The CBO Calculates the Pain of Budgetary Inaction
James Bacon submits:
When President Bill Clinton and House Speaker Newt Gingrich were running the country back in the 1990s, "divided government" came to be equated with fiscal discipline and balanced budgets. Some pundits fantasized that a government similarly split between President Barack Obama and a resurgent GOP might bring more of the same. Our limited experience with divided government in 2010, however, has not been encouraging. The latest tax deal emerging from Washington will extend the Bush-era tax cuts, riddle the tax base with more loopholes, spend more on unemployment benefits and ensure higher-than-forecast budget deficits. Moody's took a dim view of the compromise, warning that its cost would run between $700 billion and $900 billion over the next two years. The credit-rating agency also said that the plan, if enacted, would increase the likelihood that "a negative outlook" would be conferred upon the United States' AAA bond rating. A negative outlook signals a heightened risk of an actual rating cut in the following 12 to 18 months. Investors apparently shared the Moody's appraisal: Treasury prices fell sharply and yields hit a six-month high.Complete Story »
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