US election noise obscures approaching fiscal precipice

Some excerpts from a very lengthy, but excellent Reuters article "Insight: Lessons for U.S. from Canada's "Basket Case" Moment":

By Paul Johnson:It's easy to get lost in all the gloom and doom of the approaching "fiscal cliff" these days with constant reminders all around us. There's even a counter on the MarketWatch.com site that tolls the days, hours, minutes and seconds as we irretrievably march closer and closer to the precipice.

I’m normally a skeptic about the power of ideas to change politics—I normally think of it all coming down to a hard-boiled clash of power and interests—but if you want a good example of Keynes’ theory that ideas matter a great deal, I think you can’t look much further than the current misguided global obsession with fiscal retrenchment.

(cc photo by Jeff Kubina)

Talks on the fiscal cliff have resumed, but as of this writing there is not yet an agreement. The current negotiations focus on the income threshold under which tax cuts should be extended, among other topics. As we have noted, the sides seem as far apart as ever, and as Goldman notes, while it is still possible that an agreement will be reached by year end, a retroactive deal in January looks more likely.

WASHINGTON — Senate leaders rushed to assemble a last-ditch agreement to avoid middle-class tax increases and possibly delay steep spending cuts in an urgent attempt to find common ground after weeks of post-election gridlock. The focus turned to the Senate after President Barack Obama held an hour-long, high-stakes meeting with the leaders of Congress on Friday afternoon to try to avoid the automatic austerity measures that begin to take effect Jan. 1 that threaten to send the economy sputtering into another recession.

Following the U.S.

Following the U.S.