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Political implications of grim CBO report

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    Can we avert the 'fiscal cliff'?

  • Duration 9:06
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If lawmakers do not reduce the deficit sharply -- when he thirteen.

Perhaps because of the near term economic consequences.

They will need to reduce it later.

At some point we will need to adopt policies that require people to pay significantly more in taxes.

Except substantially -- government benefits and services.

For both.

Doug -- -- -- head of the Congressional Budget Office talking about what happens at the end of the year the CBO projecting today deficits.

For this coming fiscal year 2012.

To be at one point one trillion dollars is you take a look at the graph deficits under President Obama of course is the president.

Who vowed to cut the deficit in half when he.

Came to office shall now see it exceed a trillion dollars according to CBO for the fourth straight year and as you take a look at this next graph.

This is essentially -- -- door was talking about.

If the current law stays in place.

The alternative fiscal scenario there you see everything stays the same they pass everything to stay the same as it is right now the deficit is roughly one point.

One shy of one point one.

That should be one point one trillion not billion.

It should be one point one trillion dollars in growth in GDP would be one point seven and unemployment at eight point.

-- but then you see the 2012 baseline that is.

Really what happens if this sequestration goes into place this is at the end of the year and if all the tax cuts are not extended.

The bush -- tax cuts and you see the deficit go down growth go into the negative and unemployment shoot up again that's.

Six 641000000000.

And one point one.

Trillion roughly let's bring in our -- Steve Hayes senior writer for the weekly standard.

AB Stoddard associate editor of the hill and syndicated columnist Charles crack.

Okay Steve you look at these numbers you see what -- -- said today and put it in political perspective.

Well it's it's scary and it's a virtual certainty that nothing will be done.

About this before the election and everybody's operating as if nothing will be done because it doesn't make sense politically free to party.

To do this the problem with the fiscal cliff among you know among many others including the fact that it would send us into -- recession as Doug Allen or suggested.

Is that it's mainly cuts in discretionary spending and mainly due to defense -- so.

It may have a short term impact on the true -- budget trajectory.

But it doesn't actually solve our long term fiscal problems it does nothing on entitlements we really doesn't.

Challenge the structure -- the structures of the entitlements that are driving.

Our national debt so it's a short term.

Hit that we would take it would drive us into recession as a near certainty.

And it doesn't do -- solve our problems this is exactly the kind of thing that people send their congressmen and women to Washington to fix and nobody wants to do anything about it.

The White House response is that the house.

And Republicans in in congress are holding middle class.

The middle class hostage to give tax cuts to millionaires and billionaires.

That tax cuts they say that that the US can afford the presence now.

Banking on this plan for his election yet look this this is one of the most unbelievable.

Story lines of the 2012 election cycle.

President Obama has twice in public on the record.

Argued against raising taxes and economic downturn there's no question that he's made this case.

He said it would hurt the economy if we raise taxes in an economic downturn he said it twice in 2009 and again in 2000.

He is now running -- fat as the centerpiece of his economic message so he's running on something that he himself has said.

Would hurt the US economy and where's the national news media asking him questions about this admission be the first question he gets at every press conference Mr.

President.

Why are you running on something that you have said specifically would do damage to the US economy and he's not being asked the question maybe.

Well let's go back to fiscal cliff which found.

Is not the fault of the Republicans but it is not the fault of the Democrats either.

Both parties are accountable and everyone and home was watching should recall that they both supported this deal.

It was -- from the start with a triggered death trap of cots or let's -- are not -- just.

For people sitting at home the reason they came -- this is it went to a super committee right -- the White House and house Republicans namely a speaker Boehner couldn't come together on a big deal.

On deficit and debt cutting that included.

Tax -- is on the democratic side and major spending cuts and entitlement reform on the Republican -- we ended up in the super committee they couldn't get it done.

That was the threat that if they couldn't then you get the sequestration these major cuts.

And separately all of these tax increases tied to extending the bush era tax cuts -- it in a simple.

Like they knew that that that the time to fix these out across the board nonsensical draconian cuts would be at the time that the bush tax cuts were expiring.

Because the whole thing was a head -- and the people who sign on of this deal at the cliff of default in August 2011 all new in both parties they could rewrite this if they had to.

This December at the last minute after the 2012 presidential election is.

So crazy waiting -- got you know it's it's really it's really incredible I wish I could tell you -- as you know we'll Seth with the fiscal cliff.

And I wish I could tell you that members when you talk to them.

Are any further from their denial or closer to the reality of how quickly they will have to forge consensus in that seven weeks between November 7 and Christmas Eve.

Or whatever it is they are not and the new rumor is that they're gonna let everything.

Expire and set in.

Because they've got on December 31 because that way -- five days later they can reinstate.

Some of the tax cuts if not all of them so that they are tax cutters.

Instead of people who raise taxes if you're sitting on the -- at home and you have -- sit at the table and do your budget.

Do you look at Washington and say what he's going on there.

Well this is kind of crazy way to do business.

But I must say that I feel a strange and equanimity about peace.

Cliff I'd like to get my shorts -- a twist that I can't commit myself because they're only two options either Obama wins or Romney wins in November.

So if Obama wins he's an -- -- a warning is a useful way.

Everybody knows that if nothing happens over -- Clifford and have a recession.

So assume Obama wins he doesn't want to have a recession as one of the worst economy.

Starting off a second term that he had in the first assuming the Republicans retain the house which is a good assumption.

He's going to have to come to a compromise exactly like the kind he did.

After the shellacking you took in 2010.

Where he -- McConnell worked out a deal now if Romney wins.

He was simply an -- on the day after he's elected.

That if the problem isn't solved in the lame duck he will.

On the for as soon as he gets in office reverse retroactively.

Everything that happens on January 1.

Now this does assume that Republicans.

Win the -- -- Romney wins the White House he will likely with the senate.

Although we have a Missouri -- -- issue.

Well -- talk about national thing right but assuming if you have enough that you gonna win the presidency you probably have enough to win.

51 seats in the senate so he'll announce a retroactive undoing of all this stuff Watkins a six month extension while they work out.

Real Ryan like tax reform and entitlement reform.

I sleep well at night.

If it's a president round usually we'll either but either way out.

Yes but about other issues but asked of the cliff either way whether Obama's elected or around me.

We do not go over a clue why why what -- -- will President Obama.

To work with house Republicans once he's glad to finally -- to house Republicans see it on their hands.

And you can't enact anything unless they agree.

Then Obama's gonna have -- -- endorphins just reported.

A crash in the economy 9% unemployment.

A second the recession Obama does not want to start -- second term.

Would they ruined economy it makes no sense -- usually give on the tax cuts there he will work out the same kind of deal he worked out with McConnell.

In 2010.

After winning instead of losing but she can't see -- signaled that they're sending is there's -- he would break the Republicans if they win with a mandate from the NUS people there won't be a mandate for Obama -- -- but under our constitutional system he's not a dictator.

He can't enact a mandate unless the house agrees it's a Republican told a house as they -- -- in 2011.

He can't act without the Republicans and -- four.

He will have to work out a compromise as he did with Mitch McConnell here for Charles -- We're Charles it is a fiscal hill you don't need for the others it doesn't fiscal -- -- you don't need ambient.

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