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Mark Faber predicts economic future if House Republicans kick fiscal cliff down road
Howard Richman, 11/14/2012

In an interview on CNBC's Squawk Box, Mark Faber, author of "The Gloom, Boom, & Doom Report," laid out the economic future if the House Republicans kick the can down the road in the Fiscal Cliff negotiations.

In his scenario, the fiscal cliff results in nothing more than minor tax increases and minor cuts in spending. Meanwhile, the world economy will continue to stagnate until it goes over the precipice with a "complete collapse of society in 5 or 10 years time".

Oh well, it was a great world. But then the Republicans decided that they were the party of tax cuts and the Democrats decided that they were the party of spending increases, and there were no adults.

And to think, if they simply balanced the budget and trade, we would get right out of the depression.

Perhaps it is not as bad as all that. Churchill reportedly said, "Americans can always be counted on to do the right thing... after they have exhausted all other possibilities."

Maybe we just have to do some more exploring of fiscal irresponsibility and tolerating mercantilism. Then we will figure it out.

Comment by Zbigniew Mazurak, 11/16/2012:

Gentlemen, you are wrong. Flat wrong. So is Marc Faber.

Sequestration (which means $120 bn in cuts in annual federal spending) might be a "minor cut" in the overall scheme of things, as it would barely make a dent in the total federal budget deficit, which is $1.3 trillion per annum.

But for the most important function of the federal government - defense - it would be a catastrophe. Coming on top of all defense cuts previously implemented and scheduled by the Obama administration, it would make a $60 bn cut in the defense budget in every year from now through FY2022. This means that, in January, the base defense budget would be cut from $531 bn to $469 bn virtually overnight. War (OCO) spending would have to be cut simoultaneously, as would the DOE's defense-related programs.

This would mean deep cuts in the force structure, training, the maintenance of existing equipment and bases, and the development and acquisition of new equipment. For JCS Chairman Gen. Martin Dempsey, it would mean creating "the definition of a hollow force".

Analysis from all unbiased sources, from the AEI to the Heritage Foundation to the Bipartisan Policy Center, confirms this. Here's what the BPC says on the subject:

http://bipartisanpolicy.org/sites/default/files/BPC%20Sequester%20Paper.pdf

Of course, myself, I have written about sequestration's consequences numerous times on my own blog (http://zbigniewmazurak.wordpress.com).

I know that the federal government has to balance its budget, but mindless across the board cuts, or deeply cutting funding for a must-do function which is the federal government's #1 Constitutional duty, is NOT the solution. The right way to do it is to pass a budget which prioritizes Constitutional priorities and cuts back on unconstitutional programs and agencies. Examples include the budget plans of Chairman Ryan, the Republican Study Committee, Sen. Toomey, and Sen. Lee.

America's security is at stake.

Response to this comment by Howard Richman, 11/18/2012:
I would not like to see drastic defense cuts either. I hope that the cuts mostly take fat out of the budget. But the key is avoiding the fiscal disaster that threatens 5-10 years from now if this can is kicked down the road again.