The fiscal cliff deal passes the Senate

January 2nd, 2013 at 9:00 am by David Farrar

Stuff reports:

The US Senate has passed legislation early New Year’s Day to neutralize a fiscal cliff combination of across-the-board tax increases and spending cuts with a lopsided 89-8 vote.

Senate passage set the stage for a final showdown in the House of Representatives, where a vote was expected later Tuesday or perhaps Wednesday, which raises tax rates on wealthy Americans.

The Senate vote came hours after the White House reached a compromise deal with Senate Republicans.

The spending cuts are delayed just two months. The Republican compromised significantly on the revenue side (as did the Democrats to a degree). The real crunch will be whether the Democrats can agree to reduce some of the spending the Government is unable to pay for.

The Washington Post looks at the winners and losers to date:

Winners

  • Joe Biden – may set him up for 2016
  • Mitch McConnell – saved the Republicans from being blamed for tax increases for everyone
  • Obama – got a deal he can sign

Losers

  • John Boehner – couldn’t get the votes from his own team
  • Obama – his last minute campaign rally alienated votes he needs

The House has yet to vote on the deal, but the massive vote in the Senate suggests it should pass the House fairly comfortable. I’d guess 80% of Democrats and 50% of Republicans may vote for it.

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47 Responses to “The fiscal cliff deal passes the Senate”

  1. SPC (4,675 comments) says:

    An increase in the capital gains tax from 15% to 39.5% with the fiscal cliff probably sharpened sensitivity on the Republican side.

    This leaves the two sides campaigning next election over 15 or 20% CGT and a top rate of 36 or 39.5% (and the rate this applies from) – hardly that important to the wider budget debate.

    The real contest was always the spending side.

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  2. Manolo (12,637 comments) says:

    Biden does not have a hope in hell of being nominated in 2016. He’ll be 74 years old and more of the clown and buffoon he already is.

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  3. Neil (528 comments) says:

    Watching CNN News I was disgusted to see that pep rally in the Eisenhower building Obama had collected round him. Snide comments about Republicans and the cheering and clapping of a partisan group. People say he is a good man-humbug !
    Did you see the ethnically well placed positioning of a particular person behind the wonderman Obama ? What a nasty and incompetent leader he is.

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  4. Redbaiter (6,481 comments) says:

    “The bill would amount to the biggest tax hike in more than four decades – raising a reported $620 billion in new revenue and cutting just $15 billion from the budget.”

    http://www.dailymail.co.uk/news/article-2255707/Fiscal-cliff-Senate-620B-tax-rises-15B-spending-cuts-House-Republicans-voice-opposition.html#ixzz2GlK2OZx7

    Of course in the grand scheme, $620 billion is utter chickenshit. It does nothing to avert the looming debt crisis.

    These Repubrocrat clowns and the ignorant gimmee gimmee fuckwits who vote for them will destroy the country.

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  5. Jimbob (639 comments) says:

    Obama is in la la land. The financial markets are going to have to spew their guts out before this simpleton gets his sh*t together.

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  6. Jack5 (4,224 comments) says:

    The fiscal cliff deal changes nothing for the rest of us in the West.

    The Reserve Bank governor and successful forex punter John Key will see New Zealand’s export industries crucified this year as key central banks around the world crank out their money supplies to keep exchange rates low. Meanwhile NZ will stand aside.

    The Swiss example is relevant to NZ. A small export-based country, Switzerland is successfully capping its exchange rate and so far is making billions doing so.

    The massive money printing in the major countries (Japan the latest to join in) is going to cause a short-term world sharemarket boom , perhaps followed by a dive according to a British pundit.

    In NZ, the Greens have been ridiculed for advocating printing money. They and Winston Peters at least recognise there is a problem, and advocate what most of the world is doing. China has always kepts its currency low and central bankers, as did Germany for decades, and most recently through the euro.

    Central bankers from 14 countries representing 75 per cent of the world’s GDP are meeting every second month in Basel. Here they discuss their vast currency play. Using theory developed at MIT in the 1970s and 1980s they are running present money-pumping policies. The Wall Street Journal</i) calls their strategy a high-stakes gamble.

    NZ is drawn in on the side of the bookmakers, as it were. Standing aside from the money printing, our currency is throttling the export industries by which the country survives.

    Credit to the Greens and Peters for trying to create a national debate on the policy. Key, despite currency trading experience, remains fairly quiet on the issue.

    Ambrose Evans-Prichard's interesting piece in the Telegraph (link below) today – (Jan 1 issue in Britain) – says among other things:

    The US, Japan, Britain, as well as the Swiss, Scandies, and a string of states around the world, are actively driving down their currencies or imposing caps.

    AND

    … the S&P 500 index of stocks will break through its all time high of 1565 in early 2013…

    AND

    The more that investors come to think another cycle of global growth is safely under way, the riskier it will be to hold corporate bonds, $8 trillion in the US alone. With yields priced for deflation, that bubble is dangerous to own on 10-year maturities. The money will rotate into equities and bullion, with China’s central bank driving gold through $2,000 at last.

    The link:

    http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9773911/Stocks-to-soar-as-world-money-catches-fire-Calvinst-Europe-left-behind.html

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  7. Jack5 (4,224 comments) says:

    Whoops! Since Kiwiblog stopped the facility to edit a post, it’s easy to make a mistake.

    In my post above here is the corrected fifth paragraph:

    In NZ, the Greens have been ridiculed for advocating printing money. They and Winston Peters at least recognise there is a problem, and advocate what most of the world is doing. China has always kepts its currency low and central bankers, as did Germany for decades, and most recently through the euro.

    Sorry, fix the stuffed-up italics.

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  8. Jack5 (4,224 comments) says:

    Whoops No. 2!

    Sorry can’t fix the stuffed up italics.

    DPF: Please bring back the editing function.

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  9. Scott (1,614 comments) says:

    Thanks for the link Redbaiter. Apparently for every $1 of spending cuts there are over $40 of increased revenue. Obama will never cut spending. The Democrats are about government spending and redistribution. The $16 trillion American debt should be the central fact of American life but Obama believes they should address it soon. But that day will never come. The Democrats there, like the Labour party here are a party of big government and big entitlements and that will only change when the money finally runs out. America and New Zealand have to start to actually live within our means.

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  10. tvb (3,945 comments) says:

    Obama wants republican scalps for 2014. Obama is a strategic thinker and if a few republicans walk away because the president annoyed them well that is too bad. Obama will have their scalps in 2014.

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  11. scrubone (2,971 comments) says:

    As tvb points out, Obama used this crisis to get at Republicans.

    Says a lot about the man that he would sacrifice the country for politics.

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  12. scrubone (2,971 comments) says:

    It’s like an oxen pulling a cart that’s too heavy for it. There’s two solutions: lighten the burden or whip the ox.

    Why is it that one side insists that there can be no solution without more whipping?

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  13. Manolo (12,637 comments) says:

    Obama may not be a simpleton, but a crafty agent hellbent on destroying the US economy. So far, he’s making progress while conning the entire world on his “messianic” abilities.

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  14. Fletch (5,726 comments) says:

    One PICTURE is worth a thousand words – Tax Hike, vs 2011 Budget Deficit.

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  15. AG (1,727 comments) says:

    It seems a bit weird to on the one hand say that Obama is a loser in this deal because “his last minute campaign rally alienated votes he needs”, whilst also saying that “the massive vote in the Senate suggests it should pass the House fairly comfortable (sic).” Exactly what votes did he “alienate”?

    FWIIW, the Washington Post article didn’t mention Obama’s actions “alienating votes” … it was more a “tut-tut” that he seemed to be taking an unpresidentially triumphant tone in announcing the deal as a victory.

    [DPF: There is another vote needed in two months. I imagine that is when karma will strike]

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  16. AG (1,727 comments) says:

    @scrubone: “Says a lot about the man that he would sacrifice the country for politics.

    Exactly. Unlike those TRUE patriots, who had (and have) no concern for anything but the nation’s future and paid no heed to partisan political calculations.

    (At this point, insert the name of the US senator/representative/talk-show host who parrots the lines that you happen to like the best.)

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  17. krazykiwi (9,188 comments) says:

    scrubone 12:28 – yes, but it’s the enormous size of burden (deficit) that gives the whip bearers (Dem) their mandate to whip all and sundry (the ‘rich’). There can be no solution. The US fell off the fiscal cliff years ago. Any thoughts otherwise are three-level deep Inception dreams!

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  18. Fletch (5,726 comments) says:

    Update, it’s just passed through the House….

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  19. mikenmild (8,890 comments) says:

    Now they can all start screaming about how awful a deal it is through to the next milestone – the debt limit.

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  20. SPC (4,675 comments) says:

    It was the easiest option, the hard part being left to last. This was always the spending cuts.

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  21. Fletch (5,726 comments) says:

    In all, 85 Republicans voted to pass the Senate-backed measure.

    Shortly after the passage of the deal, President Obama held a press conference to thank Congress for reaching an agreement and vowed going forward that there would be no more drama between his administration and Congress.

    “I will not have another debate with this Congress over the debt ceiling,” the president said.

    The president will depart later this evening to resume his Hawaiian vacation

    His Hawaiian vacation which is costing the taxpayer $4 Million.

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  22. SPC (4,675 comments) says:

    The irony being that a re-elected President and a largely unchanged House of Reps will return to this in the next session of Congress, to talk spending cuts before the next debt ceiling date.

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  23. mikenmild (8,890 comments) says:

    Seeing the vacation is costing so much, it would be irresponsible of him to miss any more of it.

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  24. big bruv (12,380 comments) says:

    There are some comments in this thread that are laughable. Some even go as far as to suggest that Obama is hell bent on destroying the US economy and accuse him (Obama) of playing petty politics.

    What is clear is that the Seppos are fucked unless they make radical changes. The left just have to come to grips with massive spending cuts and the right need to take their heads out of their arses and accept that for some there will be tax increases.

    Given that we are told the result of going over the fiscal cliff will be tax increases and massive spending cuts I am left wondering why they just don’t let it happen and start working toward paying down their huge debt.

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  25. Frederick (39 comments) says:

    Sorry Jack5 but you seem to have your facts wrong

    The efforts of the Swiss National Bank to reduce the francs value were a failure and it incurred book losses on its new and existing foreign exchange reserves of CHF 26 billion.And this from one of the best capitalised central banks in the world.

    Frankly any talk of NZ intervening in the foreign exchange market to attempt to drive down the currency is nonsense and possibly suicidally expensive. Peters/Parker/Norman are idiots and should be completely ignored.

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  26. Redbaiter (6,481 comments) says:

    “The left just have to come to grips with massive spending cuts and the right need to take their heads out of their arses and accept that for some there will be tax increases.”

    You really are one ignorant hick. No wonder you support the Nat/Labour revolving door coalition.

    The tax increases will not make one iota of difference to the debt, but they will make the economy even worse than it is now, making payment of the debt and economic recovery even more of a remote eventuality.

    There is only one possible path to economic redemption for the US and that is massive cuts to spending and massive tax reductions.

    Simple maths, which you, like most socialists, have never had a handle on.

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  27. Monique Watson (1,062 comments) says:

    Over here, in California. NBC is reporting the “deal” as having failed to reach the fiscal cliff deadline. The latest anchored report has said that taxes were up on Americans from midnight.

    One story for Americans and another for the rest of the world.

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  28. Fletch (5,726 comments) says:

    There’s a list on Scribd, showing the House Republicans who voted for the bill.

    http://www.scribd.com/doc/118633397/House-Votes-Yes-on-The-Senate-s-Fiscal-Cliff-Bill

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  29. hinamanu (2,352 comments) says:

    Boehner Falls on The Sword: All Tax, No Cuts

    http://www.dailypaul.com/268223/boehner-falls-on-the-sword-all-tax-no-cuts?utm_source=twitterfeed&utm_medium=facebook&utm_campaign=Feed%3A+dailypaul%2FFClq+%28The+Daily+Paul+-+Ron+Paul+for+President+2012%29&utm_content=FaceBook&utm_term=Ron+Paul

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  30. Azeraph (598 comments) says:

    I like Ron Paul but he’s too long in the tooth.

    Japan just joined in the printing game? I thought they were on QE 15 not QE 3?

    Keynessian nutters.

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  31. Jack5 (4,224 comments) says:

    At 6.30 Frederick posted:

    Sorry Jack5 but you seem to have your facts wrong

    The efforts of the Swiss National Bank to reduce the francs value were a failure and it incurred book losses on its new and existing foreign exchange reserves of CHF 26 billion.And this from one of the best capitalised central banks in the world.

    Sorry Frederick, but I’m not sorry! The Swiss National Bank’s cap so far has been very successful, though of course who knows what can happen as the economic storm gathers.

    Reuters reported from Zurich on October 31 that the Swiss National Bank (which is, of course, Switzerland’s central bank) made a hefty nine-month profit while maintaining its cap of 1.20 Swiss francs per euro.

    “Today’s policy can be continued, for sure,” Credit Suisse economist Maxime Botteron was reported as saying of the bank’s result.

    Swiss National Bank reserves to October 2012 srose to 70 per cent to 429.9 billion Swiss francs ($461.8 billion), equivalent to almost three-quarters of national output, as it bought billions of euros to enforce the cap.

    The Swiss National Bank said it recorded a gain of 10.3 billion francs on its foreign currency positions for the first nine months, helping it to record a book profit of 16.9 billion francs for the period.

    The Wall Street Journal reported this on August 28:

    When the Swiss National Bank slapped a limit on the strength of its currency nearly one year ago, doubters said the policy was a magnet to speculators, and doomed to failure.

    But as the lower limit on the euro’s exchange rate against the franc approaches its first anniversary Sept. 6, industry lobbies praise it as a lifeline, and politicians suggest it is here to stay, despite ballooning foreign-currency reserves.

    The Wall Street Journal reported that Switzerland’s foreign currency reserves had swollen to 68 per cent of annual economic output, compared with 40 per cent in currency-reserve-rich China.

    As recently as two months ago, the Swiss National Bank’s chairman, Thomas Jordan, reiterated the central bank’s determination to maintain its cap of 1.20 francs per euro.

    Perhaps John Key and our unelected Reserve Bank governor are right in their high-kiwi-dollar policy. Time will tell. But it’s wrong to pour contempt on the Greens’ suggestion it should be changed. We need to talk about it as much as possible. We are either run by very smart people, or by the equivalent of the Allied generals whose antiquated ideas resulted in enormous carnage in World War 1. Regarding our leaders as mystical geniuses incapable of being wrong is not going to keep NZ afloat.

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  32. SPC (4,675 comments) says:

    Frederick, you are mistaken if you thought that anyone was proposing to use QE specifically to intervene in the foreign exchange markets – as only the Swiss are doing (and quite successfully).

    It was, from Norman at least, a proposal to finance the Christchurch rebuild and the restoration of the Earthquake Fund (it being depleted covering the earthquake). This at a quite modest $2B pa – half going into each.

    Not borrowing as much money for the rebuild means less inflow into the Kiwi dollar and building up the Earthquake Fund by QE and then investing the money offshore also eased upward pressure on the Kiwi dollar.

    He merely suggested using QE to cope with off the books/one off events. It is not like this would be unorthodox in todays financial environment. As with earlier Green ideas – such as doing what Australia did with the floods (a tax surcharge), they are an alternative to simply borrowing more and more as National is doing. The borrowing places upward pressure on the dollar so that exporter returns are being squeezed.

    Farrar makes a similar mistake, when he compares it to QE offshore – where the money is poured through financial institutions to inflate asset values. Both the purposes and amounts are different. Comparing that to what Norman proposed is like comparing someone leaving high school to work in a brothel to heavy petting on a prom date.

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  33. SPC (4,675 comments) says:

    Redbaiter, why did the Reagan (1980-1988) and Bush era (2000-2008) tax cuts result in the budget deficit growing?

    Why did the era of no tax cuts (1992-2000) result in a decline in the budget deficit and end with a balanced budget?

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  34. wreck1080 (3,527 comments) says:

    Isn’t it amazing , each time the US legislates its way out of regular financial crises their sharemarket booms. Not that underlying problems have changed, probably they worsen each time due to compounding debt.

    And, as for the kiwi dollar. When something bad happens to the US economy the NZD dollar jumps (US more likely to print money). When something good happens to the US economy, The NZD jumps (more demand for risk assets).

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  35. gump (1,231 comments) says:

    @Redbaiter

    You’re a Daily Mail reader?

    No wonder you’re so bitter and angry at the world.

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  36. Frederick (39 comments) says:

    SPC – I agree with you. However the rhetoric (from Norman especially) seems to be that QE is being used by countries specifically to lower their exchange rate which is incorrect. QE is being used to stimulate their economies – the fact that say the UK pound is rather weak is because of the parlous state of their economy – little to do with QE.

    As for the success or otherwise of the Swiss Bank I took my information from a Dominion post article based on an ASB report. They state “The economic costs of moving away from using monetary policy to target inflation would well outweigh the benefits. For example, intervening in foreign exchange markets to bring down the dollar tends to have little lasting impact and can potentially expose a central bank to large financial losses. Since 2008, the Swiss National Bank has racked losses of CHF 20 billion (NZ26b) largely from the failed intervention in 2010”.

    I fully concur with the ASB’s findings. That’s the thing isn’t it, intervening in the foreign exchange market can have dire consequences and with all respect the Swiss National Bank is just a teeny bit bigger than the RBNZ. Best to leave well alone I say.

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  37. Jack5 (4,224 comments) says:

    Frederick posted at 10.34am:

    … Best to leave well alone I say…

    “Well”? When most export industries are being squeezed to near-death?

    And the relative size of Swiss and NZ: Switzerland has about 1.8 times the population of NZ and an economy probably around 4 times the size of ours.

    Could the Swiss economy per capita be so much better than ours because Switzerland has smarter bureaucrats, bankers, and politicians? Helped, perhaps, by not being fed your Dominion Post drivel.

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  38. pq (728 comments) says:

    thanks so much Jackass 5, we are so stupid we don’t see the goodness of printing money

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  39. Monique Watson (1,062 comments) says:

    What pq said.
    The importance of keeping inflation under control cannot be underestimated. Inflation is most simply derivative of the creeping costs of production and an increase in the money supply.
    EG: Prices increase (say a minimum wage increase) and Joe Blow expects to buy the same basket of goods with “Oh Fuck”, the same pay packet.
    It doesn’t happen on one hand.
    Joe Blow buys less goods. The producer can’t scale his costs of production to the same degree because he has less sales. He needs to increase prices to make a profit. This causes inflation. On the other hand, Joe Blow borrows to buy the same amount of goods and this causes an increase in money supply which is inflationary.

    Anybody who attacks the inflation targeting mechanisms as a basis for our monetary policy is attacking our economic sovereignty.

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  40. hinamanu (2,352 comments) says:

    ‘Anybody who attacks the inflation targeting mechanisms as a basis for our monetary policy is attacking our economic sovereignty.’

    Bill Clinton said it’s the economy stupid

    No it’s not. It’s reserve banks placed in every western nation which make us slaves to the UN and World Bank

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  41. scrubone (2,971 comments) says:

    Exactly. Unlike those TRUE patriots, who had (and have) no concern for anything but the nation’s future and paid no heed to partisan political calculations.

    I’m not saying that certain groups aren’t making political calculations. Everyone does in politics.

    What I am saying is that Obama’s actions have been observed by a number of commentators to be much more driven by destruction of the Republican party than by serving the country. The final deal shows that he certainly doesn’t care much about the country, and it’s certainly not the deal the Republicans wanted.

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  42. cha (3,539 comments) says:

    A true patriot.

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  43. cha (3,539 comments) says:

    Fight!

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  44. cha (3,539 comments) says:

    Although it does appear the Republicans can self-destruct all on their lonesome.

    http://www.nationalmemo.com/a-knife-in-the-back-boehner-faces-bipartisan-fury-after-punting-sandy-aid/

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  45. AG (1,727 comments) says:

    @scrubone: “What I am saying is that Obama’s actions have been observed by a number of commentators to be much more driven by destruction of the Republican party than by serving the country.”

    Oh … “commentators” say so. Any number of such. Well – that’s me told, then. Just by-the-by, but … these commentators wouldn’t, by any chance, be of a conservative persuasion?

    “The final deal shows that he certainly doesn’t care much about the country, and it’s certainly not the deal the Republicans wanted.”

    I think you’ll find that when your presidential candidate has just lost an election, and you’ve lost seats in both the Senate and the House, you tend not to get the deal you want. That’s sort of how politics works. And as for Obama not “car[ing] must about the country”, why should he … seeing as he was born in Kenya. Right?

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  46. AG (1,727 comments) says:

    “[DPF: There is another vote needed in two months. I imagine that is when karma will strike]”

    Possibly. But it is, of course, an untestable hypothesis … unless some significant number of Republicans say outright “I was all prepared to do a deal with Obama until he held ‘his last minute campaign rally’ back during the fiscal cliff negotiations, but that so alienated me I now won’t do so.”

    Just as likely, I suggest, is that hardly anyone will remember the event come the next round of fighting, because there’s so many other things that will happen in the next 60 days.

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  47. Jack5 (4,224 comments) says:

    PQ posted at 5.33:

    … we don’t see the goodness of printing money …

    Then stick to shells and beads, PQ.

    If the Swiss National Bank issues new Swiss currency in return for foreign currency, it’s a very qualified form of printing money, and so far, highly profitable. Presumably, the fresh Swiss currency can be cancelled when the SNB sells the foreign currency off and the francs come back.

    The way the SNB’s performing at the moment it’s trading far better even than Lucky John did in his heyday. Certainly beyond the ability of our bureaucrats, such as those in Treasury who ran the finance company guarantee scheme. Switzerland has internationally prominent banks. NZ owns Kiwibank, TSB, Co-operative Bank, Southland Building Society, and Heartland. We can look down on the Swiss, alright.

    It’s hard for high-kiwi-dollar supporters to claim they are in the corner of conservatives when they are still borrowing internationally. Public spending hasn’t been rigorously addressed. Interest-free student loans reformed? No. Books balanced yet? No. Gaps in the tax net tightened (such as those for charities which apparently allow church-owned Sanitarium Products and Ngai Tahu-owned businesses apparently to operate tax free)? No.

    Does the high kiwi ramp in consumer spending and encourage saving? No.

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