Spoke Larry Kudlow of CNBC, Sudeep Reddy of WSJ, and John Cochrane of Hoover, to learn there there is no deal to be had in Washington over the threat of a recession that will follow the tax increases and spending cuts that start at midnight on December 31, the infamous fiscal cliff. Senator Toomey of PA tells Larry Kudlow that he knows of no deal in the Senate, nor does he know what POTUS Obama will says as he departs the White House for a campaign swing in Pennsylvania on the morrow. No deal. Sudeep Reddy reports that the White House speakers the last weeks have used the word "rates" when talking of increasing taxes, meaning that the Democratic position is that tax rates must climb, that capping deductions is not adequate for a deal. Senator Durbin of IL tells a think tank today, according to Sudeep Reddy, that the Senate Democrats do not want entitlements on the table in a hasty deal, that entitlements can be dealt with next year, in the new Congress, 2013. This statement alone is a deal killer, and Durbin and the White House know it.
What I learn from Professor Cochrane is that the entitlements that the federal, state and city governments provide -- the entitlements that the Democrats refuse to reduce -- could very well be part or much of the reason there is such sluggishness surrounding the economy. Benefits such as unemployment, food stamps, housing subsidies, all healthcare provided by the state, create a ball and chain around the recipient that keep him or her from growth and profit because of arbitrary limitations. Earn a dollar more than this particular amount, and you lose the benefits; therefore, remain low-income and dependent (or in the gray and black market and dependent). Washington and the state capitols are not providing a safety net, they are maintaining a cage. Also, the governments must tax for the money to supplement the dependent, and this drains cash from the private economy where it would grow jobs. All this is the entitlement gloom of the last four years. The rise in food stamps is not an expression of helplessness, rather it is a measure of how the growing entitlement drags down growth. The explosion of entitlements is not a symptom of the recession and despair, it may well be a dominant cause of the same.