OMB's Stockman: “We're At The Fiscal Endgame”
To those on the hill and elsewhere who suggest this growing ‘fiscal cliff' and ‘debt ceiling' crisis will all get solved, former Office of Management and Budget (OMB) Director David Stockman tells Bloomberg TV that “they will punt, punt, punt and kick the can with partial solutions driven by eleventh hour crisis-based extensions that will go on for the whole of the next term!” When asked whether this economy will be mired in the doldrums, he rather ominously states “it will be worse, because we will be in recession” and notes that when the lame ducks re-look at the budget numbers with a realistic recession (instead of the current assumption of no recession within 12 years) it will be far worse and in a political environment where ‘we cannot possibly raise taxes – and we cannot possibly cut spending'. With a 78% disapproval rating for the ‘do nothing' Congress, Stockman is surprised that 16% somehow approve – approve of what? His warning is that unlike in past periods, today “we are completely paralyzed, there is an ideological divide on taxes and entitlement like we've never had before” and while he realizes that “the debt problem doesn't become a debt problem until the market suddenly have a wake up call and realize that if the Fed doesn't keep printing, it's game over.”
“The fact that rates are so low is not a reflection of the US as a safe-haven but a bet on the Fed not allowing rates to rise.”
“The perverse low-rate environment simply tells Congress that they can borrow a trillion dollars for 10 billion a year.”
If rates rose then it would break this huge partisan stalemate we have today”
“There is a huge costs to stalemate!”
In a little under six minutes, David factually describes the certainly-not-priced-in dismal reality of the political situation we face in the next few months… must watch…
