I did not watch the Sunday morning political shows (I prefer to keep my breakfast down most weeks) - but apparently the mantra by the "fiscal conservatives" is rather than make any decisions that will actually cost them a vote, we will fall back to the easy ethereal solution: "growth will take care of our debts". Since that policy worked so well in the '00s.....
In fact per Moody's (hat tip ZeroHedge)
From a credit perspective, the negative effects on government finance are likely to outweigh the positive effects of higher economic growth. Unless there are offsetting measures, the package will be credit negative for the US and increase the likelihood of a negative outlook on the US government’s Aaa rating during the next two years.
Higher economic growth should have a positive effect on government revenues and reduce payments related to unemployment. However, the magnitude of this positive effect will be considerably less than the foregone revenue and increased benefit expenditure, resulting in substantially higher budget deficits than would have otherwise been the case.
But but but.... we're going to grow our way out of the problem Moody's!
Of course there is the elephant in the room... we've kicked the can 2 more years and you can be SURE in 2012 we'll either say "we can't stop these expenditures or increase taxes because it will threaten the recovery and/or worsen the slowdown....." I can already write the talking points.
In addition, there is a risk that the two-year extension may be renewed at the end of 2012, given that that period coincides with a presidential election.
Somehow I expect I'll be posting the same Walker videos in 2015.
[Jun 10, 2010: My Choices for President and Secretary of Treasury in 2012 or 2016]
[Mar 31, 2010: David Walker - U.S. Standard of Living Unsustainable Without Drastic Action]
[Jan 6, 2010: David Walker CNBC January 2010 Video]
[Aug 7, 2008: I.O.U.S.A. Movie Trailer]
[May 23, 2008: David Walker on CNBC this Morning]
[Nov 23, 2008: David Walker in Fortune Magazine]
[Mar 26, 2008: Annual Spring Entitlement Warning Falls on Deaf Ears]