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The Fiscal Deal: It's not all Bad

Since most people are complaining about the fiscal agreement, I'll point out a few positives ... first, remember the "fiscal cliff" was about too much austerity too quickly. The "fiscal cliff" included expiring tax cuts (income, payroll), expiring spending (unemployment insurance, etc.) and the "sequester" (mostly defense spending cuts). The sequester has been delayed for two months, so we don't know the size of the cuts yet, but ...

1) There was an agreement, and earlier in January than I expected!

2) It appears the amount of austerity will not drag the economy into a new recession. I would argue for a different mix of policies, but reducing the amount of austerity was achieved - and this was a key goal for the fiscal agreement.

3) Although long term debt sustainability is still an issue, the deficit is declining right now - and will decline further in 2013. David Wessel at the WSJ wrote about the declining deficit a few weeks ago: Putting the Brakes on Cutting the Deficit.

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