**Fiscal Discipline da 2
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- Fiscal irresponsibility from the Fed discourages businesses from investing
- IL-Protectionism
- IL--Dollar Sell-Off
IL--Investor ConfidenceSpending crushes investor confidence– confidence key to stop a sell-off of assets that would cause a global depressionSCHILLER 97 Professor of economics at American University [Bradley R., 5/6, The LA Times, p. lexis] The ever-cautious budget office hints at the kind of disaster that might ensue: "Foreign investors might suddenly stop investing in U.S. securities, causing the exchange value of the dollar to plunge, interest rates to shoot up and the economy to stumble into a severe recession . . . Higher levels of debt might also ignite fears of inflation in the nation's financial markets, which would push up interest rates even further. Amid the anticipation of declining profits and rising rates, the stock market might collapse, and consumers, fearing economic catastrophe, might suddenly reduce their spending. Moreover, severe economic problems in this country could spill over to the rest of the world and might seriously affect the economics of U.S. trading partners, undermining international trade." In other words, the projected U.S. deficit might trigger another Great Depression. Fiscal irresponsibility from the Fed discourages businesses from investingSaphir, Reuters Correspondent, 12 (Ann, “Fed is sugar-coating Congress's task,” 4-30-12, http://www.reuters.com/article/2012/04/30/usa-fed-fisher-idUSL1E8FUI6K20120430) (Reuters) - The U.S. Federal Reserve's super-easy monetary policy is doing little to spur job creation and is giving Congress license to avoid tackling looming fiscal problems and the towering national debt, a top Fed official said on Monday. "By providing monetary accommodation, we are saying, in essence, 'Congress, you better eat your vegetables, or we are going to serve you a big plate of monetary cookies,'" Richard Fisher, president of the Dallas Fed, told the Milken Institute Global Conference. The Fed's program of bond purchases is pushing down the price of debt, interfering with a pricing mechanism that would otherwise force Congress to come to terms with its "fiscal misfeasance," he said. "We have children in Congress," he said. "They need to be disciplined." Unless Congress acts to reduce uncertainties around fiscal policy, the Fed's low-interest-rate policy will remain powerless to boost jobs, he said, reprising a theme he revisits often in speeches around the country. The U.S. central bank last week kept its policy on hold, reiterating its expectation that it will need to keep rates near zero through late 2014 to support a weak recovery. Fisher, who is not a voter this year on the Fed's policy-setting panel, has been a staunch opponent of further Fed easing and identifies as an inflation hawk. While the Fed has been successful in keeping inflation in hand, he said, its easy money policy has not succeeded in bringing unemployment down to acceptable levels. Unemployment registered 8.2 percent in March, well above the 5.5 percent rate that is typically seen as representing full employment in the United States. Asked to explain why low rates have not pushed unemployment down faster, Fisher said, "My argument is because of fiscal policy." Uncertainty over taxes and regulation are keeping businesses from hiring, Fisher added. IL-ProtectionismNew rounds of protectionism will escalate—traditional checks failBremmer, President of Eurasia Group-the political risk consulting firm and Roubini, Professor of Economics at NYU, 11 [Ian and Nouriel, “A G-Zero World: The New Economic Club Will Produce Conflict, Not Cooperation,” Foreign Affairs, Vol. 90, Iss. 2]bg International commerce is a different game; trade can benefit all players. But the divergence of economic interests in the wake of the financial crisis has undermined global economic cooperation, throwing a wrench into the gears of globalization. In the past, the global economy has relied on a hegemon-the United Kingdom in the eighteenth and nineteenth centuries and the United States in the twentieth century-to create the security framework necessary for free markets, free trade, and capital mobility. But the combination of Washington's declining international clout, on the one hand, and sharp policy disagreements, on the other-both between developed and developing states and between the United States and Europe- has created a vacuum of international leadership just at the moment when it is most needed. For the past 20 years, whatever their differences on security issues, governments of the world's major developed and developing states have had common economic goals. The growth of China and India provided Western consumers with access to the world's fastest-growing markets and helped U.S. and European policymakers manage inflation through the import of inexpensively produced goods and services. The United States, Europe, and Japan have helped developing economies create jobs by buying huge volumes of their exports and by maintaining relative stability in international politics. But for the next 20 years, negotiations on economic and trade issues are likely to be driven by competition just as much as recent debates over nuclear nonproliferation and climate change have. The Doha Round is as dead as the dodo, and the World Trade Organization cannot manage the surge of protectionist pressures that has emerged with the global slowdown. IL--Dollar Sell-OffLoss of confidence because of spending sparks a dollar sell-off crushing the economyFINANCIAL TIMES 2009 [May, 22, http://www.ft.com/cms/s/0/bdd23cb0-4639-11de-803f-00144feabdc0.html] Congressional Budget Office estimates suggest that under administration policies the US will have a medium-term structural deficit (the deficit when the economy is operating at full potential) of roughly 5 per cent of gross domestic product. “If we are winding up with deficits that are in the 5 per cent of GDP range we will change policies,” a senior administration official told the FT. “We have said that 5 per cent is unsustainable.” Another administration official said the biggest threat to recovery was the risk that the bond market might lose confidence in US public finances, pushing up bond yields and throttling growth. That would present the Federal Reserve with the choice of standing by or creating more money to buy bonds to push private borrowing rates back down – a move that could spook foreign creditors and fuel a sell-off in the dollar. The yield on 10-year Treasuries has risen 74 basis points to 3.15 per cent since the start of the year, in spite of Fed buying. Meanwhile, the dollar is close to its lows for 2009. Analysts said recovery hopes naturally led to higher Treasury yields and a weaker dollar, but movements likely reflected concern about US finances as well. “It is to be expected that as we come out of the downturn bond yields will go up,” Mr Orszag said. But he added “we have said for a long time under current policies the nation is on an unsustainable fiscal path and therefore something has to change”.
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