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Thursday, April 14, 2011

Obama Vs. Paul Ryan & Taxation On Billionaires (Its About Time!)

I Was Extremely Pleased With President Obama's Speech Last Night On Improving Our Nation's Fiscal Situation, As Were Many Of His Base Constituents. Especially The Part About Making Super Wealthy Citizens Pay Their Fair Share Of Taxation Versus Paying NOTHING Such As Most Of Them Are Paying Now. Thank You President Obama!

Its About Time Pres. Obama Finally Stood Up To His GOP Counterparts In Congress. For Too Long After His Election He Has Bowed Down To White, Republican Leaders As If He Were A Butler Or Servant. Telling Congressman Paul Ryan To His Face That He Does In Fact Plan To Raise Taxes On The Super Rich, Was A Bold Political Move That Won My Approval.


What Paul Ryan Didn't Tell You Is That His Plan Is A Growth Killer

Republican Paul Ryan's plan to cut the deficit, which debuted last week, claimed it would cut government spending and drive U.S. growth. In fact, he described his plan as, "Each and every reform in this budget is advanced with a clear focus on economic growth and job creation." More specifically, Ryan said his plan "Spurs economic growth, increasing real GDP by $1.5 trillion over the decade."

But the result of the plan's implementation couldn't be more anti-growth, according to research from Societe Generale analyst Rudy Narvas.

If we use the Debt Commission proposal as the template for the Obama plan and assume the budget is balanced through general spending from 2011 to 2020, the average annual hit to GDP could range between 0.9pp to 3.0pp.

The Republican plan which looks for steeper spending cuts would have an impact of somewhere between 1pp to 3.6pp. The analysis does not take into account the potential hit to GDP from the revenue side of the Fiscal Commission report which would likely result in a further drag to GDP. In our forecasts for the US economy, we did not take into account any austerity measures by the US federal government. If any plan is passed that has a similar deficit reduction trajectory of the two plans, we may have to adjust our GDP forecast down for 2012 and beyond.

Similarly, the deficit commission's proposal would also have a negative impact on GDP growth, at about the same rate as the Republican proposal, according to Narvas.

This visualization certainly backs up Larry Summers comments on the UK's austerity plans, that a cuts for growth strategy was "oxymoronic."

More worrying even is that a decline in GDP growth is likely to lead to a decline in tax revenue, which would add to the deficit.

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Sources: Business Insider, MSNBC, Youtube, Google Maps

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