Wall Street To Washington: Spending Cuts Alone Aren’t Enough

Washington is looking at the budget talk in Washington, and it doesn’t like what it sees:

(Reuters) – A majority of top Wall Street bond dealers and money managers say spending cuts alone cannot solve the U.S. budget problems and tax increases must be part of the mix.

In a Reuters survey conducted on Tuesday, 17 out of 29 fund managers and economists representing major Wall Street bond dealing firms said the Republicans’ favored option of spending cuts alone would not a work.

The good news for politicians is that big Treasury market players say they have a couple of months to hammer out a solution. Twelve out of 23 surveyed said the government had until the end of July before the bond market would start to worry.

The bad news is any deal requires a compromise between anti-tax Republicans and Democrats, who support social spending programs known as entitlements — positions that each side is holding onto dearly ahead of 2012 elections.

A middle path is needed, Wall Street said.

“I would ask Republicans to come up with new revenues that don’t undermine incentives to work and invest. And I would ask Democrats to recast entitlements in a way that doesn’t compromise the social safety net,” said Bob DiClemente, head of U.S. economic and market analysis at Citigroup in New York.

Nine of the respondents said a deal could still be credible without dealing with the popular but huge entitlement programs, Medicare, Social Security and Medicaid before the 2012 elections.

Eight said such a deal would not be credible and the rest did not answer.

There’s not much time left. We will hit the statutory debt limit in about five days, and Treasury Department it can only go until August 2nd at the latest before the nation would start defaulting on it’s debt. The time for all sides to act responsibly is, it seems clear, long past.

 

FILED UNDER: Deficit and Debt, Quick Takes, Social Security, Taxes, US Politics
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010 and contributed a staggering 16,483 posts before his retirement in January 2020.

Comments

  1. john personna says:

    In a Reuters survey conducted on Tuesday, 17 out of 29 fund managers and economists representing major Wall Street bond dealing firms said the Republicans’ favored option of spending cuts alone would not a work.

    Bond managers? Marxists!

  2. Patrick T. McGuire says:

    A majority of top Wall Street bond dealers and money managers say spending cuts alone cannot solve the U.S. budget problems and tax increases must be part of the mix.

    Aren’t these the same clowns that needed a bailout back in 2008 because they couldn’t manage their finances?

  3. JKB says:

    Hey, Wall Street, give us our cash back with interest then you can have an opinion. Until then, just remember, if the US defaults, it’s your assets on the line.

    Also, the US will not default on our debt. The Treasury has already said it will roll over the current debt. What we won’t be able to do it incur new debt, which means cutbacks on new expenditures over current receipts. That is what happens when your credit card is cut in half.

  4. Herb says:

    What we won’t be able to do it incur new debt, which means cutbacks on new expenditures over current receipts.

    Who told you that?

    Probably the same person who told you that the US debt acts like a credit card……

  5. mantis says:

    JKB,

    Economics is not fit for children. Go play in the yard.

  6. Robert Bell says:

    Doug: “The time for all sides to act responsibly is, it seems clear, long past.”

    The one thing I would say about Republicans in particular on this score is that the majority of House Republicans voted for the Ryan plan which implies greater deficits, and hence debt, over the next few years, yet Republicans are also playing chicken with the debt ceiling. So it seems to me a necessary prerequisite for House Republicans to decide amongst themselves what level of debt they are comfortable with, and then determine a debt ceiling based on that.

    So I don’t know about value judgements like acting “responsibly”, but it does seem that at a minimum the Republican side of the aisle should be intellectually coherent to enter negotiations.

  7. john personna says:

    JKB, not if you count the TALF windfall they didn’t!

    (pay back)

  8. hey norm says:

    Bob DiClemente sounds like a smart man. “…“ask Republicans to come up with new revenues that don’t undermine incentives to work and invest…ask Democrats to recast entitlements in a way that doesn’t compromise the social safety net…”
    And ask everyone to agree that we do not need a Pentagon budget that is 20% of our fiscal spending.
    This really doesn’t seem too difficult to me. But then again you have a Republican party refusing to vote for Republican proposals and programs…so is anything actually possible?