webfact Posted November 9, 2012 Share Posted November 9, 2012 GUEST COLUMN US fiscal cliff: Will Thailand fall off too? Chodechai Suwanaporn BANGKOK: -- Beside the euro-zone crisis, another concern for the global economy is the so-called US "fiscal cliff". The term was first used by Ben Bernanke, chairman of the US Federal Reserve, in late February before the House Financial Services Committee: "A massive fiscal cliff of large spending cuts and tax increases" on January 1, 2013. Now, we need to understand what the fiscal cliff is and the implication for the Thai economy in 2013. First, the fiscal cliff refers to a large predicted reduction in the budget deficit and a corresponding projected slowdown of the economy if specific laws are allowed to automatically expire or go into effect at the beginning of 2013. These laws include tax increases due to the expiration of the Tax Relief, Unemployment Insurance Re-authorisation, and Job Creation Act of 2010, and spending reductions under the Budget Control Act of 2011. Under current law, which mandates these tax increases and spending cuts, total federal revenues would increase 19.6 per cent from 2012 to 2013 and total federal spending would be reduced less than 1 per cent. The Congressional Budget Office (CBO) estimates revenues would rise from 15.7 per cent of GDP in 2012 to 18.4 per cent in 2013, returning to the historical average, while spending would fall from 22.9 per cent of GDP to 22.4 per cent, above the historical average of 21 per cent. The deficit for 2013 is projected to be reduced by roughly half, with the cumulative deficit over the next ten years to be lowered by as much as US$7.1 trillion. However, it is also projected to cause a double-dip recession in the first half of 2013. Now, US policy-makers are facing a Catch-22 dilemma: for the short-term impact, the deficit reduction in 2013 would adversely affect the US (and the world) economy in the short-run. On the other hand, if Congress acts to extend current policies, deficits and debt will rise rapidly over the next decade and beyond, slowing the economy over the long run and dramatically increasing interest costs. The US CBO estimates that if the fiscal cliff scenario is allowed to take effect in 2013, it will reduce federal spending by $103 billion and increase tax revenues by $399 billion (and another $105 billion "mostly in revenue") through September 2013 (the end of FY 2013). This would amount to a net total of $560 billion, roughly half the $1.2 trillion FY 2011 deficit. The White House estimates that a family of four with an income of $50,000 to $85,000 would pay an additional $2,200 in federal taxes. Over the medium-term, spending for federal agencies and departments, including defence, would be reduced significantly through 2022 due to the budget reduction. Within the US, the projected effects of these changes have led to calls both inside and outside of Congress to extend some or all of the tax cuts, and to replace the across-the-board reductions with more targeted cutbacks. I think that any policy decision would come in the period after the 2012 federal elections and the end of the year. At the latest, nearly all proposals to avoid the fiscal cliff involve extending certain parts of the 2010 Tax Relief Act or changing the 2011 Budget Control Act, or both, thus making the deficit larger by reducing taxes and/or increasing spending. Thus, the likelihood of the fiscal cliff happening in the US in 2013 is rather low. However, if the unlikely were to happen, and the US economy falls into recession by -0.5 per cent in 2013, the world economy would surely be affected. In July, the IMF projected the world economy to grow by 4.1 per cent in 2013, with US economic growth at 2.3 per cent. Thus, if the US were to contract by -0.5 per cent in 2013, the world economy would take a direct impact of a -0.7-per cent hit, or growth of 3.4 per cent. This is a simple and direct calculation not taking into account the indirect repercussions on the major US trading partners. Overall, it will not bode well for the world economy and Thailand. Over the years there seems to have been a close to one-to-one correlation on Thailand's economic growth and global economic growth. Thus, the US fiscal cliff may hit Thailand by reducing 0.5-1.0 percentage points from our baseline growth in 2013. Nonetheless, in my view the US fiscal cliff is a low probability scenario. More importantly, how the US government plans to consolidate its fiscal position over the medium-term, after the extension of fiscal cliff deadlines and the implications for the world economy, is the more important questions to ponder. Chodechai Suwanaporn is executive vice president of economics and energy Policy at PTT. -- The Nation 2012-11-10 Link to comment Share on other sites More sharing options...
Popular Post rotary Posted November 10, 2012 Popular Post Share Posted November 10, 2012 (edited) The US Govt has been spending money like a drug user that just inherited a vast fortune to only find out 1 year later the money was all counterfeit. Looks like the USA will affect the whole world with their spend thrift ways, not just their own frail economy. For any country borrowing untold trillions and vast social freebie programs will wreck the economy. Edited November 10, 2012 by rotary 4 Link to comment Share on other sites More sharing options...
khaowong1 Posted November 10, 2012 Share Posted November 10, 2012 The US is a large, if not the largest, importer of Thai goods. Whatever the economy does in the US will definetly effect Thailand for good or bad. Link to comment Share on other sites More sharing options...
comserve Posted November 10, 2012 Share Posted November 10, 2012 The US Govt has been spending money like a drug user that just inherited a vast fortune to only find out 1 year later the money was all counterfeit. Looks like the USA will affect the whole world with their spend thrift ways, not just their own frail economy. For any country borrowing untold trillions and vast social freebie programs will wreck the economy. Yes,it's about time that America starts paying it's way instead of thinking that the rest of the world needs to fund their greed.The 2008 crisis was wholy caused by American greed and the incompetence of Fanny & Freddy. In Australia we have an insurance structure doing this job & they are (used to be) the main obstacle to getting a housing loan. 1 Link to comment Share on other sites More sharing options...
rakman Posted November 10, 2012 Share Posted November 10, 2012 I seriously doubt it. The Fiscal Cliff spending "cuts" are only $109 billion in 2013, and a total of $1.2 Trillion in 10 years. That's compared to $3,800 billion in spending in 2013. The spending "cuts" are only 2.87% of the budget. Hardly noticeable as it's about a rounding error of the total budget. Plus, the US military gets the bulk of the "cuts". Since the US budget will probably grow at 4% - 6% per year and maintain at least $1.2 Trillion in deficits for the next 4 years, the money won't be missed except in the wailing of progressives and threat of gloom and doom. What is going to happen, the Social Security tax cut will end (a stupid move as it was), the current tax rates will rise, the Alternative Minimum Tax will snare more people, business tax cuts on R&D and accelerated depreciation will end. Also, the first of the Obamacare taxes go into effect. All told, assuming a static economic model its a $290 Billion per year tax increase. Fun, fun, fun.. no hope, no change.. 1 Link to comment Share on other sites More sharing options...
chainarong Posted November 10, 2012 Share Posted November 10, 2012 If USA go's down the gurgler, everyone go's, like they say in Oz, when wall street coughs, Australia gets pneumonia , prognosis, up the creek without a paddle ,join the cue Thailand. 1 Link to comment Share on other sites More sharing options...
prvtdetdave Posted November 11, 2012 Share Posted November 11, 2012 In the US as it is. Taxes must be raised and spending must be cut. A major tax cut, 2 unfunded wars and a wall street bailout. The republicans were quick to try to say it wasn't thier fault. (Hey! I robbed the bank and I'll get away with it.) Greece had a poor system of collecting revenue and had broad social programs. The business sector and general populace cheated on paying taxes and now are crying because of austerity measures that needed to be put in place. The US as given more financial aid than any other country in the world. Yes, it should be curtailed and much more discretion used. I don't wave the flag often for my homeland often . but if not for them the Aussies would be speaking Japanese and the Brits would be speaking German. All the modern world economies have the prosperity they do because of the US. That includes China and Russia. Link to comment Share on other sites More sharing options...
jamescollister Posted November 11, 2012 Share Posted November 11, 2012 prvtdetdave, Maybe you should check your history a bit, just because Hollywood made the movies doesn't make it true. Jim 2 Link to comment Share on other sites More sharing options...
meatballs Posted November 11, 2012 Share Posted November 11, 2012 I think when the housing bubble grew the govt. thought it was authentic "growth" when in fact it was just debt being created. Then when housing crashed they have these deficits. Seems like anybody with a brain would have been careful to base present govt. spending on a housing bubble. What were these idiots thinking?? Link to comment Share on other sites More sharing options...
Naam Posted November 11, 2012 Share Posted November 11, 2012 (edited) I think when the housing bubble grew the govt. thought it was authentic "growth" when in fact it was just debt being created. Then when housing crashed they have these deficits. Seems like anybody with a brain would have been careful to base present govt. spending on a housing bubble. What were these idiots thinking?? the housing crash did not cause "these deficits". the U.S. is running fiscal deficits since more than four decades, interupted only by a few years of fiscal surplus. 2011 - $1.5 trillion budget deficit 2010 - $1.3 trillion budget deficit 2009 - $1.4 trillion budget deficit 2008 - $455 billion budget deficit 2007 - $162 billion budget deficit 2006 - $248.2 billion budget deficit 2005 - $319 billion budget deficit 2004 - $412.7 billion budget deficit 2003 - $377.6 billion budget deficit 2002 - $157.8 billion budget deficit 2001 - $128.2 billion budget surplus 2000 - $236.2 billion budget surplus 1999 - $125.6 billion budget surplus 1998 - $69.3 billion budget surplus 1997 - $21.9 billion budget deficit 1996 - $107.4 billion budget deficit 1995 - $164 billion budget deficit 1994 - $203.2 billion budget deficit 1993 - $255.1 billion budget deficit 1992 - $290.3 billion budget deficit 1991 - $269.2 billion budget deficit 1990 - $221 billion budget deficit 1989 - $152.6 billion budget deficit 1988 - $155.2 billion budget deficit 1987 - $149.7 billion budget deficit 1986 - $221.2 billion budget deficit 1985 - $212.3 billion budget deficit 1984 - $185.4 billion budget deficit 1983 - $207.8 billion budget deficit 1982 - $128 billion budget deficit 1981 - $79 billion budget deficit 1980 - $73.8 billion budget deficit 1979 - $40.7 billion budget deficit 1978 - $59.2 billion budget deficit 1977 - $53.7 billion budget deficit 1976 - $73.7 billion budget deficit 1975 - $53.2 billion budget deficit 1974 - $6.1 billion budget deficit 1973 - $14.9 billion budget deficit 1972 - $23.4 billion budget deficit 1971 - $23 billion budget deficit 1970 - $2.8 billion budget deficit Edited November 11, 2012 by Naam Link to comment Share on other sites More sharing options...
belg Posted November 11, 2012 Share Posted November 11, 2012 what a crazy world: the world economy depends on americans putting themselfes into heavy debts they cannot afford, they have to spend or the economy is bad .... isn't that crazy ? and we have to import cheap stuff from china, because they own 10% of the national debt in de US ... we are so dependent on foreign oil, at inflated prices, because there is supposed to be a shortage, but they were talking about shortage to increase the price since the oil crisis in the seventies.... alternative energy ... what do we have for free in abundance for 12 hours a day ??? free sun, but no incentives or subsidies in thailand to get this off the ground... they could power whole villages, off the grid ... Link to comment Share on other sites More sharing options...
paulchiangmai Posted November 11, 2012 Share Posted November 11, 2012 I think when the housing bubble grew the govt. thought it was authentic "growth" when in fact it was just debt being created. Then when housing crashed they have these deficits. Seems like anybody with a brain would have been careful to base present govt. spending on a housing bubble. What were these idiots thinking?? the housing crash did not cause "these deficits". the U.S. is running fiscal deficits since more than four decades, interupted only by a few years of fiscal surplus. 2011 - $1.5 trillion budget deficit 2010 - $1.3 trillion budget deficit 2009 - $1.4 trillion budget deficit 2008 - $455 billion budget deficit 2007 - $162 billion budget deficit 2006 - $248.2 billion budget deficit 2005 - $319 billion budget deficit 2004 - $412.7 billion budget deficit 2003 - $377.6 billion budget deficit 2002 - $157.8 billion budget deficit 2001 - $128.2 billion budget surplus 2000 - $236.2 billion budget surplus 1999 - $125.6 billion budget surplus 1998 - $69.3 billion budget surplus 1997 - $21.9 billion budget deficit 1996 - $107.4 billion budget deficit 1995 - $164 billion budget deficit 1994 - $203.2 billion budget deficit 1993 - $255.1 billion budget deficit 1992 - $290.3 billion budget deficit 1991 - $269.2 billion budget deficit 1990 - $221 billion budget deficit 1989 - $152.6 billion budget deficit 1988 - $155.2 billion budget deficit 1987 - $149.7 billion budget deficit 1986 - $221.2 billion budget deficit 1985 - $212.3 billion budget deficit 1984 - $185.4 billion budget deficit 1983 - $207.8 billion budget deficit 1982 - $128 billion budget deficit 1981 - $79 billion budget deficit 1980 - $73.8 billion budget deficit 1979 - $40.7 billion budget deficit 1978 - $59.2 billion budget deficit 1977 - $53.7 billion budget deficit 1976 - $73.7 billion budget deficit 1975 - $53.2 billion budget deficit 1974 - $6.1 billion budget deficit 1973 - $14.9 billion budget deficit 1972 - $23.4 billion budget deficit 1971 - $23 billion budget deficit 1970 - $2.8 billion budget deficit Naam, perhaps you should have put against each year which president was in office. Link to comment Share on other sites More sharing options...
puck2 Posted November 11, 2012 Share Posted November 11, 2012 Naam, perhaps you should have put against each year which president was in office. Link to comment Share on other sites More sharing options...
jacnl2000 Posted November 11, 2012 Share Posted November 11, 2012 "I think that any policy decision would come in the period after the 2012 federal elections and the end of the year." Prospects for 2013 depend on it ? Link to comment Share on other sites More sharing options...
cloudhopper Posted November 12, 2012 Share Posted November 12, 2012 Naam, perhaps you should have put against each year which president was in office. Or perhaps not since that is completely irrelevant. Both major political parties in the US congress are corrupt and responsible for the deficit spending. We are in for some great political theater that will be totally ineffective altering the course of mathematical reality. Thailand may not fall off but it's current leadership is running pell mell toward the edge. 1 Link to comment Share on other sites More sharing options...
Naam Posted November 12, 2012 Share Posted November 12, 2012 Naam, perhaps you should have put against each year which president was in office. Or perhaps not since that is completely irrelevant. Both major political parties in the US congress are corrupt and responsible for the deficit spending. We are in for some great political theater that will be totally ineffective altering the course of mathematical reality. Thailand may not fall off but it's current leadership is running pell mell toward the edge. both political parties/presidents are NOT responsible for invading Afghanistan and Iraq where a fistful of trillion dollars have been and are still wasted. 1 Link to comment Share on other sites More sharing options...
cloudhopper Posted November 12, 2012 Share Posted November 12, 2012 Naam, perhaps you should have put against each year which president was in office. Or perhaps not since that is completely irrelevant. Both major political parties in the US congress are corrupt and responsible for the deficit spending. We are in for some great political theater that will be totally ineffective altering the course of mathematical reality. Thailand may not fall off but it's current leadership is running pell mell toward the edge. both political parties/presidents are NOT responsible for invading Afghanistan and Iraq where a fistful of trillion dollars have been and are still wasted. Sure they are. Those trillions weren't wasted, they were spent largely in the US in the killing machinery defense industry and all the related economic food chains whose lobbyists own the congress in order to further secure US economic interests. No war ever fought by the US, declared or not, has ever been stopped by the US congress. Nor, I might add, by a population largely in support of previous and continuing wars, willingly deluded by nationalist patriotic concepts such as 'manifest destiny', 'freedom' and 'democracy'. Link to comment Share on other sites More sharing options...
Naam Posted November 12, 2012 Share Posted November 12, 2012 Naam, perhaps you should have put against each year which president was in office. Or perhaps not since that is completely irrelevant. Both major political parties in the US congress are corrupt and responsible for the deficit spending. We are in for some great political theater that will be totally ineffective altering the course of mathematical reality. Thailand may not fall off but it's current leadership is running pell mell toward the edge. both political parties/presidents are NOT responsible for invading Afghanistan and Iraq where a fistful of trillion dollars have been and are still wasted. Sure they are. Those trillions weren't wasted, they were spent largely in the US in the killing machinery defense industry and all the related economic food chains whose lobbyists own the congress in order to further secure US economic interests. No war ever fought by the US, declared or not, has ever been stopped by the US congress. Nor, I might add, by a population largely in support of previous and continuing wars, willingly deluded by nationalist patriotic concepts such as 'manifest destiny', 'freedom' and 'democracy'. wasted or not... the trillions are gone. Link to comment Share on other sites More sharing options...
thenervoussurgeon Posted November 12, 2012 Share Posted November 12, 2012 In the US as it is. Taxes must be raised and spending must be cut. A major tax cut, 2 unfunded wars and a wall street bailout. The republicans were quick to try to say it wasn't thier fault. (Hey! I robbed the bank and I'll get away with it.) Greece had a poor system of collecting revenue and had broad social programs. The business sector and general populace cheated on paying taxes and now are crying because of austerity measures that needed to be put in place. The US as given more financial aid than any other country in the world. Yes, it should be curtailed and much more discretion used. I don't wave the flag often for my homeland often . but if not for them the Aussies would be speaking Japanese and the Brits would be speaking German. All the modern world economies have the prosperity they do because of the US. That includes China and Russia. Yes they definately won the battle of Britain ,cracked the enigma code as well . just like those joke American movies tell you so . The Americans were very brave in the war ,but only came in because the Japanese attacked Pearl Harbour ,dont believe all Hollywood tells you . Link to comment Share on other sites More sharing options...
cloudhopper Posted November 12, 2012 Share Posted November 12, 2012 wasted or not... the trillions are gone. Oh they were wasted without a doubt. In fact (or IMO anyway) all surplus capital or credit money that is not invested in a productive enterprise is wasted. The collapse of credit money is always far more severe than mere capital losses however, and that is the true cliff the US along with the entire world is mathematically destined to go off. Link to comment Share on other sites More sharing options...
Naam Posted November 12, 2012 Share Posted November 12, 2012 All the modern world economies have the prosperity they do because of the US.That includes China and Russia. Link to comment Share on other sites More sharing options...
jbrain Posted November 12, 2012 Share Posted November 12, 2012 Naam, perhaps you should have put against each year which president was in office. Or perhaps not since that is completely irrelevant. Both major political parties in the US congress are corrupt and responsible for the deficit spending. We are in for some great political theater that will be totally ineffective altering the course of mathematical reality. Thailand may not fall off but it's current leadership is running pell mell toward the edge. both political parties/presidents are NOT responsible for invading Afghanistan and Iraq where a fistful of trillion dollars have been and are still wasted. Then who gives the final green light for the action? Link to comment Share on other sites More sharing options...
Naam Posted November 12, 2012 Share Posted November 12, 2012 Naam, perhaps you should have put against each year which president was in office. Or perhaps not since that is completely irrelevant. Both major political parties in the US congress are corrupt and responsible for the deficit spending. We are in for some great political theater that will be totally ineffective altering the course of mathematical reality. Thailand may not fall off but it's current leadership is running pell mell toward the edge. both political parties/presidents are NOT responsible for invading Afghanistan and Iraq where a fistful of trillion dollars have been and are still wasted. Then who gives the final green light for the action? you tell us. Link to comment Share on other sites More sharing options...
Khun Jean Posted November 12, 2012 Share Posted November 12, 2012 (edited) Naam, perhaps you should have put against each year which president was in office. Or perhaps not since that is completely irrelevant. Both major political parties in the US congress are corrupt and responsible for the deficit spending. We are in for some great political theater that will be totally ineffective altering the course of mathematical reality. Thailand may not fall off but it's current leadership is running pell mell toward the edge. both political parties/presidents are NOT responsible for invading Afghanistan and Iraq where a fistful of trillion dollars have been and are still wasted. Then who gives the final green light for the action? Someone did, let me see, congress.... no, the president...... yes. As a commander in chief he is the one that makes that decision, even if it is against the constitution. But that happens when your country is in a state of emergency since 1933. "Since March 9, 1933, the United States has been in a state of declared national emergency.... Under powers delegated ... [during a national emergency] the President may: seize property; organize and control the means of production; seize commodities; assign military forces abroad; institute martial law; seize and control all transportation and communication; regulate the operation of private enterprise; restrict travel; and, in a plethora of particular ways, control the lives of all American citizens." Edited November 12, 2012 by Khun Jean 2 Link to comment Share on other sites More sharing options...
jbrain Posted November 12, 2012 Share Posted November 12, 2012 both political parties/presidents are NOT responsible for invading Afghanistan and Iraq where a fistful of trillion dollars have been and are still wasted. Then who gives the final green light for the action? you tell us. Well, Khun Jean just told us , and what I can understand is that the president IS responsible for invading Afghanistan and Iraq. Link to comment Share on other sites More sharing options...
jacnl2000 Posted November 15, 2012 Share Posted November 15, 2012 Naam, perhaps you should have put against each year which president was in office. Some people call it fiscal cliff, while others who're about to feel the pain call it taxmageddon. Not exactly a social pleasantry. National Dept Graph by President: Original graph can be found here: http://zfacts.com/p/318.html Link to comment Share on other sites More sharing options...
yoshiwara Posted November 16, 2012 Share Posted November 16, 2012 Thailand has its own VIP event cliff to look forward to. Link to comment Share on other sites More sharing options...
Khun Jean Posted November 16, 2012 Share Posted November 16, 2012 So true. I am holding out until that event is passed a few years before going 'all in' in Thailand. Link to comment Share on other sites More sharing options...
farang000999 Posted November 16, 2012 Share Posted November 16, 2012 The US gov should just keep printing a ton of money. Let's do a job an infrastructure bill and get new roads and airports. The Chinese are the one's paying for it. Link to comment Share on other sites More sharing options...
jacnl2000 Posted November 18, 2012 Share Posted November 18, 2012 Thailand has its own VIP event cliff to look forward to. Look forward to collecting more hard to get VIP-less [European] banknotes. Following one is clearly a fake: Link to comment Share on other sites More sharing options...
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