From Josh Barro on Twitter

0.15% of GDP. Small. MT @ernietedeschi: If structured like Boehner’s revised plan it’s a $22b outlay cut in ’12. Table 3

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If you fail to resolve this issue properly your reputation will suffer as well.

They'll get by fine.

What reputation?

There's no credible commitment. It binds future Congresses about as much as a spider web binds an elephant.

Some say the world will end in fire,
Some say in ice.
From what I've tasted of desire
I hold with those who favor fire.
But if it had to perish twice,
I think I know enough of hate
To say that for destruction ice
Is also great
And would suffice.

Politically, it is enough of a compromise to anger plenty on both sides. Realistically, it changes very, very little about all of our budget problems.

0.15% of GDP cut probably on lowers GDP growth by about 0.2%, which probably reduces employment by less than 0.1%, which so likely we don't lose more than 150,000 jobs.

It does establish the principle that extortion works as a governance tool.

Well of course it does, it's the basis of taxation.

It does establish the principle that extortion works as a governance tool.

And some would say that government is an extortion tool.

Tyler, you are failing to give a proper context to the "debt ceiling" comedy and the likelihood that it becomes the turning point of U.S. public finances. Long ago we knew that the numbers in the comedy were peanuts --we didn't need the CBO to tell us that. Only some useful idiots working for the fraudulent clowns could have believed that the comedy was about huge, immediate changes in the amounts of spending and taxation.

From the very beginning, that is, since at least November 2010, we knew that the time has come for a big fight about the future of U.S. public finances. The "debt ceiling" comedy is the first round of a long fight. The only relevant question is if the deal that ends the comedy will mark a turning point or the fraudulent clowns will quickly be back to business as usual. The implementation of the deal in the months up to November 2012 will tell us whether the comedy has been or not such a turning point.

I hope you take advantage of the next few months to give a context to understand what the fight is about and what alternative solutions may be. Don't waste your time circulating details with zero value added.

From the very beginning, that is, since at least November 2010, we knew that the time has come for a big fight about the future of U.S. public finances.

A big fight between who and who else?

Do you want a big fight between the fraudulent clowns who say they want more taxes and less spending, versus the fraudulent clowns who say they want less taxes and less spending?

A big fight over who can get the most votes, to preside over a government that spends more on their constituents and probably less on their opponents' constituents?

Or is it going to be a big fight between the bankers and the military over who gets more of the government money?

If it's a big fight between the sane americans and the insane americans, then it's time to head for the border. There isn't much room for doubt about who'll win that one, or the consequences of being on the losing side.

To answer your question, let me refer to what Charles Krauthammer wrote a few days ago

We’re in the midst of a great four-year national debate on the size and reach of government, the future of the welfare state, indeed, the nature of the social contract between citizen and state. The distinctive visions of the two parties — social-democratic vs. limited-government — have underlain every debate on every issue since Barack Obama’s inauguration: the stimulus, the auto bailouts, health-care reform, financial regulation, deficit spending. Everything. The debt ceiling is but the latest focus of this fundamental divide.

The sausage-making may be unsightly, but the problem is not that Washington is broken, that ridiculous ubiquitous cliche. The problem is that these two visions are in competition, and the definitive popular verdict has not yet been rendered.

Totally agree with you here. 2012 will be an interesting year.

E.Barandian, we have been arguing about limited government for a very long time. Reagan said he wanted limited government. So did Bush Senior. Republicans talked like they wanted limited government in the time of Bush Junior, but somehow the GOP congress did nothing whatsoever to limit government. Nixon wanted limited government. Eisenhower wanted limited government. Hoover wanted limited government.

But from Nixon on, Republican presidents have not given us limited government, and mostly Republican Congresses have not given us limited government.

Limited government is something that Republican politicians talk about to get elected. It is never something that Republican politicians actually do.

This is a giant debate with no actual content.

If the GOP actually does get power, and actually does appear to be trying to cut spending, it's utterly predictable that they will suddenly discover an urgent need to invade Indonesia, or Paraguay, or some nation most Americans have never heard of, and it will take a great big gob of money to do it.

Circumstances matter. Regardless of what may have happened the past 200 years, the 2008-201? economic crisis is changing the prospects of the U.S. economy and, more important, the perceptions of voters about these prospects. There is a sense of urgency that it was not there before the crisis and it is reflected in the expansion of the Tea Party. In addition, the slow recovery --including the probability of another decline in output and employment in 2012-- forces to look beyond old solutions to turn the economy around.

Indeed, a Republican government is not a guarantee that a serious fiscal adjustment program will be implemented. The alternative, however, is not even interested in a fiscal adjustment.

No J Thomas, this time it's different. I predict a "Republican Revolution" in the next election, in which a new breed of Republican politician decides to make a "Contract with America" and really change the way government works. "The era of big government will be over." Trust me, all this will be accomplished without raising taxes -- "read my lips, no new taxes."

It's so exciting to live in the present time, I'm so filled with "hope" that things are really going to "change."

In addition, the slow recovery –including the probability of another decline in output and employment in 2012– forces to look beyond old solutions to turn the economy around.

This is a tremendously important point, not just an "ini addition". This is the central thing.

I want to claim that the Keynesians were right about the Great Depression. They had a lack of demand, and things improved as demand improved.

However, now our problem is not lack of demand. Now our problem is that we are collectively not competitive at supply. We import a lot because imports are better for the price. We do not export as much because our exports are not competitive at their price. We do not devalue the dollar enough for exports to balance, because China and others do not let us.

So keynesians try to stimulate demand and it just costs the government money. It's like giving a transfusion to a man with a spurting arterial wound. The new blood circulates through once and then it bleeds out.

So that isn't going to solve the problem. But not doing that won't solve the problem either. I don't hear anybody providing alternatives about how to actually improve the economy.

Here's one thing that could help -- convert to metric. We're pretty much the only nonmetric nation in the world and it can't be helping our exports. And when better to convert than during a recession?

On the plus side, unlike the Patriot Act, TARP, stimulus, and health care, maybe this will be the first time in years that we'll have a huge we-need-to-pass-this-now-and-you-dont-even-have-time-to-read-it-or-the-world-will-end bill that doesn't have unsightly government-expanding surprises in it. Maybe.

Well clearly a cut of .015% of GDP is going to push us into recession, since everyone knows government spending has a multiplier well into the hundreds.

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