Jump to content

Econ Disads Ankurstyle

Recommended Posts

If you are asking me for financial advice, I am not qualified. I follow the economy, yes, but am I qualified enough to advise? No. I am not a financial advisor and have no plans to be. But speaking personally, right now, I would go the way most people are going - risk averse. There is a lot of instability that I am not comfortable with. I would wait to see how the fall out of this is affecting the other countries involved before I would consider buying into the risk.

Edited by Ankur

Share this post

Link to post
Share on other sites

Here are some articles with snippets that might help you make a disad out of the current crisis.


Article 1 does a decent job in the underlined sections illustrating why the debt collapse in Greece is relevant to the United States. In comparing the debt levels of Spain to the US, if Spain is in trouble despite having a much better handle on its debt, then where does that leave the US? This could be used in a US-debt based scenario.


Article 2 talks about how the common currency, the Euro, is hampering efforts to right the ship. Ordinarily, a country can revalue its currency or change its own interest rates (as was done during the Asian crisis in 1997). Since Greece shares the Euro with the rest of the EU, it cannot do this.


Article 3 talks about the non-debt impact of Euro-zone collpase on the US. A pullback in the US recovery from recession leads to lower tax revenue and higher deficits and total debt. This then provides more ammunition for a debt-based scenario. It also says that the EU bailout may not have resolved worries, indicting the SQ methods to deal with the crisis.






Greece's debt crisis could spread across Europe



By Neil Irwin

Washington Post Staff Writer

Friday, May 7, 2010; A01


MADRID -- A third straight day of decline in world financial markets on Thursday was vivid evidence of a scary proposition: That the fiscal crisis that began in Greece months ago is spreading across Europe like a virus, causing growing doubt even about the fates of nations with far more manageable levels of government debt.


It is called the contagion effect, economists' metaphor for the rapid and hard-to-predict spread of a financial crisis, and it's driven by the fragility of investors' perceptions. Contagion is a function of vicious cycles in which confidence in a country's ability to repay its debts falls. If investors lose piles of money on the debt of one country, they assume that owning the debts of other countries with similar finances might cause them to lose even more. So they sell their investment in the second country, which in turn must pay higher and higher interest rates to get any loans, which adds to its debt and creates a fiscal death spiral that can well move on to the next country.


Spain is in the path of the storm and at the mercy of global investors, who are operating under the twin pressures of fear and greed. The country has less debt relative to the size of its economy compared with the United States or Britain, but contagion can threaten even countries that have managed their government debt responsibly if investors change their views about the country's future deficits or ability to handle debt.


The odds of a full-blown sovereign debt crisis have risen significantly over the past two weeks and especially after the market turmoil Thursday, such that Europe in 2010 looks increasingly like East Asia in 1997 and 1998, when a currency devaluation in Thailand sparked a broad crisis in South Korea, Indonesia and elsewhere.


Once a panic starts and contagion is spreading, it often takes dramatic government action to reverse the tide -- including external bailouts and steps to address the underlying cause of the crisis that are more aggressive than those needed in a non-panic situation.


In the case of Asia in the late 1990s, it took a wall of money from the International Monetary Fund and the United States to arrest the series of crises, combined with painful austerity measures in the nations involved. Banking panics have similar dynamics, and during the 2008-2009 financial crisis, the U.S. government stepped forward with the $700 billion Troubled Assets Relief Program, a series of unconventional lending efforts from the Federal Reserve, and stress tests for major banks that required many of them to raise more private capital.


One lesson that could apply to the current situation is that a large-scale intervention from unaffected countries or the European Central Bank could ultimately be needed. Another is that government officials in the affected countries might need to promise more aggressive budget cuts than they would have if the situation hadn't become a market confidence game.


"You have to overdo the fiscal consolidation measures to convince people that you are serious," said Rodolfo G. Campos, an economist at IESE Business School in Madrid.


On Thursday, Jean-Claude Trichet, head of the ECB, said there was no discussion at a bank policymaking meeting about buying countries' debt -- a decision that would mean essentially printing money to fund borrowing by Greece and other at-risk countries.


That drove up borrowing rates for Greece, Spain, Portugal and other nations viewed as in financial trouble, and it drove the price of the euro down as low as $1.25 -- down from $1.27 Wednesday and $1.35 three weeks ago -- as investors betting on continuing economic turmoil in Europe shifted their money to dollars.


European stock markets fell, with the British market off 1.5 percent, France's down 2.2 percent, Spain's down 3 percent and Italy's off 4.3 percent. The Spanish stock market has dropped 11 percent since Monday.


Analysts had hoped the ECB might use its essentially limitless ability to create money to stanch the crisis, though doing so could hurt the long-term credibility of the central bank as an inflation fighter that does not yield to politics.


"Measures that damage the fundamental principles of the currency union and the trust of the people would be mistaken and more expensive for the economy in the longer term," said Axel Weber, a member of the bank's policymaking council, according to Bloomberg News.


Still, Trichet did not explicitly rule out buying countries' debt, saying only that the concept was not discussed. This suggests that the idea is not out of the question if the situation becomes worse.


It did grow significantly worse since Trichet made his comments, with the European market sell-off followed by an even more dramatic decline -- and partial rebound -- in the United States.


The herd selling seen on both sides of the Atlantic is typical of financial contagion and shows how these crises feed on investor psychology, not just economic fundamentals.


In the case of Spain, the country's public debt only adds up to about 70 percent of its annual gross domestic product, compared with 84 percent in Germany, 82 percent in Britain, and 94 percent in the United States.


But with 20 percent unemployment and a generous set of social welfare benefits, Spain is running a higher annual budget deficit than those other countries -- 11 percent, compared with 2.3 percent in Germany. So to keep its debt from rising significantly, Spanish leaders need to rein in spending or raise taxes to reduce annual deficits.


Normally, they would have years in which to make that transition; after all, the debt wasn't going to explode overnight.


But since it became clear to global investors that Greece was more indebted than they realized and that the country may not be able to pay back what it owes, buyers of government bonds have been taking a hard look at countries with debt problems of their own. And they have focused on Spain, Portugal, Italy and Ireland.


Thus, while Spain may have more in common with Greece's sunny weather and nice beaches than its level of indebtedness, markets have turned on the nation.


"If you look like somebody who is sick, you get sick," Campos said.


Once borrowing rates rise -- Spanish 10-year bond yields have risen to 4.2 percent Thursday from 3.8 percent a month ago, though the shift in Greece was far more dramatic -- a vicious cycle is underway. With the price to roll over maturing debt higher, it becomes that much harder to trim the budget deficit.


The contrasts -- and increasingly, comparisons -- between Spain and Greece have become a fact of life for Spanish politicians and, increasingly, ordinary citizens.


On the streets of Madrid, citizens take umbrage at being compared to the Greeks, whose problems were caused by free spending and hiding their degree of indebtedness.


"No, Spain is not like Greece. Our mentality is completely different. We have a different mentality about working and developing things," said Juan Manuel Heranz, 35, a maintenance technician at the airport.


"We're not Greece," said Alexandra González, 28. Her mother, Concepción Lima, walking with her in downtown Madrid, chimed in: "But if we continue on like this, we will be."








Greek debt crisis: how did the Greek economy get into such a mess?

The financial chaos in Greece shows the dangers of relying on loans



Dan Roberts

guardian.co.uk, Thursday 6 May 2010 20.32 BST


Like many countries, the Greek government relies on borrowed money to balance its books. The recession has made this harder to achieve, because tax revenues are falling just as welfare payments start to rise. It doesn't help that, in Greece, tax evasion is commonplace and pension rights are unusually generous – but, to be fair, using public spending to even out the bumps of the global downturn is what most large developed economies are trying to do right now.


Unfortunately, investors have lost confidence in the Greek government's ability to walk this tightrope – so they have been demanding ever higher rates of interest to compensate for the risk that they might not get their money back. The higher its borrowing costs, the harder it is for the Greek economy to grow itself out of trouble.


Events began to spiral out of control when credit rating agencies downgraded Greek government debt to "junk" status, pushing the cost of borrowing so high that the country effectively had its international overdraft facility cancelled overnight. Fearing bankruptcy, Greece had to turn instead to the European Union and the International Monetary Fund (IMF) – the world's lender of last resort – for up to 120bn euros of replacement lending.


But political opposition in Germany and IMF orthodoxy in Washington demands that the rescue package comes with strings attached: a tough series of public sector cuts designed to reassure international investors that the government can become creditworthy again.


The snag is, this traditional market response is complicated by Greece's membership of the single-currency euro club. This means it cannot stimulate growth by devaluing its currency, and nor can it cut interest rates any further, which would help, because these are decided by the European Central Bank in Frankfurt. Instead, the public sector cuts are almost certain to deepen the Greek recession, reducing tax revenues and making it even harder to service the debts in future.


What many investors fear is that the only way out of this vicious circle is for Greece to walk away from its existing debts and try to go it alone – potentially triggering a wave of similar defaults in other indebted European countries, and jeopardising the euro itself. In the meantime, what many Greeks fear is that the IMF option is just going to prolong the agony – and drive the country to the brink of political as well as economic collapse.








Click here to find out more!

Your request is being processed...






This is the print preview: Back to normal view »





Greek Debt Crisis: Fears Intensify That Crisis Will Hit U.S.



The Huffington Post

CHRISTOPHER S. RUGABER | 05/ 7/10 06:50 PM | AP


WASHINGTON — The stock market's slump this week reflects a widespread concern among many economists that the European debt crisis could slow the U.S. economic recovery.


Few expect the problems in Greece and other European nations such as Portugal and Spain to drag the United States back into recession. But the crisis has increased the uncertainty facing U.S. business leaders.


"The perception of risk has just changed in a major way," said Mark Vitner, senior economist at Wells Fargo Securities. "Business leaders now think there is more risk in the world economy than they did 30 days ago."


A weaker European economy could reduce demand for U.S. exports, as European consumers cut back their purchases of autos, appliances and other goods.


And as the euro declines in value compared to the dollar, U.S. goods become more expensive in the 16 countries that use the European currency.


"There is some negative effect on the U.S. economy, no doubt," said Michael Mussa, senior fellow at the Peterson Institute for International Economics.


Still, Mussa said the impact in Europe will likely be greater. While Greece's economy isn't that large, many major European banks hold billions of dollars of its debt. Should Greece default on or restructure its debt, which many economists expect, those banks – still recovering from the 2008-2009 financial crisis – may cut back lending to conserve cash.


That's even more likely if other highly indebted nations, such as Ireland, Spain, or Portugal also run into problems financing their deficits. Tighter credit would slow Europe's economy.


And efforts by Greece and the others to reduce their deficits, through tax increases and spending cuts, could also worsen their economies.

Story continues below


The growing European debt crisis has sent stock markets on a wild ride. The Dow Jones industrial average fell 140 points, or 1.3 percent on Friday. That followed the 1,000 point plunge Thursday afternoon, before the markets recovered to close with a 348-point loss.


Vitner said he worries that Europe's debt crisis could tip the 16 countries that use the euro back into a recession. The euro area comprises the second-largest economy in the world, after the United States. And as in the United States, Europe's economy has been slowly recovering from recession.


Economists say the situation is reminiscent of the collapse of Lehman Brothers in the fall of 2008. The resulting chaos caused banks to clamp down on lending. Nervous consumers stopped spending. Companies facing plummeting sales cut back on production and laid off millions of workers.


Some economists raise the prospect of a similar cycle in Europe.


"Europe feels like we did after Lehman Brothers," said Barry Eichengreen, an economics professor at the University of California, Berkeley. "No one has seen this kind of thing before ... and they are questioning the competence of their leaders to deal with it, and rightly so."


European consumers may soon cut back on purchases of new cars or appliances, Eichengreen said, "because they don't know what's next."


President Barack Obama's goal of doubling U.S. exports over the next five years is unlikely to be reached under these conditions, economists say.


Obama's plan "is completely off the table if the dollar remains strong and one of the leading economic areas enters a deep recession," said Eswar Prasad, an economics professor at Cornell University.


A $140 billion rescue package agreed to by the International Monetary Fund and European leaders has failed to resolve concerns in the financial markets that Greece might default on its debts.


The concerns are likely amplified, economists said, because memories of the 2008 crisis are still fresh. Before the recession, many experts, including Federal Reserve Chairman Ben Bernanke, said the fallout from the subprime housing bust wouldn't spill over to the broader economy.


"Remember, people thought the subprime mortgage crisis would go away, and it didn't," said Sung Won Sohn, an economics professor at the Smith School of Business at California State University.




AP Economics Writer Martin Crutsinger contributed to this report.

  • Upvote 1

Share this post

Link to post
Share on other sites

If you do a quick google search, you will come up with hundreds of articles/blogs for the following.


Today, gold hit record highs as a result of the Greece debt crisis. Investors are dumping the debt of high-debt/high-risk countries and sinking their money into gold as a refuge from risk. Gold is up 20% since February. Since last year's March 09 bottoming, its up almost 40%. This raises the prospect of a gold bubble. If the current crisis is resolved quickly and the threatening spread of debt defaults is halted by the EU, US and Canadian bailouts, then gold prices could collapse. There are a multitude of impacts possible from that including hyperinflationary scenarios and more Wall St collapses (they are heavily investing in gold - widespread losses could result in liquidity problems again, insert Bear Sterns etc).


If the aff claims to significantly benefit the economy quickly/immediately, that can be the link to collapsing gold prices. By helping the economy, people will jump out of gold into American debt, yields will go down and the price of gold could collapse. An aff response, on the other hand could be that the better America does, the worse Europe will do. That will ensure wider debt problems there and though American debt would be in demand, the lower demand in European debt would soften the blow to the price of gold.


Interesting opportunities to craft VERY VERY specific disads.

Edited by Ankur
  • Upvote 1

Share this post

Link to post
Share on other sites

So some of this is interesting if you want to go in a different direction with China instead of Greece, but still use Greece as a uniqueness/threshold argument. I would transcribe the Q&A but I have finals to study for. You should probably do this soon because yahoo doesnt keep these interview up all that long. In fact, if someone wanted to post the transcript, that would be awesome.




Forget Greece, China's "Red Flags" Are a Bigger Problem

Posted May 18, 2010 07:30am EDT by Tech Ticker in Investing, Commodities, China


The world is intensely focused on Europe these days but don't forget about China, say Wall St. Cheat Sheet co-founders Damien and Derek Hoffman.


A number of "red flags" have emerged in China recently, the Brothers Hoffman tell Henry in the accompanying clip, including:


* -- Rising inflation and a brewing real estate bubble: Chinese real estate rose 12.8% in the past year, the highest since 2005.

* -- Government efforts to quell said bubble: Money supply has been shrinking in China, which Damien Hoffman says is a sign the government "concerned growth is overheated."

* -- Falling exports and rising imports: Amid a slowdown in industrial manufacturing, China reported a trade deficit in March for the first time since 2004. "It looks like the Chinese might be learning some of our bad habits," Damien says.


Because the global market are "so fragile," right now, the Hoffman Brothers worry what will happen if more investors get a sense the world's "engine of growth" is starting to sputter.


"If China has [more] problems in upcoming data points, we think smart money hedge funds are going to sell first and ask questions later," Damien says.


Given the obvious concerns about Europe and the "under the radar" issues in China, the Hoffman Brothers are big believers in gold right now. Even if gold is a bubble, as Henry suggests, it could have much further to inflate if confidence in paper currencies continues to erode, they say.


Click on the player to embed and share the video.

Share this post

Link to post
Share on other sites

I am not entirely sure I would add to any of that, per se... at least as it pertains to educating debaters. If a debater wants to learn economics, this is not the place to do it. There are textbooks and courses for that. Understanding economic fundamentals is one thing, but having an application for it in terms of debate is a different thing entirely. I take a completely different approach with this thread. I am not here to regurgitate a textbook for debaters. I am giving debaters an analysis of economic events as they happen, and in the process of helping them develop their arguments, show how an in-depth understanding of fundamental principles of the economics (such how supply-demand works in the resource-linked economics disad) can make the argument very specific, strategic, expansive to encompass a wide array of impacts, and elusive to responses by the other team.


For example, everyone generally tends to understand supply-demand vs price. Supply goes up, prices fall. Demand goes up, prices increase. But debt works the opposite. Yields go up when no one demands debt. Its one of those things that if you sat around and pondered for a while, it makes perfect sense. But who has time to sit around and wonder about it? My explaining it saves debaters time. I come up with lots of random, creative ways to write disads because I follow the global economy, not necessarily economics.

Share this post

Link to post
Share on other sites

Here are some links to some interesting articles.


Article 1: Interesting (and humorous) view of the idea that you can accumulate more debt to get out of debt. Specific to the Greece crisis, but the author takes a few backhanded swings at the US; especially in the closing with a chart of % debt compared to GDP vs time. Note the last time that the chart spiked.


Article 2: Short blurb which you should backtrack on the Financial Times website... but it discusses how China is considering dropping its holdings of the Euro because of Greece's crisis. If China is displeased with the debt problems of Greece and dumped the Euro which is linked to 16 European countries, what does that say about their demand for the dollar? Doesnt bode well.... then again, it might bode perfectly well because China would be flush with cash and what else would they invest it in but US dollars?

Edited by Ankur

Share this post

Link to post
Share on other sites
This post of mine isnt disad related, but it is an interesting look on economics and strategic business decisionmaking for those who are interested.

Share this post

Link to post
Share on other sites

So I was thinking of something interesting as a fun topic specific disad for the upcoming year (and I have no clue if others have/will write this).


A post-war bust often originates not only from a production slow down in the military-related research and manufacturing centers, but also from the fact that soldiers return home and re-enter the labor force. In many economic situations, much of the influx can be absorbed, however, the current labor market cannot absorb thousands upon thousands of returning soldiers.


Currently, unemployment is the most significant factor causing market pessimism and may be the primary risk for a double dip recession.


Might be worth researching for evidence which I am sure is out there.

Share this post

Link to post
Share on other sites

At the very least you could use it as a double bind position. If they link out of your "Troop Shift to Afghanistan Disad" with "We send them home" or "Normal means is to send them home."


My humble guess is more literature suggests that at this current crossroads in history that Afghanistan. The one main hang up with this is that the pledge to reduce troops in Afghanistan would seem hege against such shifts....Although that doesn't mean it won't happen--it just means it **might** look bad if it happens (ie its seen as hollow)

Share this post

Link to post
Share on other sites

Well, the server crash lost some of the articles that I posted... but here's another one that might lead you towards developing an econ scenario.


What Will Cause the Next Recession?

by Seth Fiegerman

Thursday, January 13, 2011



It's been a year and a half since the recession officially ended, and many signs point to a slow but continued recovery, at least for the near future.


Consumers started spending again at the end of 2010, with sectors like the retail and auto industry experiencing particularly strong growth after a long period of struggle. Indeed, businesses and firms around the country have reported higher demand for their services and expect to hire more workers in the first quarter of this year.


Even the housing market, which has been in shambles since 2007, has shown promise, as the number of foreclosed homes dropped to the lowest amount in two years and the rate of mortgage delinquencies continues to decline.


But for every sign that the economy is improving, there is another hinting that the tough times are not over yet.


Sure, businesses are making money again and could stand to hire again after a long period of layoffs, but for months now many of these companies have sat on record amounts of cash and chosen not to bring on new employees. As a result, the unemployment level remains frozen near 10% and some predict it may get even higher this year. And yes, the housing market may be sorting itself out, but by some estimates, there are still 10 million or more homes in danger of foreclosure, which means we still may not have seen the worst of the housing crash.


With all these competing signals, it can be difficult to decipher whether the economy is on its way out of a recession or on its way back into one. So we surveyed a dozen leading economists to get their opinions on what, if anything, could lead to another recession down the road, whether in six months or six years. Here is what the experts are watching out for.


The Housing Market

If previous recessions are any indication, the housing market is the most likely to sink the economy.


"Historically, the main risk to the economy has come from the housing sector. With two exceptions, it's led us into all the recessions we've ever had," said Edward E. Leamer, director of the Anderson Forecast at the University of California, Los Angeles, which provides quarterly predictions about the direction of the U.S. economy.


Leamer personally believes that any threat posed by the housing market is still a long way off, but several other economists believe the threat is more immediate.


"Home prices are starting to sag again under the crushing weight of foreclosed properties," said Sal Guatieri, senior economist and vice president at BMO Capital Markets, an economic research group. "A sharp drop in prices would undermine household wealth and confidence, and reverse the recent pickup in consumer spending. It would also fuel the vicious cycle of delinquencies and tight credit standards."


Moreover, if 10 million more homes are still to be foreclosed on, this could hurt state and local economies, which are already on thin ice.


"Foreclosures will drive down values, which in turn will drive down local tax revenues (real estate taxes) affecting local government services," said Mark Lieberman, a private economic consultant and former senior economist for Fox Business Network. "State and local governments will have to shrink payrolls" as a result.


Oil Prices

While the housing market may be the leading contender for triggering the next recession, it's far from the only risk the economy faces. Several economists also expressed concerns that rising oil prices could stall our road to recovery.


"In the short run, the risk is from the oil sector. If oil prices top $125 [per barrel] and stay there for about three months, then the economy will have a mild recession," said Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University. "Consumer spending will take a hit, followed by the capital spending plans of businesses, which will be cut back, leading to a recession."


Others place the bar for trouble even lower. Bernard Baumohl , the chief global economist at the Economic Outlook Group and author of The Secrets of Economic Indicators, says if oil tops $120 a barrel for two months or longer, it will "cause serious problems for our economy." Likewise, Baumohl says gas prices exceeding $4.50 a gallon would be an additional red flag for the economy.


So what are the odds of this actually happening?


At the moment, Baumohl's group predicts a 90% chance that oil prices will shoot above $100 a barrel sometime in 2011. The real question is how much higher they will go after that.


National Debt

"If you ask what the most likely source of a recession is in the next two or three years, it's the growing indebtedness of the United States," said Leamer, the UCLA economist.


The national debt recently topped $14 trillion and is on pace to hit the government-imposed ceiling of $14.29 trillion by March of this year. Congress is currently gearing up for a battle over raising the debt ceiling, but even if they do, it won't solve the basic problem: The U.S. is in over its head in debt and owes hundreds of billions to foreign creditors.


"The most pertinent threat to our economy is probably the sovereign debt horror show playing at a theater near you in the United States," said Carl Leahey, senior managing director and global economist at Decision Economics, a financial consulting firm. "This year, we could see a loss of investor confidence, a spike in interest rates and a general rolling over in the economy" as a result of the rising debt.


Economists point to the recent debt crises in European countries like Greece and Ireland as a sign of what's to come if the U.S. government does not get its house in order.


"The ongoing European debt crisis would provide a small window to what the U.S. could potentially face," said Dian Chu, a chartered economist who runs the financial blog Economic Forecasts and Opinions. If the debt crisis did blow up, he says, "The U.S. government would most likely resort to austerity measures, and/or raise taxes, which could really plunge the economy into a recession or even a depression."


The Bond Market

If there were a debt crisis, our economists say it would likely wreak havoc on the bond market, as the Treasury struggles to finance debt and raises interest rates on Treasury bonds.


But even if debt concerns are overblown, some economists believe there is still another risk to the bond market, and to the economy as a whole: At the end of 2010, the Federal Reserve decided to buy another $600 billion worth of bonds, in a second stimulus known as quantitative easing (or QE2) intended to provide a boost to the economy.


Yet, perhaps counter-intuitively, the Fed's attempt to jumpstart the economy could actually end up destabilizing it.


"If the economy is showing fresh vigor, as it has in recent months, and the Federal Reserve insists on pumping more reserves into the economy, then it could lead to a potential crisis in the bond market, where investors begin to worry about future inflation risks," said Baumohl of the Economic Outlook Group. This worry could potentially drive many investors to flee from the bond market.


"This stampede to get out of bonds could cause yields on longer term securities to rise very quickly, which could hut the economy, and certainly hurt real estate because of its impact on mortgage rates. So that's one real scenario we need to keep an eye on in the next six months," Baumohl said.


Commercial Banks

It may be hard to believe, given all the money that has been pumped into the financial sector in the form of bailouts, but the banking industry as a whole still faces big problems with their balance sheets.


"As the economy starts to recover and the government begins to tighten monetary policy a little bit, I'm not sure there's enough capital in the financial sector at the moment to support robust growth," said Douglas W. Diamond, an economist at the University of Chicago Booth School of Business.


Diamond is particularly concerned that smaller banks may not have enough resources to stay solvent, let alone to do much lending to businesses and homeowners.


"I think we could see a continuing number of failures in intermediate and smaller size banks," Diamond said. "This is not a disaster because most of corporate America has strong balance sheets at the moment and could acquire the firms that don't. But if there turns out to be solvency issues in the remaining firms, that's definitely an issue."


North Korea and Iran

Even if everything in the U.S. economy runs smoothly, there's always a wild card threat, and right now that means North Korea or Iran.


According to Baumohl, any military action between North and South Korea could scare the global markets and hurt our economy as a result. Similarly, if the U.S. decides to take military action against Iran in the coming years, it could impact oil prices and negatively impact the world economy and our own.

Share this post

Link to post
Share on other sites

What link turn arguments do you think will be best against the econ DA on next years topic, assuming the link scenario is massive government spending leads to the perception that the US will default on its loans?

Share this post

Link to post
Share on other sites

Well, I suppose a decent argument would be that demand for currency and debt is somewhat zero-sum. Investors pretty much only speculate on a handful of currencies. So, someone's loss is another's gain. So as long as Europe keeps spiraling down the porcelain bowl, and as long as investors keep fleeing the Euro as a result of their increasing discomfort with the growing idea of the Euro's eventual demise, people will flee the Euro and back other currencies - that includes the US dollar. This means people will keep buying our debt and as long as they keep buying our debt, we are okay. The problem is when China and the rest of the world say "okay, we've had enough...."


But what if we function in a world in which Europe will stablize the Euro? If people get over their fears of a Euro collapse, then the dollar regains the spotlight as the troubled currency, US the spotlight as the troubled economy, and our debt as the oh-my-god-how-did-we-ever-let-it-get-so-bad AHA! moment.


The nice thing about econ is that you can always take it one step further and answer something. Its less a question of how far you can go and more a question of how well you can rationalize your position. Its a real debater's dream and a bad debater's nightmare.

  • Upvote 1

Share this post

Link to post
Share on other sites

So today the S&P cut the debt rating of the US from stable to negative. This means that there is a stronger chance that within 2 years the debt rating could be slashed from triple A to something lower.


One of the biggest things going for America was that regardless of how deep in debt we got, the world never considered the debt to be risky. Now, its changing. People are taking notice and they are showing their concern publicly.


This news is a GREAT internal for spending disads and economy disads as a whole!!!!

  • Upvote 1

Share this post

Link to post
Share on other sites

In my opinion the most credible story is one of perceptions, which might be less linearly responsive and more prone to a sudden snap. For instance, according to Bloomberg the EU just told Obama at the G8 that they want "some sort of sign that Obama is serious about cutting long-term deficits" and "credible steps towards deficit reduction", and China has been gradually reducing new treasury purchases for the same reason. Even if plan itself doesn't cost hundreds of billions, signalling a commitment to an expensive space program will leave little doubt that the U.S. has no intention of reigning in spending (the alternatives are default or having the Fed engage in larger scale open market operations where they monetize the debt, leading to inflation and killing the value of existing bonds much like default would). What has been a slow and orderly exit from treasuries could become a panic rush to the door. Greece has illustrated the almost paradoxical nature of debt servicing: as the market questions your ability to repay, borrowing rates go up which makes it harder to service your debt and that spiral... so you just have to win the spark of a crisis.


Still, unless affs are unreasonably expensive (building a Death Star) I have reservations about this DA. $14 Trillion debt, and aff plan is the straw that breaks the camel's back? The announcement of QE2 ($600B) barely moved inflation projections meaningfully. Also, a lot of the possible causes of recession from the Fiegerman article are interconnected, and are almost hedged against each other: oil prices respond to inflation expectations, but both are highly correlated to growth expectations (2008 recession tanked oil prices $130 -> $40). If it were certain that "$120+ oil for X months causes recession", those prices should never materialize because people would short oil at or near that price. A similar story plays out in US bonds:


So today the S&P cut the debt rating of the US from stable to negative. This means that there is a stronger chance that within 2 years the debt rating could be slashed from triple A to something lower.



One of the biggest things going for America was that regardless of how deep in debt we got, the world never considered the debt to be risky. Now, its changing. People are taking notice and they are showing their concern publicly.



This news is a GREAT internal for spending disads and economy disads as a whole!!!!


US Debt is still considered the closest thing to a risk-free asset, and benefits greatest during "flights to safety". If rising yields hurt the economy, that rise could be offset by treasuries' role as a substitute for riskier assets (stocks, commodities, corporate bonds). Analysts argued that a global recession would decrease demand for US debt, but the opposite was true.


Even if you win full risk of recession I don't think you automatically access recession = global depression = Armageddon. The recent recession was pretty scary but we came out intact. Many argue we're better positioned to take on the next recession because the Fed has established a reputation for buying any distressed asset in sight, mitigating potential deflationary spirals as seen during the Great Depression. There's offensive arguments available like recessions good b/c they reallocate resources more efficiently to increase longer-term growth, or that recessions are inevitable but trying to fend them off just delays the inevitable and risks depression (distinct from de-dev "collapse inevitable sooner is better" args).


Of course, if you out-prep, out-jargon and out-debate your opponents with 8 minutes econ DA in the 2nc you can definitely win on this, but the same is true for any number of other strategies. With K's you can do all the same but not have to waste half your speech on the questionable uniqueness scenario, or fleshing out 8 different econ links b/c none of them could stand alone.

Share this post

Link to post
Share on other sites

Found a reasonably decent summary of the current debt crisis in Greece, in the event that you are considering creating a disadvantage whereby US action causes default or some spiraling economic problem. This is less 'evidence' and more a quick run down of what is going on so you can do a better targeted literature search for the right evidence. Hope it helps you figure out some details.


An Idiots Guide to the Greek Debt Crisis Gregory J. Krieg, ABC News. http://news.yahoo.com/idiot-guide-greek-debt-crisis-163212268.html November 7, 2011


The European Union is an economic and political institution forged over decades, sealed with a treaty in 1993 but only, truly made real in 2002, when most of the current member states dropped their currency in favor of the common euro. For centuries a breeding ground for war and imperialism, Western Europe had bound itself together in peace and apparent prosperity, with a supranational government all its own to be quartered in Brussels. Its anthem: “Ode to Joy.â€


Things have changed. While most major banks remain multinational (with interests around the world) their errors — some would say crimes — have brought renewed focus on the sovereign state. Today, with Greece on the edge of default, the euro zone nations have a new catchphrase: “Exposure.†As in, how much “exposure†do our banks have to the bad debt held by yours.


It’s enough to make one’s head take an “Exorcistâ€-style lap around the neck. But here, below, is a simple guide to this latest and most important chapter in the crisis. The results in Greece will likely determine, and certainly predict, the fate of the European Union. This is the least you should know.


Why is Greece in debt?


Like any state (or person, for that matter) it spent more money than it took in. Traditionally, but especially after switching over to the euro, the Greek government paid out huge amounts of cash it simply did not have. To compound this, the retirement age there is low by modern Western standards, and benefits are generous. Public sector employees are well paid.


Sounds good, right?


The problem is that Greece is also infamous for mass tax evasion. That means severely limited revenue. So when the money ran out, Athens turned to European banks for loans. Soon, the government was borrowing billions and those debts, like subprime mortgages in the United States, were often repackaged and sold off around the Continent. Everyone, especially banks in France and Germany, wanted a piece. Now they have it.


Why does Europe — indeed, the world — care so much about Greece’s debts?


One of the perceived perks when Europe got together on a single currency (Greeks, for instance, gave up the drachma for the euro) was that a strong Europe could prop up an individual state in a time of need. But what’s happened is that Europe itself has become too weak, in the aftermath of the global financial meltdown, to bite the bullet on a country like Greece. A default would shatter otherwise monetarily strong countries like Germany. The Germans, like the Americans, would be left with a host of “too big to fail†banks ready to do just that.


What kind of deal has the EU offered the Greeks?


There have been a few already, and certainly a handful more are in the works, but it boils down to this: European banks will take 50 cents for every dollar owed to them by the Greek government. In exchange, Greece must impose what many have described as a crushing austerity. That means no more early retirement, reduced pay for public workers (the ones who manage to keep their jobs), large-scale cuts to social programs, and a staggered repayment of the reduced debt.


Why did Prime Minister Papandreou originally call for a referendum?


As you might imagine, “austerity†is a dirty word in large parts of Greece. Many people there believe the country is being unfairly affected by reckless spending and subsequent cutbacks by the government.


Papandreou, one assumes, didn’t want to be the guy everyone* blamed for taking the EU deal. So he proposed a vote. A referendum. This seriously worried the rest of Europe, as stock markets cratered on fears that Greek voters would spike the bailout. The PM’s decision was scrapped after foreign leaders (and some influential Greek politicians) put pressure on his governing coalition, which might still break any minute now.


*There have been riots in Athens and across the country. Anti-austerity protesters were further radicalized when three of their own were killed during a clash with police last year.


Why are the Greeks so reluctant to take the bailout?


Pete Morici, a professor at the Smith School of Business at the University of Maryland and former chief economist at the U.S. International Trade Commission, explained it rather well in his latest column:


“[in exchange for] aid from richer EU governments, Greeks must accept draconian austerity measures,†he wrote. “These would further drive up unemployment, and shrink Greece’s economy and tax base at an alarming pace, placing in jeopardy eventual repayment of Athens’ remaining debt. … As currently constituted, a single currency may serve the One Europe designs of France and Germany, but make Greece and the other Mediterranean states nothing more than the victims of a northern conquest.â€


Greeks who oppose the deal — and even many who support it only as a means of staying a member of the EU — don’t want to end up like an American post-grad, forever in debt to the banks that provided college loans.


What would happen if Greece defaulted on its foreign debt?


The first thing you would notice is a massive drop in stock markets from the U.S. to Japan, and all across Europe. It is extremely important to understand that what happens in Greece will be seen as the way forward for a number of other countries — Spain, Portugal and Ireland, to name a few. Some believe Italy could follow suit. Default by the Greeks would likely mean other sovereign states to follow.


Strictly within Greece, it wouldn’t be as bad. Relatively speaking. They would drop the euro and return to the drachma, which would, in turn, be severely devalued. Not great news for Greek tourists planning on a trip abroad anytime soon, but very good news for exports, which would become extremely cheap, like those coming out of China or other, smaller developing markets.


Outside of Greece, it would be a big mess. German banks, and maybe French too, would need massive bailouts. The prospect of those defaults in other debt-ridden countries (see above) could cause a run on the banks. Even more money would leave the market. And when money leaves the market, demand drops. When demand drops, economies crater.


What would happens if Greece accepts the EU deal?


Now that Greek PM George Papandreou has called off the referendum on the deal — a vote would have been very close as polls indicate the Greeks are very closely split on the EU proposal — this is the most likely outcome. Greece would see its debt cut in half and be made to enforce the tough austerity discussed before. Expect riots. Banks around Europe would take a “haircut†but remain, for the moment at least, solvent.


Greece would pay over time, but most of the money right now would come out of a fund sponsored by the stronger state economies from Europe and the IMF. In short, everyone would relax, safe in the knowledge that the global financial system we’ve all come to know and, well — the system we’ve come to know would keep on spinning for at least another day

  • Upvote 1

Share this post

Link to post
Share on other sites

Figured you could use a piece of evidence saying a new recession is inevitable...




Isidore 2012 (chris. CNN Money. "A new recession seems inevitable."

February 24, 2012. Online.



While most economists have stopped worrying that the U.S. will fall

into a double-dip recession, one influential economist maintains his

position that the nation won't be able to avoid a new downturn.


Lakshman Achuthan, co-founder of the Economic Cycle Research

Institute, said on Friday that his research firm is sticking with the

forecast it made in September: A new recession is inevitable, despite

improvement in high-profile economic indicators, such as job creation

and unemployment, and a stock market rally.


Print CommentECRI is one of the more widely respected firms on

economic recessions, as it has never been wrong when forecasting that

a recession would start, or failed to predict a recession well before

it was widely accepted.


Achuthan predicts the recession will happen even without a new shock

to the economy, such as a spike in oil and gas prices or a Greek

sovereign debt default sparking a financial meltdown. If those things

occur, he says they will simply make an inevitable recession more



In fact, Achuthan said data gathered since his September forecast only

confirms his view that economic growth has slowed to such a degree

that a downturn is now unavoidable, likely by late summer.


"Now that we have several months of definitive hard data, this is not

a forecast," he said, pointing to key measures that don't receive as

much attention from the public or many economists.


Specifically, he identifies annual growth in industrial production,

real personal income and spending, as well as the year-over-year

change in gross domestic product, a broad measure of the nation's

economic activity. That GDP reading has been stuck between 1.5% and

1.6% growth for the last three quarters, far less encouraging that the

rising quarterly GDP, which is more widely reported.


"Basically, growth has flatlined," he said.


Some might think that a new downturn would be a so-called double-dip

recession, in that it comes before the economy has fully recovered

from the jobs lost during the Great Recession. But Achuthan said if

the economy falls into recession at this point, it would be a new

recession, not a double dip, given the time that has passed since the

formal end of the recession in 2009 and the economic growth since



He said improved consumer confidence and economists' stronger outlook

are due to gains in jobs and stocks over the last six months.


The unemployment rate has fallen for five straight months, dropping to

8.3% in January compared to 9.1% in August. Filings for new jobless

benefits have fallen to a nearly four-year low. And the Standard &

Poor's 500 (SPX) index has gained 27% since an October low to reach

the highest level since June 2008.


Even ECRI's own leading indicators have been showing steady

improvement since October. But Achuthan said those readings are still



He said the time it takes employers to increase staff means that job

growth is a so-called lagging indicator, which reflects economic

conditions in the past rather than pointing to future growth.


"Job growth always follows consumer spending growth, not the other way

around," Achuthan said.


That doesn't necessarily mean the economy will start losing jobs again

by this summer, when he expects the recession to start. He said hiring

can continue in the early months of a downturn, but there will

definitely be job losses ahead.


He credited stocks' rise to central banks' infusing the global economy

with money. He said the so-called velocity of money, the number of

times a dollar is spent by consumers, has fallen to a record low in

recent months, which he sees as another indicator of underlying



"The world central banks are printing money as never before in

history," he said. "The money is not boosting economic growth, but

[it's] still there and it goes into risk assets."


Achuthan's views are not widely accepted. In a CNNMoney survey of

economists in December, they cut the double-dip recession risk to 20%

from 30% only three months earlier. The Federal Reserve Bank of

Philadelphia's survey of economists finds that most forecast improved

growth and hiring through this year and for the next three years.


Achuthan denies that he is taking a bearish view of the economy,

saying that when others worried about a double-dip recession risk in

the fall of 2010, he saw no signs of a downturn at that time.


But more than 50 years of economic data followed by his firm has shown

him that when underlying growth slows to this degree, a recession

always follows.


"I don't like to be the skunk at the garden party," he said

  • Upvote 3

Share this post

Link to post
Share on other sites

Could I make an overconfidence turn? ie. Temporary market improvement inflates consumer and investor confidence, creating a market bubble, which in the long term pops and does greater economic damage?


Also: Deficit turn


Economic downturn forces congress to cut spending = longterm econ good


Good econ U: http://www.washingtonpost.com/blogs/ezra-klein/post/wonkbook-robert-kagan-obamas-favorite-romney-adviser/2012/01/30/gIQAj1wEcQ_blog.html

Share this post

Link to post
Share on other sites

Could I make an overconfidence turn? ie. Temporary market improvement inflates consumer and investor confidence, creating a market bubble, which in the long term pops and does greater economic damage?


Also: Deficit turn


Economic downturn forces congress to cut spending = longterm econ good


Good econ U: http://www.washingto...1wEcQ_blog.html


Sorry, didnt see this until now. Absolutely there is a thing as overconfidence. There are a lot of bulls right now when it comes to the American markets. There are a lot of people around the world who see the turmoil - EU financial problems, China's clearly lying about the health of their economy - and think that America is the next best safe haven. So they are all pumping their money into the US because everyone else looks like a worse bet. But at the same time, economic fundamentals are really rocky right now. Unemployment remains stubbornly high, wages are not going up, consumer debt is accumulating, federal debt is accumulating, the budget is nowhere close to being resolved, etc. You can very easily make the argument that a double dip/new recession is a very likely scenario, and that would wipe out the gains and really damage the psyche of the bulls who are running the markets now.

  • Upvote 1

Share this post

Link to post
Share on other sites

I just saw this article on yahoo news today and figured that the original research might be a good thing to read as an answer to econ disads.


Next Great Depression? MIT researchers predict ‘global economic collapse’ by 2030


Eric Pfeiffer

A new study from researchers at Jay W. Forrester's institute at MIT says that the world could suffer from "global economic collapse" and "precipitous population decline" if people continue to consume the world's resources at the current pace.

Smithsonian Magazine writes that Australian physicist Graham Turner says "the world is on track for disaster" and that current evidence coincides with a famous, and in some quarters, infamous, academic report from 1972 entitled, "The Limits to Growth."

Produced for a group called The Club of Rome, the study's researchers created a computing model to forecast different scenarios based on the current models of population growth and global resource consumption. The study also took into account different levels of agricultural productivity, birth control and environmental protection efforts. Twelve million copies of the report were produced and distributed in 37 different languages.

Most of the computer scenarios found population and economic growth continuing at a steady rate until about 2030. But without "drastic measures for environmental protection," the scenarios predict the likelihood of a population and economic crash.

However, the study said "unlimited economic growth" is still possible if world governments enact policies and invest in green technologies that help limit the expansion of our ecological footprint.


The Smithsonian notes that several experts strongly objected to "The Limit of Growth's" findings, including the late Yale economist Henry Wallich, who for 12 years served as a governor of the Federal Research Board and was its chief international economics expert. At the time, Wallich said attempting to regulate economic growth would be equal to "consigning billions to permanent poverty."

Turner says that perhaps the most startling find from the study is that the results of the computer scenarios were nearly identical to those predicted in similar computer scenarios used as the basis for "The Limits to Growth."

"There is a very clear warning bell being rung here," Turner said. "We are not on a sustainable trajectory."

  • Upvote 1

Share this post

Link to post
Share on other sites

Note the warrants which lead up to the underlined sections....and the words in bold and italics. (my additions of course)



A surprising and promising trend in the US economy: sharply declining oil imports

Seeking alpha

May 25, 2012





We've all been hearing about all kinds of ominous developments, and certainly the last few weeks have not been fertile ground for optimism. I was, therefore, surprised on going through energy statistics when I discovered the powerful trend that has recently emerged in the United States economy: Oil imports are going down at a steady pace.

In order to get a picture of this, I compared the first two months of 2012 with the same two months of 2006; a year well before the recession. I wanted to be sure that the decline was not due to the recession, so I compared real GDP in the two time periods: Real GDP in the first quarter of 2012 was more than 5% higher than real GDP in the first quarter of 2006. All things being equal, one would assume that oil consumption and oil imports would be higher in 2012 in order to support a considerably larger economy.

In fact, oil imports have plummeted. Net imports of oil and refined products (total imports of crude and refined products minus exports of crude and refined products) have declined from 12.363 million barrels per day in January and February 2006 to 7.784 million barrels per day in the same two months of 2012. While net import figures are not available for more recent time periods, other data suggests that the trend is continuing. During this same time period, net imports from Canada have actually been increasing from 2.227 million barrels per day in 2006 to 2.639 barrels per day in 2012. As a result, net imports from the rest of the world ex Canada have been cut almost in half from 10.336 million barrels per day in 2006 to 5.567 million barrels per day in 2012.

There are a few complicated moving parts behind these numbers. There has been a huge increase (roughly a tripling) in the export of refined products from the United States. Apparently what has happened is that, as domestic demand for gasoline and distillate has declined, the U.S. refinery industry has more refinery capacity than is necessary for the U.S. market and is now refining crude oil in order to supply refined products to the export market. While total imports are down somewhat, net imports are down much more because of the large increase in exports of refined products.

Behind this trend are several key developments. Domestic oil production has increased more than 1 million barrels per day during this time period (this increase in domestic oil production is an important part of the increased real GDP during this time period). In addition, despite the fact that real GDP has increased, domestic consumption of petroleum and petroleum products has decreased by more than 3 million barrels per day during the same time period. This appears to be partly due to increased production of ethanol (which displaces gasoline), increased vehicle mileage (as more fuel efficient new cars enter the market), less driving, relatively warm winters, and some displacement of oil by natural gas in the heating and transportation markets. These trends seem to be continuing and, while we still import a tremendous amount of oil, the strategic and economic vulnerability of the United States to the world oil market may be on the decline.

What are the implications of this development for investors and for the country in general? First of all, it may produce a change in the nature of the business cycle. In the past, virtually every recession coincided with a run up in oil prices. Higher oil prices sucked dollars out of the U.S. economy and, at the same, created inflationary pressures which led to monetary tightening just as consumers had less money to spend because of higher gasoline prices. While U.S. gasoline prices will still be driven by world oil prices, a price increase will not suck as much money out of the domestic economy and will lead, instead, to a shifting around of wealth and economic activity within the United States (and its very economically integrated neighbor, Canada).

Secondly, national security policy may be subject to a change in emphasis. To the degree that the United States is less vulnerable to an interruption in oil imports, we may see the use of the Strategic Petroleum Reserve as a price stabilizer rather than a true strategic backstop. In addition, the United States may pursue other goals in Middle Eastern policy with more determination. Of course, other countries are importing more and more oil all the time and we may come to a point at which China becomes a major player in the Middle East.

Thirdly, there is a danger of complacency and drift and there may be pressure to relax some of the measures that have helped us solve the problem by imposing restrictions on domestic drilling or abandoning vehicle mileage standards.

Fourth and most importantly, I think that the trend illustrates the beginnings of a long-term displacement of petroleum by natural gas in the transportation market which will probably start in the more advanced economies. Natural gas has already displaced some 500,000 barrels of oil per month in the transportation market. This is a proverbial "drop in the bucket", but the trend is steady and powerful and companies like Clean Energy Fuels (CLNE) are poised to take advantage of the trend as it accelerates. Each economic recovery and expansion emphasizes certain sectors of the economy - tech in the 1990s, housing in the 2000s. It is likely that a renaissance in the U.S. energy industry will be an important part of any further leg up in the U.S. economy. Picking winners and losers within the industry is still difficult although the majors, including Exxon (XOM) and Conoco (COP), look very cheap at these price levels.

Disclosure: I am long CLNE, XOM, COP.

  • Upvote 1

Share this post

Link to post
Share on other sites

Does anyone run threshold arguments anymore? Off uniqueness?

I am not a huge fan of politics links, but this could be an interesting trade off or segue into an advantage, depending on your perspective. For example, you could argue that Congress is inept and will fail to extend the cuts, therefore the country would be headed for a massive fiscal cliff. But the warrants are based on the fact that the Fed is running out of options to help the economy and monetary modifications are unable to kick start hiring and easing of the unemployment problem which is exerting a huge drag on the economy. And plan fixes that. Or you could run a trade off/political capital link where in passing infrastructure plan which costs billions, Obama cannot extend the cuts on the basis of fiscal discipline and the economy tanks.

Either way, you can make it work both ways for you.


Also, if you search for the terms ("financial cliff" or "fiscal cliff") and "Bernanke", you will come up with dozens of blogs with more information and alternative analysis. Worthwhile stuff to be found in that search.


Bernanke warns lawmakers country headed for 'massive fiscal cliff'

By Peter Schroeder - 02/29/12 02:26 PM ET


Congress risks taking the economy over a “massive fiscal cliff,†Federal Reserve Chairman Ben Bernanke warned lawmakers on Wednesday. In remarks that hit Wall Street stock prices, the central bank boss suggested the economy could hit a serious roadblock if Congress allows the Bush tax rates and a payroll tax cut to expire and $1.2 trillion in spending cuts to be implemented simultaneously in January. “Under current law, on Jan. 1, 2013, there’s going to be a massive fiscal cliff of large spending cuts and tax increases,†Bernanke told the House Financial Services Committee. “I hope that Congress will look at that and figure out ways to achieve the same long-run fiscal improvement without having it all happen at one date. “All those things are hitting on the same day, basically. It’s quite a big event.†The tax hikes and spending cuts could knock GDP growth in 2013 down from 2.6 percent to 1 percent, according to Andrew Fieldhouse, a federal budget policy analyst with the liberal Economic Policy Institute. “There is obviously a huge fiscal drag pending if Congress adheres to existing law,†he said. Bernanke’s comments underline the stakes for this year’s post-election lame-duck session of Congress, when the fate of the tax rates and spending cuts are likely to be determined. Congress is also not expected to raise the debt ceiling until after Election Day, but is unlikely to be able to punt that decision beyond the lame-duck session. The nation’s triple-A credit rating hangs in the balance, with agencies likely to decide on whether to downgrade the United States depending on what happens to the debt ceiling, tax rates and spending cuts. The fiscal triple whammy was set up by the failure of a supercommittee of lawmakers to agree on a deficit-cutting plan last year. Bernanke, who has long advised policymakers to rein in the deficit, called again Wednesday for a “credible plan†to reassure markets that the nation is repairing its finances. Failure to do so could trigger another financial crisis and sharply higher interest rate, as is happening in Europe, he said. Bernanke warned that draining funds from the economy by allowing tax cuts to expire and trimming spending could slow growth. “You ... have to protect the recovery in the near term,†he warned. Some Republicans, such as Sen. John McCain (Ariz.), have already vowed to find alternatives to the spending cuts, which would hit the Pentagon. And the fight over the Bush tax rates will be a central theme of the presidential election. President Obama wants to extend the individual tax rates for families with annual income below $250,000 and individuals below $200,000, while allowing tax rates on higher incomes to rise. Republicans want to extend all the Bush-era rates. Congressional Democrats are increasingly embracing $1 million in income as the right threshold above which higher income taxes should kick in. “Obviously, the Speaker is opposed to the massive tax hike that Washington Democrats have engineered for the end of the year,†Michael Steel, a spokesman for House Speaker John Boehner (R-Ohio), said Wednesday. While economic conditions have improved and the unemployment rate has fallen, Bernanke warned that the labor market is still “far from normal.†“The unemployment rate remains elevated, long-term unemployment is still near record levels and the number of persons working part-time for economic reasons is very high,†he said. Underlying data suggest the economic expansion is “uneven and modest by historical standards,†and that Europe’s debt crisis remains a persistent threat to the U.S. recovery, he said. The Fed has lowered interest rates effectively to zero and vowed to keep them there through the end of 2014 in response to those challenges, but Bernanke suggested there is little more the central bank can do. “Monetary policy is not a panacea,†he said. “The long-term health of the economy depends mostly on decisions taken by Congress and the administration.†Bernanke acknowledged the difficult politics of taxes and spending cuts. “These criticisms are easy for me to make,†he said. “I don’t have to deal with the politics.†He steered clear of recommending a specific deficit-reduction path for Congress, but said it is “very important†to address rising healthcare costs and that the economy would benefit from a clear plan from Congress to reform the housing market.




The contents of this site are © 2012 Capitol Hill Publishing Corp., a subsidiary of News Communications, Inc.

  • Upvote 1

Share this post

Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Create New...