Are US Fiscal Issues Really Over?

Tyler Durden's picture

Despite the recent sharp narrowing in the U.S. federal budget deficit, the U.S. fiscal policy outlook carries financial stability risks, driven by three factors (aacording to the OFR - aka, The Treasury). First, a rapid pace of deficit reduction carries economic costs. Second, a clear resolution of the nation’s long-term fiscal challenges is still lacking. Finally, the political process for implementing sustainable fiscal adjustments has become more uncertain.

(click for large legible version)

Chart: Goldman Sachs

But this substantial fiscal adjustment carries two risks. First, it has created a fiscal drag on an economy that remains weak. Second, it creates an extra burden on other policy levers to support the economy. A policy mix that keeps short-term interest rates and unconventional monetary policy tools in place for an extended period potentially increases future risks to financial stability, whether through excessive risk-taking in credit markets or through volatility and interest rate shocks.

Delays in addressing long-term challenges could have longer-term, and potentially permanent, adverse financial stability consequences.


While everyone is still bleating over the success' of the budget deal (despite its betrayal), the next few months have plenty of potential mines for fiscal fragility.

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HedgeAccordingly's picture

Likely no. Though the inflation game is now on and Fed, depsite the "tapir"; is clearly worried about deflation. How much more QE is left? likely more than most academics are willing to admit because in the end their compensation is tied to pushing their employer's views.

max2205's picture

Like killing FASB, eliminating ceilings and government limits removes all 'issues'.....brilliant why didn't we do this before?    Oh wait

Rafferty's picture

So what's going to happen?  I've been reading for 5 years that we fall over the cliff 'within minths'.  I'm still hearing it.

NoDebt's picture

"Delays in addressing long-term challenges could have longer-term, and potentially permanent, adverse financial stability consequences."

I've been hearing this for 20 years.  It's like the weather.  Everyone complains about it, nobody does anything about it.

This is the path we are committed to.  All levers have been pushed into the "run until failure" position.  No going back now.  Any attempt to fix it by rational means will only hasten it's failure.  And everyone knows it.

kridkrid's picture

I agree completely, excpt for "everyone gets it". I think something like less than 5% of the general public grasps what you just wrote.

JLee2027's picture

They didn't actually "cut" anything, just raised taxes to close the deficit. So, no not over, just beginining.

disabledvet's picture

not true at all. we have had a massive austerity in the USA that is only coming to light right now. No Syria, no ACA. Now the Fed pulls the trigger on "taper which is not tightening." hmmmm. so if QE is stimulus how is "taper not tightening"? because "I sez so"? REALLY? I think we'll see an outright deflation scare hit us in the coming days or weeks. Prepare accordingly.

artless's picture

"we have had a massive austerity in the USA that is only coming to light right now. No Syria,"

You might want to look up something called baseline budgeting before you write something as idiotic as this. Austerity? You've got to be kidding. NOT A SINGLE DOLLAR has been cut from the budget in total. This is a fact or arithmetic. The only thing that has happened is the increase in tax revenue and the short term follover of debt in a zero interest environment thus lowering the debt payments through interest rate and closing a bit of the DEFICIT through higher tax income. Same as it was during the later Bush years WITH THE RECORD TAX INCOME and during the Clinton years when they began this nonsense and actualy had the gall to announce a surplus.

Has the 17+ trillion gone down. No. Because we do not make payments on the principle. Never have in my lifetime. Never will.

Perhaps the most idotic part of the whole post is this deflation fear and the idea that government profligacy and proerty confiscation (taxes to all you statist assholes) somehow is the source of economic prosperity. Sure it is to some. I think folks use the term "the 1%". Probably a lot less than that since in reality only the zombie financial field really gets the behefit. without QE, TARP, and the Fed and its hand in deficit spending the Goldmans JPs Bof As of the world would be dead and gone several years ago.

And as we all know we can't have that.


yrbmegr's picture

We don't really need a whole post on this, do we?  We're still running a deficit, and projected to do so, increasingly, in the future.  Of course we still have fiscal issues.

ultimate warrior's picture

The government has agreed that they will never cut anything. When politicians act like it's the Apocalypse when discussing trivial fractions of one percent cuts to the budget and no agreement can be made on those cuts, it is safe to assume that government spending and FED money printing to finance the deficits will continue on to perpetuity.   

Anyway, just continue to stack and when you are with your family and friends this week just take a moment to appreciate the time you have with them because things might start to unravel this coming year.


Merry Christmas Zerohedgers!

MontgomeryScott's picture

"Despite the recent sharp narrowing in the U.S. federal budget deficit,..."

Of course, I missed the 'sarc' tag here (call me STUPID).

The Federal debt (see 'deficit' for legal terms as MONEY OWED to another or others; the difference between monies on-hand and monies spent; or, for the simpler concept, the balance on the national Credit Card) is now 'officially' just over $17.4 trillion. That's TRILLION, with a 'T'. 

I presume that this article statement describes the DROP in the RISE of this debt/deficit (otherwise known in FedSpeak as 'Look in my right hand, over here! Pay NO attention to my LEFT hand! There's another one born every minute!).

Gee, silly ME. it DOESN'T.

IT holds the bullshit line that the 'deficit' has 'sharply narrowed' or some hyperbolic non-sequitor BULLSHIT that 'economist' fucks like to use as 'official terminology' do describe an ever-RISING debt/defecit/'whatthehellareweborrowingmoretogivetotheFSAfor' (because we HAVE to keep SPENDING more than we have, BUT, see, we raised taxes...).

I remember the time when Social security receipts were NOT counted in the 'general fund' as 'income' to these pricks in D.C....right before CLINTON' left office with a so-called 'BALANCED BUDGET' using them...

Lednbrass's picture

There is no narrowing of the deficit at all, one of the Tylers is just plain wrong here. It's rare to have to point this out here, but better research was needed.

Total debt at the end of the last fiscal year on September 30- $16,738,184,000,000

Total debt as of today-$17,250,434,606,937

That's $512 billion deficit in not even three full months of the current fiscal year, is is not narrowing by any stretch of the imagination.  Additional taxation isn't slowing anything down, the deficit is actually accelerating again so far this year.

Anyone who looks at Clinton's numbers can also see that there never was a balanced budget unless it is somehow possible to increase debt under a balanced budget, pure lies.

artless's picture


No dude these guys actually BELIEVE this shit. Throw around a bunch of government supplied numbers shake, strain into a coktail glass and enjoy!

Good point about the SS thing. I forgot that one. Kinda like how the folks that have "left the workforce" aren't counted as unemployed and therefore actually help the official rate decline. I nelive there is a ZH post out there which runs numbers on the current rate of workforce decline that if held contant will give us 0% umemployment by the 2016 inaugeration of POTUS.

Can't wait for that headline.

A Lunatic's picture

Yes, we have clearly turned a corner thanks to George Bush, Barack Obama and Ben Bernanke. Their tireless efforts to save us from the most spectacular recession in modern history have paid, and will continue to pay, great dividends........

-The 1%-

surf0766's picture

deficit reduction will never happen in any country where people like free shit.

kridkrid's picture

Red herring. The deficit is going up because our debt based Ponzi scheme of a monetary system needs to be fueled by ever increasing issuance of debt.

surf0766's picture

There are millions of ways to define free shit.

newsguy68's picture

Someone forwarded me this intel today...


Iran Plans to Launch an Electro-Magnetic Pulse Nuclear War Against the US

A Lunatic's picture

The U.S. Gov is planning a grid down test scenario toward the beginning of the new year. That could open the door to all sorts of interesting happenings. Who knows.......

MontgomeryScott's picture

In the real world, announcments like this are called 'BEX ALERTS'.

I suppose they are now only MONTHS or WEEKS away from perfecting their weapon!

Hale-Bopp SHALL return! (sarc!, snark!)

Jonestown, Guayana IS the source of the expression 'drink the Kool-Aid' (true story).

Bomb, bomb, bomb...bomb, bomb Iran!

How's HAIFA and ALEXANDRIA, right now? Doing well, newsguy?

knukles's picture

It's all fine and been fixed by our honorable trusted public servants

Go back to sleep.
They won't come till morning.
Early morning.

MontgomeryScott's picture

They (THEM, the 'NO-KNOCK RAIDERS') usually come at about 25 (or 6) to four (in the morning), right about the time when the 'smart meters' begin to transmit their data (or, the time when most humans have entered their deepest dream state and are the most difficult to arouse, according to studies published by the CIA, Stanford, the California University system, and the affiliates in Russia and olde 'nazi Germany').

You KNOW I'm right about this 'conspiracy theory' postulate, don't you?

They call it 'predictive programming', 'knuckles' (AKA 'Zippy The Pinhead').

Yeah, RIGHT!

YOU thought it was about methamphetimines, didn't you?


It was actually a very large 'underground' hit, by the band 'Chicago'. In fact, it was THE song that put them on the 'top whatever Hollywood chartopia' thingie, back in the day.

It was a WARNING (Of course, don't do drugs, silly people...) of the times and places that those who think themselves 'immune' will be summarily treated to such as has NEVER been wrought in all the history of mankind...about 3:30 in the morning...


jhalmos's picture

When is that fucking Blackrock ad going away so I can read a ZH article?

MontgomeryScott's picture




'What to I do with What do I do wi What do I doWhat doIWha...with 'my' MONEY?'

Oh, the violin strings, and the hope of a 'new promise'...


(of course, thre's always that upper-right-hand box with the 'X' on it, so that the ad will finally go away...and the 'volume' control thingie on your (name the internet device in the following empty space:                  ).


You shall NOT ESCAPE!

wisehiney's picture

Is yellen so fat that it takes her two trips to haul ass?

MontgomeryScott's picture

Which cheek(s) (of her ass)?

The ones on her face, or the ones that hang from her hips?

Frigging DEUCE AND A HALF, FOUR TIMES! Rev 'em up, and move 'em out, boys...

wisehiney's picture

Hold on, I'm trying to find the Merrill Lynch "Special Needs Calculator".......

MontgomeryScott's picture

Every time I try to power up my 'Merrill Lynch' special promotional series limited edition' ('special needs' is so raycist in this day and age!) calculator/Foxxcom Ipod, it keeps playing an old television commercial:

'Merrill Lynch. Bullshit on America.'

Then, the worst part: It starts automatically replaying old sitcom reruns of 'Happy Days', interspersed with advertisments from Mutual Of Omaha...

wisehiney's picture

The worst part is that they have jumped the shark, even in the Wild Kingdom.

MontgomeryScott's picture

WHAT was the name of Marlin Perkins' sidekick?

WHICH day of the week was 'The Wild Kingdom' broadcasted on?

WHAT television show immediately followed it?

WHAT television network aired this in the CONUS?

(The FIRST question is a 'trick question', because ol' Marlin had SEVERAL 'sidekicks')

(The THIRD question's answer has to do with some dude named 'Walt', and a defunct Orange grove east of Los Angeles, that he turned in to a 'wonderful world')

     The WORST part is that I actually might know the answers to these questions, even though my parents were too cheap to buy a 'new color television'. What has been done already is original, and everything that followed from this point is merely a repeat, a carbon-copy. That twit in Australia was merely IMITATING 'The Wild Kingdom' (as far as 'jumping the shark' or whatever).

     Jamie Dimon is as Morgan WAS, and Madoff is as Ponzi WAS. Warburg WAS, but Bernanke tried to be (and failed miserably). Look at the Choomer-in-chief...HE wanted to be the frigging BLACK JACK [KENNEDY] (Allah bless this poor gay mulatto Soetoro self, peas be upon him).

Now, CHENEY...HE does a good imitation of Il Duce (despite his battery-powered and web-vulnerable electronic machine heart), and KISSINGER...well, HE is a pretty good imitation of fucking SATAN...but THEY can NEVER hope to be as good as their mentors were...

But, I digress...

wisehiney's picture

There was color tv back then? We could get two black and white channels on a good night.

Gutenberg's picture

The deficit this year is over 525 billion dollars and its day 83 of this fiscal year. How is this under control?

MontgomeryScott's picture

I can't BELEIVE you could actually ASK this question, without looking at all the 'emergency expenditures', Gutenberg!

The 'government shutdown' was AVERTED, the SNAP charges at Walmart-USA were COVERED, the Obamacare website is a COMPLETE SUCCESS (now costing over one BILLION of your figure), and, of course, we ALL have ONE MORE DAY to sign up for fascist taxation insurance fraud (can you even IMAGINE how much it costs to keep the site open for 24 hours? One hour? One MINUTE? One SECOND? I mean, it's like looking at the 'debt clock' and trying to keep up with the small numbers (the ones to the RIGHT of the two commas)!

EASY 500 billion!

Say, can you answer this question:

What's in YOUR wallet? (how about, 'where the fuck is your wallet, plebe? Give it to me!')

Oh, those like you 'questioning domestic economic terrorists' are, of course, needing a little 're-education'...

(SARC comment!)

disabledvet's picture

"the last time interest rates were this low was 1945." hmmmm. 1945. Let's see...yep! definitely a small Government year!

TheMeatTrapper's picture

As long as we can print money at will and everybody agrees that it is money - then there are no fiscal issues. 

The minute that people decide that our "money" isn't worth shit, the entire charade falls apart in the blink of an eye. 

The problem is, all the Fed has to do is make sure we are the best smelling shitty diaper in the tub. Until the Euro, the Ruble or the Yuan starts smelling better than the dollar - nothing will change. 

All I can do is keep buying silver, one ounce at a time and stack it for my son. 

Reaper's picture

Government Double Speak: The government accounting assumes an increased budget spending each year. So, if the budget spending minus expected revenues is below their prior assumed increase, they call that savings. The budget deal only has projected savings over ten years with the projected reductions and projected tax revenues to occur in later years. It's like a drunk promising to give up drinking in two years and be sober in ten. They have to hit bottom before there is an hope for a change.

Teknopagan's picture

All hail. One hundred years of the Third Central Bank of the United States. It's birth 100 years ago tonight. Thank you Rothchild, Jacob Schiff, Paul Warburg and especially good old Woody (Peck's bad boy) for signing it into life December 23, 1913. Thank you for great wars and total wars, depressions, distortions, lies and the extermination of so many Europeans.  Couldn't help myself.....

I Write Code's picture

Fiscal is over.

We are all bitcoin now.

Yen Cross's picture

     You have to go to foreign newspapers to get any sense of reality. I can't wait to see how the MSM bullshits their way out of these figures.  Americans stay home as Christmas store traffic drops 21pc

disabledvet's picture

"we're gonna need a bigger boat."

TheRideNeverEnds's picture

well thats only moderately bullish, ES will probably only be up another 20 points this week.

overmedicatedundersexed's picture

if 95% get brain washed about the economy,  gov debt, fiat, the wisdom of our leaders, then those 5% doubters are sick and need to be medicated for their own good. the Recovery is here now, unemployment is dropping GDP is expanding, debt and QE are being cut. now feel good, and start buying cause we are in good hands.

q99x2's picture

Virtual is in. Fiscal is out.

Fraud is god. But what's it all about.

enloe creek's picture

defaults would be the order of the day had TPTB not intervened. now the debt time bombs are in slumber, lulled by printing soon all kinds of hell will break loose your eArnings will collapse in value the system is FUBAR
so what be the answer