Daily Archives: October 12, 2012

Far from being a morale booster at a time of austerity, today’s Nobel award is a grim reminder of just what bad times the European vision has fallen on, debased by the unresolved euro crisis. But the Nobel is awarded for what the recipient has done abroad – and today, there is no European foreign policy today to speak of. The best Nobels go to brave individuals and institutions that defy their times and peers to open a path to peace. This Nobel seems a bizarre and sentimental tribute to Europe’s past that further shames its present. Only a Nobel for economics would have seemed stranger.

 

At the beginning of next year, federal tax increases and spending cuts equivalent to about 5 per cent of the entire US economy will automatically come into effect, unless Congress does something to avert it. If America falls off this “fiscal cliff”, the nation will plunge into recession. Ironically, the spending cuts will be triggered because Democrats and Republicans in Congress have been unable to agree on a plan for long-term deficit reduction. Yet as a practical matter, negotiations will drag on into the new year and, because everyone knows that the final compromise will be made retroactive to the start of the year, the cliff won’t feel like much of a cliff. With any luck, by the time significant tax increases and spending cuts take permanent effect, unemployment will already have dropped and growth will have accelerated. America’s irrational and irascible political process may come up with a timetable for reducing the budget deficit that’s surprisingly sensible.