Tom Woods shares Bob Murphy's post on the fiscal cliff and includes this line, referring to my post the other day:
"Daniel Kuehn, Bob’s nemesis, crunches the numbers a bit differently, but still finds a vast imbalance between spending cuts and tax increases, and agrees with Bob that the panicked talk is overblown."
I don't know if I'm Bob's "nemesis", but it just sounds too good to quibble with that part. There is an imbalance between the part dedicated to spending cuts and tax increases - that's why all the news sources are characterizing this first and foremost as an automatic tax hike.
But I would take issue with that last line - that I agree with Bob that the panicked talk is overblown. This is really terrible policy. The last thing we need in a weak labor market where the Fed seems to be targeting an unemployment rate 1.3 percent above estimated NAIRU is to impose fiscal austerity through tax hikes and spending cuts. People seem aware that this is a problem, but this is primarily treated as a deficit problem to be solved, not a jobs problem to be solved. So no, discussion of the fiscal cliff is probably not overblown. I'll start thinking we have the right attitude on this when someone comes to the table with a proposal to change nothing immediately and instead of just doing a continuing resolution setting a new sunset date for these taxes and beginning the process of long-term entitlement reform (primarily Medicare). In other words, when something even modestly resembling the Romer plan is on the table I'll think they're taking this seriously enough.
Introduction to Algorithms, Lecture Three
1 hour ago