US Deficit Super-Committee Fail

The WSJ reports that the US Deficit Super-Committee has failed to reach agreement on the 1.2bn required to be cut from spending as part of the debt cieling deal. Automatic cuts, starting in 2013, will now kick in.

The direct consequences are tame, but the signal is dire. This increases the probability that Congress will not be able muster agreement to extend unemployment benefits and the earlier payroll tax cut.

If both of these roll off at the start of 2012, the fiscal contraction (of ~2ppts of GDP) may be sufficient to send the US back into recession. With the EU also likely to in recession at that time, the global growth outlook for 2012 now looks dire.

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One Response to US Deficit Super-Committee Fail

  1. On your Marx says:

    I agree BUT it appears a lot of Republicans believe Austerity brings on growth despite a lot of evidence to the contrary.

    The US looks like it wants to copy the lost decade of Japan with the same mistakes

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