Today's Wall Street Journal highlighted the often-ignored plight of the U.S. fiscal cliff
. Beginning in January 2013, $1.2 trillion
of automatic, across-the-board cuts in discretionary spending will take place over 10 years, as directed by the congressonional “supercommittee” last November (yawn…remember them?).
>Of course, there is still time for Congress and take a serious look at what should be on the
chopping block, but none of this will take place until after the election, if it does at all. Meanwhile, the WSJ notes that economists expect the Federal Reserve to buy assets this year, lowering interest rates. Really?
I am by no means a die-hard Keynesian, but right now the investment schedule (IS) curve, as known in Keynesian economics, is evidently inelastic. That means that no amount of low-interest rate “carrots” will entice investors into moving their money into jobs-producing, income-growing, GDP-boosting ventures. Monetary policy from the Federal Reserve will not work, so Congress needs to start making decisions – preferably before the election.