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Monday, August 1, 2011

J.P Morgan Said WHAT?

August 1st, 2011

Outside of knee-jerk radicals like Grover and Heritage and Cato, what problem do actual, on the ground and presumptively conservative financial organizations have with the debt deal? It might surprise you. One of the biggest failings in this hyper-partisan plan is...

no stimulative spending.

From the J.P. Morgan analysis

"4) Impending fiscal drag for 2012 remains intact. The deal does nothing to extend the various stimulus measure which will expire next year: we continue to believe federal fiscal policy will subtract around 1.5%-points from GDP growth in 2012. Its possible the fiscal commission could do something to extend some measure such as the one-year 2% payroll tax holiday, though we think unlikely, as it would need to be paid for, which would be tough. If anything, the debt deal may add modestly to the fiscal drag we have penciled in for next year." EMPHASIS OURS

Yup. Much the same point that economists such as Krugman, Stiglitz and Reich have been making. We are very much through the looking glass.

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