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Welch: We’ll Spend Ourselves Into Oblivion

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    Reason Magazine editor-in-chief Matt Welch on the fiscal cliff’s impact on the economy.

  • Duration 3:32
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Thank you -- call.

-- Treasury Secretary Timothy Geithner is warning that the -- if congress doesn't come together and avoid that fiscal cliff.

Deep spending cuts tax hikes at the kick -- next year the economy plunged back into recession.

Matt Welch editor in chief of reason magazine says guy he is right any joins us now thanks for being with -- mat entrapment -- how real is the threat that they just don't get this done or will they get it done because the consequences of not.

Get reaching compromise -- just to -- They're gonna get things done in the same way that they've done now for years even decades.

Which is that they will extend the debt ceiling most likely and we'll keep spending ourselves into oblivion in the long term right now we're at.

A 100% of GDP is now our debt.

We're spending more than 225 billion dollars in interest rates service at this point they're gonna figure that out because Republicans are unwilling to cut defense.

And Democrats are unwilling to stave off the entitlement time bomb and because of that they'll figure out a way.

To basically screw over the rest of us buy out coming up -- -- -- an agreement -- reach some kind of compromise both for the November election or after November election but before the new administration if there is one takes.

Takes hold that's a good question depends on where the pressure builds up if it becomes completely untenable.

For four markets and for people looking at.

Hey can we count on these middle class tax cuts of the bush tax rates.

Being extended or not then there might be pressure before the election -- I think it's more likely to happen after the election.

Is there really simply no defense cut that actually is -- -- -- the Republicans act like it's sacrosanct but I can't.

Culpable -- the must be something to to be cut -- of course there's something that can be cut I mean.

As senator Rand Paul said yesterday I think this is a direct quote.

Look just start -- crap because there's -- and that budget of course there is Republicans are are -- -- their own were track record when they were in power they're unwilling -- to cut defense but to cut government period so it's only a handful of Republicans like Tom Coburn.

Like Graham Paul who were actually talking about defense cuts and until they do they're not gonna cut to restaurant government here.

You say the federal deficit basically is encourage gap in which.

In which case the courage gap is even wider than ever has been before explain sure I mean -- -- we're paying forty cents and every dollar.

For in in borrowing costs the courage is in between.

Government's ability to say hey we're -- these -- and governments being honest and and saying this is how much those goodies cost so we're taking this down.

And taxing our children and grandchildren at this point because were unable to basically ask Americans to pay for the government they are receiving.

And unwilling to make actual cuts in -- government that has doubled in size in ten years.

And yet because of the -- -- interest rates now on government debt we actually spend less cash.

It's financing this huge debt that we are -- -- back of the Reagan deficit there in terms of net -- dollars from what I've read.

Did we make the mistake of 1937 over again do we start jawboning too early about worrying too much about debt but need to increase taxes that part of what's -- our recovery.

I'm I would -- people telling me back around 2006 -- hey look you know it's it's a different market now housing -- going to appreciate.

Forever -- -- you people saying you know dot com stocks in 2000.

Are just gonna keep going on forever we have this mentality now because we haven't faced sharp inflation or sharp interest rate hikes in such a long time that we forgotten that inflation was racking this country -- united 65 to 1980.

And so yes this'll keep going on and tell the moment -- -- stops but if if borrowing costs NATO goes up even one -- our point.

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