Lewis Alexander On The Debt Ceiling: Top Nomura US economist Lewis Alexander... identifies four key points where the two sides remain far apart:
- Still no actual agreement on tax rates.
- Still no sign that Democrats will give any ground on entitlements.
- Still not clear that the Democrats and Republicans are close to a number on revenues.
- Other spending cuts not agreed to.
Those might sound obvious, but he adds some more meat to his argument:
At this point it does not appear that the two sides have exchanged specific proposals.... It does not appear that the need to raise the debt limit early in 2013 is being actively discussed.... We continue to believe that it is marginally more likely (55%) than not that a broad agreement to a framework for implementing deficit reduction can be reached before the end of this year. There is a possibility that things will go smoothly from here and a deal could be reached relatively early in December. But this does not seem like the most likely way a deal will be reached...
And Greg Sargent:
Why Dems shouldn’t blink in battle over tax hikes on rich: If the “fiscal cliff” talks grind on towards the January 1st deadline with no clear resolution, here’s what you can expect. Republicans will call for all the Bush tax cuts, including those on the rich, to be extended temporarily. CNBC commentators and others will warn that Dems opposing a temporary extension are irresponsibly risking fiscal cliff armageddon and threatening to tank the recovery. Spooked moderate Dems may be tempted to agree. Don’t do it. In reality, a temporary fiscal cliff solution — including a temporary extension of the high end tax cuts — is one of the worst things we can do for the economy.
That’s what Mark Zandi, the chief economist at Moody’s Analytics, said in an interview with me today. Zandi has privately counseled Senate Dems that a temporary postponement of a resolution will put the recovery at risk.
“Temporarily extending the tax cuts would be a mistake,” Zandi told me. “Business people and investors will not engage and hire more aggressively until policy makers provide a narrative with regard to how we’re going to address our problems. If we simply extend everything and kick the can, it will exacerbate all the uncertainty and we’ll be stuck going nowhere.”
Zandi said that a temporary fix would actually be more likely to rattle the markets. “If we kick the can, at some point we’re going to downgrade,” he said, in a reference to our credit rating. “You’re going to create more instability almost by definition in the financial markets..... My view is that going over the cliff temporarily is fine, if that results in a good deal,” he said. As for raising taxes on those over $250,000, Zandi said that as long as it is done in the context of a broader agreement, it is “the least painful thing you can do to the economy.”