US Economy

[GAP]

The public sector shrank by 71,500 jobs."

That's the real good news here....that's 71,500 less sucking at the public teat.....

 

[Nemo888]

You do know those numbers include the military right?

 

[Redeye]

That's the real good news here....that's 71,500 less sucking at the public teat.....

I'm not gonna lie, I always chuckle when I see anyone military decrying people "sucking at the public teat".

It's particularly common amongst American conservatives, and funnier when pointed out to them.  On some blog some tool went on at length about suck "sucklers" and "public employees living off the work I do" and such nonsense.  Noticing that he claimed to be military, I highlighted to him that he was one, and hilarity ensued.

 

[Edward Campbell]

Reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the Globe and Mail is a report that the US credit rating has been downgraded:

http://www.theglobeandmail.com/report-on-business/sp-downgrades-united-states-credit-rating/article2121658/

S&P downgrades United States credit rating

WALTER BRANDIMARTE
NEW YORK— Reuters

Published Friday, Aug. 05, 2011

The United States lost its top-notch AAA credit rating from Standard & Poor’s Friday, in a dramatic reversal of fortune for the world’s largest economy.

S&P cut the long-term U.S. credit rating by one notch to AA-plus on concerns about growing budget deficits.

U.S. Treasuries, once undisputedly seen as the safest investment in the world, are now rated lower than bonds issued by countries such as the UK, Germany, France or Canada.

The outlook on the new U.S. credit rating is negative, S&P said in a statement, a sign that another downgrade is possible in the next 12 to 18 months.

That will make the cost of borrowing higher which might mean that the bargained cuts to spending will not be enough to postpone the next credit limit debate until after the 2012 elections.

 

[GAP]

You do know those numbers include the military right?

I am well aware of it, but when the public service can reduce 71,500 jobs without discernible impact on services, you can rightly assume that some little empires are  going on a diet.....

How far does it need to go? Dunno, but there was a number quoted somewhere, of an increase of 20% something growth in the public service since 2006.....There hasn't been a 20% increase in services, so why the increase in personnel?

 

[Brad Sallows]

>"sucking at the public teat"

There are people for whom the description is apt; there are parasites in both public and private service.  The private service periodically sheds its burden; the public sector rarely does.  The usual symptom in the private sector is a sudden thinning of the number of layers and increase in span of control between the upper echelons and the coal face.  Business goes on, and the coal face is less harassed by frequent requests for information and "improvements" from people trying to look busy enough to justify their employment.

 

[Edward Campbell]

More on the bond rating downgrade, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the Globe and Mail:

http://www.theglobeandmail.com/news/world/konrad-yakabuski/us-loses-its-triple-a-credit-rating/article2121769/

U.S. loses its triple-A credit rating

KONRAD YAKABUSKI
WASHINGTON— From Saturday's Globe and Mail

Published Friday, Aug. 05, 2011

Weeks of political gamesmanship that fell far short of the Obama administration’s early promises of deficit reduction have cost the U.S. government the top-notch credit rating it has held for almost a century.

Standard & Poor’s announced Friday night that it was cutting the AAA credit rating to AA-plus, saying it was “pessimistic about the capacity of Congress and the administration to leverage their agreement this week into a broader [deficit cutting] plan that stabilizes the government’s debt dynamics any time soon.”

The credit rating agency, which suggested another downgrade was possible within two years, was scathing in its rebuke of the U.S. political class after Sunday’s $2.4-trillion (U.S.) deficit reduction deal. It stated that that the “brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective and less predictable.”

The humbling downgrade, which leaves the United States with a lower rating than Canada, capped a tumultuous week on global stock markets. The dive reflected a loss of investor faith in the ability of politicians and central banks in the developed countries to fix the underlying structural problems in their economies.

The two other leading credit rating agencies, Moody’s Investor Services and Fitch Ratings, have already confirmed they intend to, for now, maintain the U.S. top-tier rating.

It is unclear what impact S&P’s move will have on U.S. interest rates, which are currently at rock bottom levels. A lower credit rating typically requires borrowers to pay a higher rate. But yields on U.S. Treasury bonds are at historic lows; investors consider them among the world’s safest investments.

S&P’s move, which came after the close of stock market trading, followed the Obama administration’s reported attempts to challenge the agency’s math. President Barack Obama was not likely aware of the agency's intentions when he addressed an audience of U.S. veterans on Friday morning - he was briefed by officials later in the day - but his deameanour betrayed the gloomy economic mood.

“What I want the American people and our partners around the world to know is this: We are going to get through this,” a subdued President offered, suddenly looking every bit his 50 years and a day.

But S&P’s report underscores a harsher truth. The U.S. President is hobbled by a political system that saps what little power he and Congress have to restore economic confidence.

European leaders are similarly hamstrung by dysfunctional political systems. Their attempts to contain the euro-zone debt crisis have repeatedly come up short because the measures needed to comfort financial markets exceed the tolerance of voters.

On both sides of the Atlantic, “you’re caught between the politicians feeling as if they are making a heroic effort, pushing the boundaries of what they regard as politically possible, and [the fact] that it doesn’t come near to what is economically necessary,” explained Sebastian Mallaby, a Washington-based senior fellow at the Council on Foreign Relations.

On Friday, Italian Prime Minister Silvio Berlusconi, whose country could be the next overleveraged European nation to seek a bailout, sought an emergency meeting of G7 finance ministers. But it is unlikely they can fix in one gathering what countless previous summits have been unable to repair.

Global stock markets have cratered because, after weeks of debating, dissecting and diagnosing what ails their respective economies, U.S. and European policy makers have not been able to bring themselves to administer the bitter medicine they have all acknowledged is needed.

So, what’s the cancer? In a word, debt.

The developed countries have too much of it. The most overleveraged nations – Greece, Ireland and Portugal – have already become wards of their wealthier European neighbours.

Italy and Spain could be next. When European leaders unveiled their latest Greek bailout package two weeks ago, conceding that holders of Greek government bonds would need to take a haircut on their debt, they failed to insulate Italy and Spain from the contagion of a potential debt restructuring.

European leaders, Mr. Mallaby says, “had loudly, openly and repeatedly declared what it would take” to protect Italy and Spain, notably a massive expansion of the €440-billion European Financial Stability Facility, or bailout fund. But the politics of expanding the EFSF is difficult; voters in richer nations resent having to pay the tab for rescuing weaker cousins.

The internal politics of the most indebted nations are tougher still. The austerity measures demanded in exchange for a bailout have sent Greek citizens into the streets.

Mr. Berlusconi promised on Friday to move faster to eliminate the country’s budget deficit. But whether he will be able to, given the country’s fractured political system and certain voter resistance to spending cuts and tax increases, is anyone’s guess.

The resolution, for now, of the U.S. debt-ceiling stand-off has not provided any comfort to investors, either.

For weeks, Mr. Obama suggested the debt-ceiling negotiations would spur the U.S. political class into finally addressing the elephant in the room – unsustainable public pension and health insurance programs that are set to send the country’s debt above $20-trillion (U.S.) within a decade.

But the relief investors felt at seeing the stand-off end was soon displaced by their realization that the deal’s $2.4-trillion in cuts – all subject to repeal by a future Congress – came up short. Financial markets had been conditioned by Mr. Obama’s own advisers to look for a debt-ceiling deal that would slash the U.S. by deficit by $4-trillion over 10 years.

S&P’s verdict was swift and brutal. But it will not make tackling the problem any easier.

Despite the purported Tea Party zeal for deficit-slashing, few Americans are willing (or indeed able) to absorb cuts to their Medicare or Social Security benefits. The disconnect is encapsulated in the oxymoronic Tea Party mantra: “Keep your government hands off my Medicare.”

In short, the credit rating agencies have an easier job than the politicians.

I do not agree with Konrad Yakabuski's assessment of the US and European political systems as being “dysfunctional.” I will agree that political practices in many legislatures, around the world, are dysfunctional but, despite my suspicions about some constitutions (those of France, Greece and Italy, for example), I think the systems are good enough (most of Europe and e.g. Thailand) to very good, indeed (America, Britain, India, Netherlands, Singapore and so on). The problem is the politics – especially the politics of the culture wars that have consumed America for 50 years and most of the world for the last 25.

The culture wars are not about liberal vs. conservative (I doubt more than 10% of Americans (or Europeans) can apply any sensible definition to either term or to the difference between them), they are all about a return to the 19th century – to the battles between the "Know Nothings” and the established Whigs and Democrats – and to simple solutions to hideously complex problems. The Know Nothings and the modern cultural warriors want(ed) the same thing an America 'free' to decide its own destiny in its own way ~ and the devil take the hindmost. Fortunately, for us, we do not live in the 19th century and so we, all over the world, must cast aside the silly, isolationist, 19th century ideas and adapt to the 21st century and its imperatives.

That means that the modern, welfare state, “I'm entitled to my entitlements” liberals must come to grips with the fact that money does not grow on trees and the modern, isolationist, America-first conservative must adapt to the fact that while America might be first it does not have absolute or supreme power – it has, like every other country, feet of clay. These are hard truths and few Americans (or Australians, Belgians, Canadians, Danes and so on) are eager to embrace them; acknowledging hard truths means changing how one thinks and adapting ones expectations (often only hopes).

Now, some will say, that, at root, the voter is to blame and all (s)he need do is put her self-interest first and all will be well. Maybe, if, and it is a great Big IF, (s)he can actually identify her self interests in the near, medium and longer terms, put them in some sensible order of priority and then find candidates suitable to represent them. In fact, I think that we need to start with the media and the commentariat – the so called “chattering classes” - who set the cultural agenda. Too much of what passes for information in America, Britain, Canada and so on, all the way down to Zimbabwe, is, in fact, socio-economic and political propaganda masquerading as “news and public affairs.” And many (most?) of us read/watch/listen to the 'news' (propaganda) that tends to reinforce our own preexisting views and reject that which might support a contrary position.

My  :2c:

 

[Nemo888]

I am depressed that the right has lost its way as far as understanding the basics of economics. Firstly starting a war and decreasing taxes. Then shrinking GDP to pay the debt. Ridiculous. GDP is negative already so the solution is to grow the economy. The more you cut the more revenues you'll lose, so the more you will have to cut. This is how accountants who think they understand economics destroy businesses. I've seen this process of slow starvation firsthand in the business world. You must not cut more than growth. This is capitalism 101.

The right is supposed to be a beacon of economic reason, increasing opportunity and opening up markets. The left a beacon of enlightened generosity, cooperative labour for the betterment of society and providing fair access to opportunity. Instead we get douche bags who are masters of self interest and campaign financing beholden to special interest.

 

[Brad Sallows]

The "right" understands economics well enough, and "starting a war" is not an economic decision.

The basic principle in which the "right" believes is that if you allow people to spend their money on what they want, they are more willing to spend.  The more times a unit of currency exchanges hands, the greater the GDP and the greater the taxation revenue (sales taxes, income taxes on the employed people).  Many people understand that it is necessary to grow the economy (GDP) and then promptly turn around and enact policies contrary to the basic principle.

 

[a_majoor]

A very short piece with the upside to the credit downgrade:

ett/the-upside-of-the-downgrade/?print=1

The Upside of the Downgrade
Posted By Claudia Rosett On August 6, 2011 @ 1:21 am In Uncategorized | 29 Comments

The good news — and yes, this part really is good news — is that Standard & Poor’s has finally reduced the spending bacchanal of the U.S. government to a sound bite that anyone can understand: S&P has downgraded America’s sovereign credit rating.

There are plenty of nuances, to be sure. Not everyone agrees with S&P. The U.S. Treasury is attacking S&P’s arithmetic, and haggling over the impact of two trillion dollars, here or there, give or take. Analysts are explaining that S&P did not downgrade America’s short-term credit rating. It’s just long-term U.S. credit, which, after 70 years on its AAA pedestal, has now been knocked down to AA+. There’s lots of debate over just how much difference S&P’s rating downgrade will make to the markets, because mighty though S&P may be, its influence is a function of its ability to accurately assess things already going on. In other words, shooting the messenger, as the White House apparently hoped to do, does not change the reality the messenger was trying to convey.

Nor has S&P stumbled upon extraordinary information of which the world was unaware. The problem is not S&P. The problem is U.S. government spending and borrowing so profligate that American debt now tops annual GDP. The deeper problem, driving all this, is that American politics has become a realm in which the response to every difficulty of the human condition is for government to amass more power and dole out more money. The presumption of the U.S. government by now is that Americans cannot be trusted to arrange for their own medical care, pay for their own tuition, save for their old age, or “create or save” their own jobs. Big Brother will do that for them, even if the resulting rise of the dole and erosion of the private sector means 9.1% unemployment, almost 50 million Americans using food stamps, a stalled economy, soaring public debt, and now, a long-term credit rating lower than that of Australia, Hong Kong or France.

All the debate and Tea-Partying to date has made some difference. But it has not yet prevailed to change the profligate and power-hungry dynamic in Washington.There have been plenty of wake-up calls these past few years, but too often they have been smothered by Washington’s vast political fog. Among ordinary Americans, who has time to keep track of  the trillions spent, the endless expanding government programs, or the to-and-fro over deficits variously projected over the next decade?

The virtue of the S&P downgrade is that it serves as a simple bottom line. For a long, long time, the U.S. government earned itself a triple-A credit rating. It’s gone. Downgraded. Maybe, just maybe, that’s exactly the sound bite Americans need to hear, to concentrate voters’ minds on how to get that AAA rating back.

Article printed from The Rosett Report: http://pajamasmedia.com/claudiarosett

URL to article: http://pajamasmedia.com/claudiarosett/the-upside-of-the-downgrade/

I have also read suggestions that bond hawks could force the return on US Treasuries to climb to 9% (although the timeframe was not given), crushing the ability or willingness of the US government to borrow any more. Thinking back to when the US Treasury used high interest rates to crush inflation back in the early 1980's, this will be increadiby painful, but the pain will only be intensified the longer the US government (and by extension various Blue State and municipal governmens running huge deficits and debts and unfunded liabilities) continues on the present course.

The narrative of the TEA party movement has become that much stronger, even severely normal American voters with limited engagement in politics now have a clear and compelling principle to focus on (loss of AAA credit rating), and can easily compare this to their own household budget ( the government lost the AAA rating by spending more than they are bringing in).

The issue Canadians need to be concerned with is how can we build a firewall to limit the damage to our own economy? For that matter, what can we as individuals do to protect ourselves and our families?

 

[Nemo888]

Keep cuts to less than half of GDP growth and open up trade to make up for shrinking American imports. We did sell more lumber last year to China than the US. Time to pretend we don't care about human rights and do the "trade opens China to the world more than protest" dance. Hope like hell we can find those markets and drum up business. Secondly hope that growth is strong enough that we don't pile on too much debt till this depression turns around.  Maybe a short term payroll employee side tax cut, but nothing stupid like slashing the GST. Stay the course. Cutting public spending too quickly will send us into a tailspin like the US. Alberta would hate it but that big pile of black gold up there could be taxed a little more in the short term to keep us from going down the toilet if things get worse.

 

[ModlrMike]

Keep cuts to less than half of GDP growth and open up trade to make up for shrinking American imports. We did sell more lumber last year to China than the US. Time to pretend we don't care about human rights and do the "trade opens China to the world more than protest" dance. Hope like hell we can find those markets and drum up business. Secondly hope that growth is strong enough that we don't pile on too much debt till this depression turns around.  Maybe a short term payroll employee side tax cut, but nothing stupid like slashing the GST. Stay the course. Cutting public spending too quickly will send us into a tailspin like the US. Alberta would hate it but that big pile of black gold up there could be taxed a little more in the short term to keep us from going down the toilet if things get worse.

I think we should give some credit to prior efforts to diversify our trading partners. While we like to say that 80% of our trade occurs with the US, I think the real number is somewhat smaller. We should continue this trend... shades of not putting all of our eggs in one basket. It's fair to look at the oil sands as a strategic financial reserve. Increasing the tax revenue from that source will be painful indeed, but if done carefully, the pain should be limited.

 

[Edward Campbell]

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the Ottawa Citizen, is a timely and, I think, pretty fair  interpretation of the credit downgrade:

http://www.ottawacitizen.com/business/Downgrade+where+counts+pocketbook/5217242/story.html

Downgrade to hit U.S. where it counts: the pocketbook

By Jacqueline Thorpe, Financial Post August 6, 2011

They warned the United States clearly enough: anything short of a US$4-trillion cut to its debt mountain likely would cost the country its AAA credit rating.

When the downgrade from Standard & Poor’s finally came, after a week of turmoil on financial markets and months of the farce in Washington over the debt ceiling, it was shocking nonetheless.

It is not clear what the cut will mean when markets open in Asia — though analysts expect stocks to dive again — but it is still a stinging indictment of the U.S.’s political class.

S&P made clear the downgrade was as much about the inability of squabbling U.S. politicians and the American people themselves to grasp the seriousness of their debt problem as the debt problem itself.

“The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium term debt dynamics,” the S&P statement said. “More broadly, the downgrade reflects our view that the effectiveness, stability and predictability of American policy-making and political institutions have weakened at a time of ongoing fiscal and economic challenges.”

Now its unwillingness to tackle its debt problems head on (the deal finally reached will only cut US$2.4-trillion from the deficit over 10 years) is finally going to hurt the United States where it counts — in the pocketbook.

Of course, in the wacky world of financial markets, investors might initially flee to U.S. government debt, the very instrument that has been downgraded. That may help put a floor under the debt market for a bit, keeping yields and borrowing costs down.

The mighty U.S. government debt market, which serves as benchmark for all other markets around the world, has perversely thrived during the recent U.S. debt negotiations. It is a huge and bottomless pool of liquidity, where instruments can be easily traded. And it is seen as the lesser of other evils in this screwed-up global economy — particularly when eurozone debt is wrapped up in a drama of its own.

“A double A-rated Treasury bond still stands head and shoulders above the rest in the global universe of the most liquid and safest securities,” notes Dr. Nicholas Spiro, managing director of Spiro Sovereign Strategy in London.

The fact that Moody’s Investors Service and Fitch Ratings did not downgrade the United States may also soften the blow for a bit.

But the S&P downgrade eventually will cost the U.S. Investors will begin to demand higher interest rates for Treasuries in order to compensate them for the higher risk and this will raise U.S. borrowing costs.

“Over time, Washington’s borrowing costs will rise materially and further aggravate the need for additional austerity,” said Derek Holt, vice president of economics at Scotia Capital.

A vicious cycle may develop, as it has in Greece, where further spending cuts, needed to right the fiscal ship, drag down the ability of the economy to grow.

“It’s an indication clearly that the United States is on a downward path to growth destruction via the debt structure,” said Andy Busch, chief foreign exchange strategist at BMO Capital Markets in Chicago.

The downgrade undoubtedly will hit global confidence and equity markets just as they are already despairing over the possibility of another U.S. recession. It could also disrupt the inner workings of financial markets as the higher cost of owning U.S. government debt ripples through the system. Analysts expect an ugly start to Asian trading on Sunday night.

“The immediate market reaction on Monday is likely to be pronounced and overwhelmingly negative as investors scramble for ways to assess the knock-on impact of the downgrade on other U.S. and international corporate and public securities,” Spiro said. “There is likely to be further volatility, downward pressure on the dollar and even steeper fall in equities and increased fears of a double-dip recession.”

But will the downgrade be enough to spur the massive effort to return some fiscal sanity to the United States? Busch said that is the United States’ only hope.

“I firmly believe this is a seminal moment for the United States,” he said. “It can go down two paths. The past of least resistance is to raise taxes and cut spending a little bit and the country will limp on and become Japan. Or it could be like 1986, where we had serious tax reform that led to a boom at the end of the eighties.”

Serious fiscal reform would require dropping a bomb on the current U.S. tax system and replacing it with one that eliminates most exemptions, subsidies and credits, widens the base to include corporations and the rich and lowers the rate for all. Most importantly, it must allow the U.S. economy to grow.

That is the job ahead.

Postmedia News
© The Financial Post

 

[Northalbertan]

Keep cuts to less than half of GDP growth and open up trade to make up for shrinking American imports. We did sell more lumber last year to China than the US. Time to pretend we don't care about human rights and do the "trade opens China to the world more than protest" dance. Hope like hell we can find those markets and drum up business. Secondly hope that growth is strong enough that we don't pile on too much debt till this depression turns around.  Maybe a short term payroll employee side tax cut, but nothing stupid like slashing the GST. Stay the course. Cutting public spending too quickly will send us into a tailspin like the US. Alberta would hate it but that big pile of black gold up there could be taxed a little more in the short term to keep us from going down the toilet if things get worse.

In reference to above, if oil prices hover around the $90-95 range the oil industry could swallow a small royalty increase, but a lot of the oil produced in Alberta is from the oil sands.  Due to the expensive recovery methods (SAGD more than open pit nowadays) it costs about $75/barrel to recover the oil.  If oil prices continue on the trend of the last few days you will probably see a lot of resistance to a tax increase from the oilpatch and the Alberta government.  Like it or not the oil industry is driving the economy of Canada right now with billions of dollars flowing to provincial economies outside of the west, Ontario being a big one to benefit from the activity out here.

As an aside, the Chinese have invested billions in the oilsands, having strong Asian trading partners is key to getting away from our dependence upon the American market. 

My 2 cents.

 

[PPCLI Guy]

  Like it or not the oil industry is driving the economy of Canada right now with billions of dollars flowing to provincial economies outside of the west, Ontario being a big one to benefit from the activity out here.

Sigh - this old saw again.  What exactly is the mechanism whereby Alberta money gets given to Ontario?

 

[Edward Campbell]

I was listening to 'Meet the Nation' or 'Face the Press' (or whatever the Sunday morning talk shows are called) and Alan Greenspan made two points that I think matter:

1. Whatever the 'solution' is it will include some (much? most?) of Bowles-Simpson ~ which is a little depressing because it means that all this 2011 angst was avoidable; and

2. Whatever the 'solution' is it will involve pain - both tax increases and programme spending cuts hurt the economy in the short term (the former more than the latter according to Greenspan) and, of course, programme spending cuts are hard (painful) for politicians because Americans, like Canadians, feel very much "entitled to their entitlements," as David Dingwall might say.

The question is: how long will it take the American political classes to realize that Greenspan is right ... assuming he is, of course.

 

[KJK]

Sigh - this old saw again.  What exactly is the mechanism whereby Alberta money gets given to Ontario?

NorthAlbertan is absolutely correct if you reread his statement. Money is not given to Ontario, contracts are given to Ontario companies thereby sending money from Alberta to Ontario.

As for taxing oil on a federal level the CPC would never try because that would kill their chances of reelection. The liberals might try it as they have already written off the west in terms of votes. Just remember people out here remember the NEP and aren't likely to stand for a second go at it. Also it wouldn't hit only Alberta this time but BC and SK too. That's a lot of annoyed voters.

My $.02

KJK

 

[Northalbertan]

NorthAlbertan is absolutely correct if you reread his statement. Money is not given to Ontario, contracts are given to Ontario companies thereby sending money from Alberta to Ontario.

As for taxing oil on a federal level the CPC would never try because that would kill their chances of reelection. The liberals might try it as they have already written off the west in terms of votes. Just remember people out here remember the NEP and aren't likely to stand for a second go at it. Also it wouldn't hit only Alberta this time but BC and SK too. That's a lot of annoyed voters.

My $.02

KJK

Thanks for clarifying my point.  We are pretty good at getting the oil out the ground out here but Ontario and Quebec have the manufacturing base to produce the equipment we need to accomplish that.  The money made from oil benefits all of Canada. 

The other mechanism is called transfer payments which Quebec wisely uses for daycare instead of infrastructure.  :

 

[PuckChaser]

The other mechanism is called transfer payments which Quebec wisely uses for daycare instead of infrastructure.  :

Bridges aren't flashy and don't buy votes.

 

[Northalbertan]

I was listening to 'Meet the Nation' or 'Face the Press' (or whatever the Sunday morning talk shows are called) and Alan Greenspan made two points that I think matter:

1. Whatever the 'solution' is it will include some (much? most?) of Bowles-Simpson ~ which is a little depressing because it means that all this 2011 angst was avoidable; and

2. Whatever the 'solution' is it will involve pain - both tax increases and programme spending cuts hurt the economy in the short term (the former more than the latter according to Greenspan) and, of course, programme spending cuts are hard (painful) for politicians because Americans, like Canadians, feel very much "entitled to their entitlements," as David Dingwall might say.

The question is: how long will it take the American political classes to realize that Greenspan is right ... assuming he is, of course.

There is no way out of the American crisis that does not include a tax increase.  You have to increase revenues in order to pay the debt the Americans have accumulated.  Get rid of the exemptions and add a small across the board personal income tax increase would help them greatly. All but impossible to get the politicos to chew on that with an election drawing down upon them. 

Decreasing the size of government would have to be a part of the process as well.  As you say program cuts are painful but necessary as well.  They are going to have to bite that bullet sooner or later.  Decreasing the size of government wouldn't hurt us any either. 

But I would expect both governments to feel a lot of pressure from some of the more powerful public sector unions making the choice that much more difficult.  I don't imagine we'll see much in the way of new taxes or program cuts down south, outside of what was agreed to recently, 'till after the next presidential election.

NorthAlbertan