-at-3-year-high-in-poll-republicans-at-bottom.html

  51. GetReal1 says:

    $85 billion is hardly what you call a fiscal cliff. Stop deficit spending to the tune of $1 trillion dollars and then you will see what a real fiscal cliff is like.

    Who’s the blame? Democrats want to “help” everyone without a thought to costs or long term social problems created as a result of their help. Republicans want to cut spending (“yada yada”) without a thought about raising taxes to pay for current bills due. The special interests want money funnelled in their direction. And the American public just wants their stuff. The truth is everyone is to blame.

    Reasonable solutions? Stop deficit spending (hell, just print so everyone knows that you are robbing them of their savings, what’s the point of paying interest if you are perpetually getting deeper into debt). Stop trying to solve everyones problems (you are breeding a give me mine society). Makes you miss limited government when everyone is abusing their power.

  52. WFTA says:

    I’ll skip directly to what they should be doing:
    1. Recognize that the debt is not an immediate problem. The world loves lending to us. Have we ever borrowed at lower rates?
    2. Break the addiction to armament spending. We spend very nearly as much as the rest of the world combined (THE-REST-OF-THE-WORLD-COMBINED!!! let that sink in, please.) It employs people but the ROI isn’t close to civilian infrastructure spending. Over some reasonable period of time, cut it by half.
    3. Very carefully extract their heads from their anuses regarding healthcare. My vote is for Medicare-for-all, but stop paying for the third of scans, tests and treatments that do nothing to improve health, AND stop financing the un/under insured with unlimited procedures disguised as end-of-life care. Would it not be great for businesses large and small to not have to be concerned with their employees’ healthcare?
    4. Separate Social Security from the debt argument entirely and increase the amount of income subject to the SS payroll deduction. Expand SS assistance to the disabled.
    5. Take income taxes back to 1999 level on the top 10% or 20% of earners and drop some of the tax credits (child, tuition, etc.) for all income level. Expand the earned income tax credit (giving money to people who will spend it is stimulative.)
    6. Though it must be borrowed at first, begin a crash program of infrastructure spending to repair and improve transportation, water, sanitation, education and power systems—then level out to a sustainable and predictable level of investment.
    7. End the WAR ON DRUGS. Simply declare victory and divert the money to addiction treatment. Stop jailing non-violent offenders (another item where we outspend the rest of the world.)

    That is my socialist utopia. If adopted I think we might be running a surplus in 2025.

  53. callistenes says:

    Hey BR,

    Tim Iacono had an interesting idea how to deal with the sequester, at least temporarily. Why not suspend the bond purchases by the Fed, create accounts for the various branches that need them, and fund them. I mean Treasury already has an account with the Fed why can’t the DoD etal??

    Would be interested in your thoughts.

    http://iaconoresearch.com/2013/02/22/the-obvious-solution-to-the-nations-sequester-problem/

  54. AHodge says:

    as for savings
    we can sequester the SEC and OCC at zero, furlough everyone permanently.
    its a do over, take some time n do it right next time?

  55. DeDude says:

    My best guess is that they will agree to put the sequester off for 7 months (end of current fiscal year). Nobody seems interested in a grand bargain and nobody will bend sufficiently to the other side to make a small deal.

    If it actually happens, it will cause a slow down in the recovery but not nearly enough to cause a recession. The economy is growing a bit faster than predicted and it may not even be that easy to see an effect of sequester, although it will be there.

    The right will blame the left and the left will blame the right. But for the center 20% I think the GOP and teaparty will be blamed most. The majority of people want a balanced approach with both revenue increases (closing loopholes) and real reduced spending. The GOP “no way” approach on increased revenue will ensure that they get most of the blame.

    The reasonable solution is to postpone the implementation (in 2 stages) until specific goals of GDP growth have been reached.

    What they really should be doing is to work on solutions to the real problems that are holding back the economy. If we had full employment there would be no deficit or debt problem. If we had a more fair distribution of wealth and income the economy would be growing at a much higher rate.

  56. matt wilbert says:

    There will be a sequester. It will probably not survive until the end of the fiscal year.

    It will not put the country into recession, but it will slow things down a bit.

    The GOP will be blamed, as is appropriate.

    There are reasonable solutions, but the GOP as currently constituted is not a reasonable party, so these are not available. In this particular case, given the low level of revenue vs GDP currently, ruling out revenue increases is not reasonable.

    There are a lot of things that the parties should be doing now, but I would say the thing that I would most like to see would be infrastructure spending largely paid for with a carbon tax.

  57. Robert M says:

    What is going to happen with the sequester?

    If it occurs, will it cause a recession?

    Who is going to get blamed for the economic repercussions?

    Is there a reasonable solution to this?

    What should Congress & the White House, Democrats and Republicans, actually be doing?

    I do not know what will happen. what I would like is for the sequester to take place.

    No it will not cause a recession for 2 reasons 1, the loose money will become even looser even while it gives the patient the equivalent of AIDS. 2, fear is a big motivator for a class of people who think they control the world so the odds are they will step back.

    Real blame lies w/ everyone as they refuse to deal w/ the real issue. The real issue is a crisis of capitalism.

    The reasonable solution is to have a discussion about the crisis of capitalism and act in some consensus.

    The same as above w/ this realization. The crisis in capitalism is based on the strategy of nullification. Nullification was a political tactic to preserve slavery, capitalism at its worse human beings are property. Nullification now is to one restrain any claim by the state on the assets of the state(taxes) for the benefit of anyone oligarchical capitalists. This means in the financial industry no restraint on institutions that did substantially more to diminish the lives of most human beings on the planet by deliberately refusing to restrain themselves from capitalism’s excess.

  58. Robert M says:

    I do not know what will happen. What I would like is for the sequester to take place. I want it to take place so there is a discussion on the crisis of capitalism in this country.

    No it will not cause a recession for 2 reasons 1, the loose money will become even looser even while it gives the patient the equivalent of AIDS. 2, fear is a big motivator for a class of people who think they control the world so the odds are they will step back.

    Real blame lies w/ everyone as they refuse to deal w/ the real issue. The real issue is a crisis of capitalism.

    The reasonable solution is to have a discussion about the crisis of capitalism and act in some consensus.

    The same as above w/ this realization. The crisis in capitalism is based on the strategy of nullification. Nullification was a political tactic to preserve slavery, capitalism at its worse human beings are property. Nullification now is to one restrain any claim by the state on the assets of the state(taxes) for the benefit of anyone oligarchical capitalists. This means in the financial industry no restraint on institutions that did substantially more to diminish the lives of most human beings on the planet by deliberately refusing to restrain themselves from capitalism’s excesses.
    The political reality of this is the same or more for defense spending w/o any discussion whatsoever of what we are defending. No discussion of what government’s responsibilities in this current age-infrastructure, education, creating a tax code for the current economic realities, medical costs, et al.