The bipartisan 18-member panel backed by Obama would study the issue for much of the year and, if 14 members agree, report a deficit reduction blueprint after the November elections that would be voted on before the new Congress convenes next year. The 14 would have to include at least half of the panel's Republicans -- a big obstacle.
"These deficits did not happen overnight, and they won't be solved overnight," Obama said in a statement. "The only way to solve our long-term fiscal challenge is to solve it together -- Democrats and Republicans."
The above comments reflect not only the importance of deficit spending but also timing of it. Deficit reduction is good idea, but not until we do some more deficit spending to stimulate the economy, really make things look good, for the mid-term elections
Either the government keeps spending or the economy will continue to contract under the weight falling consumption. The side effect of such spending, the reason for the creation of deficit task force, is increased deficits and public sector debt issuance. Politicians don't like deficits, right? Well, that depends on approval ratings.
Of course, raising taxes is an option, but public reaction of pitch-fork-to-the-arse means one-term Administration.
That leaves the only political viable option of devaluation. Yes, devaluation is a tax, but few citizens understands it as such. And, you don't see a lot of education on the subject. Devaluation, in theory, reduces the size of the debt burden. It's a political win-win. Well, maybe not so much. Fiat money is a confidence game. Push devaluation too far and confidence will begin to falter. We are seeing that right now. If confidence falters too much, the biggest and possibly only direct buyer of Treasuries will have the initials B.B.
Source: finance.yahoo.com
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