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Former White House Budget Director David Stockman argues if Congress keeps stalling on the debt ceiling and a solution to Taxmageddon our economy will...
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Tuchman David.
The the economy is recovering but at a snail's pace.
There are just about by every measurement is one of the worst recoveries post recession of any recession we've had in the last hundred years.
What is it that's holding back the recovery what are they doing different this time than what you did back in the 1980s.
Well what's holding back the recovery is thirty years' worth of high living.
Thirty years -- -- -- the worth of borrowing both in the public sector and in the household sector and in business.
They got the whole economy so deeply mired in debt that it finally buckled in September 208.
And how we're slowly trying to dig our way out it's going to take years to liquidate.
All of the access that was built into our economy because -- consumer was living beyond his -- But but you and I and our fellow citizens have -- have.
When the economy buckled in the fall of 20 wait that wasn't a sign.
That there was inadequate demand that was a sign that there had been -- demand that there had been he had demand.
You know that came out of the ATM machine is households borrowed against their equity Al wildly.
Or even -- the out of the huge -- debt that was created the business sector from a lot of excess LBOs and so forth.
So we responded.
To the signal the wrong way that keynesian -- the Washington establishment said.
Let's go out and have the government borrow because the private sector is going to be.
Working back and that was a big mistake -- -- now only made the problem worse because we have a sovereign debt crisis.
This coming right -- -- in December when we're out of debt ceiling.
All of these cans and have been kicked down the road are going to expire.
It is going to be a calamity.
Of historic proportion.
You were you were the first that I know while you told me -- of previous show.
I'm gonna guess it was around January and they just extended the payroll tax again and again that you were the first one to raise the red flag and say all these things.
Are going to get I saw the numbers 400 -- four billion dollar.
Tax increase on January 1.
Which most economists say will put is just about guarantee is a double dip recession -- -- Think it's certain I mean double dip recession is built in its baked into the cake.
As a result of the irresponsible.
Policy making that we've had for years now.
And you know it's not just the taxes all expire in.
You're gonna have to -- -- hitting because they couldn't actually face the issue down last summer make some hard choices they put me in this.
Kind of maybe automatic.
Spending cut across the board.
That now is going to hit so would you put all that together -- 750.
Billion at an annual run rate.
Because remember the fiscal year starts in October -- -- a full year basis the impact.
Is the equivalent of seven and fifty billion between spending and tax increases 5% of GDP it'll hit the economy like a ton of bricks.
And the answer will not be the easy answer of well let's just extend all this.
And get to -- -- -- I went up that's what they've been doing because it will take a massive increase in the debt ceiling which is already sixteen point four trillion.
And which last summer and god raised just barrel -- on the basis of this compromise that turned out to be total hoax.
So I think it's gonna be tough.
Very tough to find the votes for huge increases.
In the national debt improperly so.
And therefore they're going to be stuck in this triangle of raising the debt extending the tax.
Cuts.
Trying to do something about the -- -- And hoping that somehow they can juggle all these balls for another day but I don't think it's possible I think there -- you know -- -- is really got to meet the road.
Probably about Christmas Eve in the lame duck session via.
We have.
Consumer confidence reports are out and -- the if you go back to you take a look.
They -- consumer confidence took a big drop the last time we got into a debt ceiling argument I was -- little surprised because I don't think that many people work.
Watching Washington fights that closed -- out of kind of inside the beltway argument right but but they worry and the consumer confidence fell the -- -- the fear about the government can't pay its bills.
And remember -- I wasn't gonna get her Social Security check and everything else.
So we're going to have a -- to deal with again true so do they raised what's your advice -- they raise.
The debt ceiling a little in return for a real promise to cut somewhere else.
Well I think that's what's gonna happen unfortunately in assist another kick the can exercise they'll raise it just enough let's say to get by through April.
So that allegedly the new president whoever he may be if he hasn't demanded a recount by then when he sees how bad the problem this.
Has time to put a plan together -- but then will be at the same point in April.
Where the government's gonna shut down were out of borrowing capacity we can't pay the bills allegedly.
And they'll have another crisis.
Sort of moment.
In which it'll be kicked down the road again for a few months and that's why our economy is going to be in a permanent.
State of recession I think.
After 2013.
Starts because the government is non functional -- he doesn't have the capacity.
To put its arms around this problem and so it's going to be a few months that -- time.
Crisis after crisis it will undermine consumer confidence undermined investor confidence.
And create.
You know self fueling downward momentum this is this is you know unfortunately.
Heading our way come into our neighborhood.
