Monday, March 30, 2009
It was pretty much inevitable that government would pick up the pieces of the financial crisis and its aftermath. A stimulus bill and some form of bank bailout were going to be facts of life. And tax revenues are plunging thanks to the recession. So the federal government's balance sheet was always going to deteriorate in 2009. The problem is that Obama's policies would move us from deterioration to disaster. The national debt Obama gripes about? His budget will double it to 80 percent of GDP in 2019. Whatever that is, it's not "a new era of responsibility."
Republicans say the path to prosperity is not the excessive spending proposed by President Barack Obama but limited spending that holds down the growth of government, taxes and debt.
"We believe you create prosperity by having an affordable government that pursues its responsibilities without excessive costs, taxes or debt," Sen. Judd Gregg said Saturday in the GOP radio and Internet address.
_ "It is the individual American who creates prosperity and good jobs, not the government."
_ "We believe that you create energy independence not by sticking Americans with a brand new national sales tax on everyone's electric bill, but by expanding the production of American energy ... while also conserving more."
_"We also believe you improve everyone's health care not by nationalizing the health care system and putting the government between you and your doctor, but by assuring that every American has access to quality health insurance and choices in health care."
He said the nation "has an exceptional history of one generation passing on to the next generation a more prosperous and stronger country, but that tradition is being put at risk."
Massages for state employees, tai chi classes and comic books are just three items state government spends your paycheck on. Not all government spending wastes money so visibly, but there is credence to the saying that for every rat you see, there are 50 more you don't.
Writing in the Chicago Tribune last week, President Obama fell back on one of his favorite rhetorical tics: “But I also know,” he wrote, “that we need not choose between a chaotic and unforgiving capitalism and an oppressive government-run economy. That is a false choice that will not serve our people or any people.”Really? For the moment, it’s a “false choice” mainly in the sense that he’s not offering it: “a chaotic and unforgiving capitalism” is not on the menu, which leaves “an oppressive government-run economy” as pretty much the only game in town. How oppressive is yet to be determined: To be sure, the official position remains that only “the richest five percent” will have taxes increased. But you’ll be surprised at the percentage of Americans who wind up in the richest five percent. This year federal government spending will rise to 28.5 per cent of GDP, the highest level ever, with the exception of the peak of the Second World War. The 44th president is proposing to add more to the national debt than the first 43 presidents combined, doubling it in the next six years, and tripling it within the decade. But to talk about it in percentages of this and trillions of that misses the point. It’s not about bookkeeping, it’s about government annexation of the economy, and thus of life: government supervision, government regulation, government control. No matter how small your small business is — plumbing, hairdressing, maple sugaring — the state will be burdening you with more permits, more paperwork, more bureaucracy.
America, let’s be serious.
It’s not the war in Iraq, party discrepancies, or ideology that is our biggest threat.
In recent months the economy has been the sharpest pain that the United States has been enduring. It’s hard to fathom that in order for us to balance our national budget we would need $53 trillion.
The documentary I.O.U.S.A, recently screened on campus, outlined what is contributing to this economic mess. Certainly, there seems to be no easy solution to eliminate the debt.
Annually, the national budget increases by two to three trillion dollars. The U.S. government continues to borrow money from various countries that it will never be able to pay back in order to cover expenses.
But the reality is clear: ultimately the countries we owe debt to may one day have a ruling voice in U.S. policy.
Within less than ten years, an unequal balance between individuals receiving social security and those paying into it will begin. We won’t be able to take care of the people who took care of us.
According to I.O.U.S.A, “In 2008, the United States spent $610 billion on Social Security benefits, $330 billion on Medicare, and $204 billion on Medicaid.”
A step in the right direction for solving the budget deficit would be to tighten up guidelines for those who qualify for Social Security. I believe that Social Security requirements need to be reviewed and revised.
Thursday, March 26, 2009
The European Union has set deadlines for member nations to bring their deficits down in the next few years.According to the Stability and Growth Pact adopted in 1997, all member nations must have an annual budget deficit of no higher than 3% of GDP, with some flexibility provided in times of economic slump.
The EU has given Greece until 2010 to bring its deficit back under the agreed-upon limit, and France and Spain until 2012.
The Commission said the UK's budget situation has "worsened substantially" and gave the UK until 2013/14 to get its deficit under control. The statement said the UK has not taken effective action to reduce its deficit.
Ireland was given a deadline of 2013. The Commission said Ireland needs a consolidation effort amid a weak economic situation.
Each nation was given six months to provide an outline of steps it will take to reign in deficits.
President Barack Obama says his ambitious $3.6 trillion budget will put economic recovery on a stronger foundation that ensures the nation doesn't face another crisis in 10 or 20 years.
The White House released excerpts of Obama's remarks for his prime-time news conference Tuesday.
Obama said: "We will recover from this recession."
Defending his budget from Republican critics and some in his party, Obama said his spending plan will lead to new energy jobs and less dependence on foreign oil. He said it invests in education, health care and makes the tough choices to cut the deficit in half by the end of his first term.
He said the budget should not continue past policies that have led to "narrow prosperity and massive debt" — a rebuke to Republicans.
Last week, the Congressional Budget Office released projections for Mr. Obama's budget that would create a $1.8 trillion deficit for this year and $9.3 trillion deficits over 10 years – a figure that many economists think is unsustainable. Mr. Obama's estimates for the current year's budget gap are in line with the CBO, but his 10-year projection is much rosier – about $2.3 trillion less than congressional auditors foresee.
"I believe we've reached the tipping point and if we tip over, it's a point of no return. We're looking at inflation and financial and economic destruction," Shelby said.
He also told The Early Show that he would not work with the president on a compromise budget.
"I don't think we should compromise destruction of our economic system. And this is where we're going here. We should work with the president when we think the president is right. But I believe he is totally going down the wrong road here."
President Obama's pledge to halve the budget deficit by 2013 is hardly ambitious. The budget deficit will quadruple in 2009 to $1.75 trillion, and cutting that level in half would still leave deficits twice as high as under President Bush. Furthermore, three expected developments -- the end of the recession, withdrawal of troops from Iraq, and phaseout of temporary stimulus spending -- would halve the budget deficit by 2013. The President's budget shows deficits averaging $600 billion even after the economy recovers and the troops return home from Iraq. That is not good enough, says Brian M. Riedl a researcher with the Heritage Foundation.
Josh Gordon, policy director at The Concord Coalition, said such soaring debt levels, while sometimes hard to comprehend, have myriad adverse effects down the road.
"The interest you're paying sucks up valuable resources," Gordon said. "It leads to a situation where we're more at the whims of international investors."
The total national debt, as of this week, is above $11 trillion.
Gordon arrived at a per-person figure based only on the amount of debt held by the public, or $6.7 trillion. The price tag? $22,000 a head.
- President Obama's $3.6 trillion proposed budget is getting mixed reviews from Congress, especially what it may mean for the national debt of more than $10 trillion.
The opinions also differ among some of Wisconsin's representatives.
"I'm confident in the fiscally responsible approach President Barack Obama, we will be able to achieve our goals of cutting the debt in half over a period of time," said Democratic Representative Steve Kagen.
Republican Representative Tom Petri says the Congressional Budget Office disagrees.
"They project a doubling of the deficits over what the President's budget provided for," said Petri. "That's very bad news indeed."
St. Norbert College Economics Professor, Kevin Quinn, says besides concerns about owing money to foreign countries, a large national debt is similar to household debt.
"If you have heavy debt, a lot of your obligations go to paying interest on that. That means there are all kinds of cool things you are not doing because you're paying interest."
Except, for the government, Quinn says those are things like health care, self defense and education.
"(President Obama) inherited a debt of $10.5 trillion. Now you can't reach into Houdini's magic hat and make that debt disappear overnight," said Kagen.
"We really have to go back to the drawing boards if we're going to be responsible custodians of the public purse," said Petri.Votes by both the Senate and the House on a revised version of President Obama's proposed budget are expected by the end of next week.
By KARL ROVE
Something powerful is stirring in the land, and it may not be good news for President Barack Obama, his agenda or the Democratic Party. Mr. Obama said Tuesday night his budget moves America "from an era of borrow and spend" to "save and invest." But people are realizing he would add $9.3 trillion to the national debt, doubling it in six years and nearly tripling it in 10 years, according to the Congressional Budget Office (CBO). How can that be "save and invest"?
Nothing has deterred the administration from pursuing its staggeringly expensive agenda. Mr. Obama brushed off any concerns Tuesday night. He is quite openly using the economic crisis to launch a massive, permanent expansion of government financed by ever-more borrowing and ever-higher taxes. This may mean that his goal is to cause taxes to rise to European levels, transforming America into a European-style social democracy.
"Budget deficits, the United States is an example, are running up dramatically. There will be tension and pressure on those markets unless governments are able to do what they are promising," Wellink said.
Wellink also warned that the U.S. government's assumptions were "particularly optimistic."
Discretionary policy, such as tax cuts, were measures that will be difficult to reverse in the future, and Wellink singled out the United States, which he said faced deficits of 12 and 8 percent for 2009 and 2010 respectively."The government has faith that budget finances will quickly improve in later years but the assumptions for this confidence are particularly optimistic," Wellink said on the U.S. budget outlook.
Tuesday, March 24, 2009
So why the huge gap between Obama and the CBO?
Obama's team employed one of the oldest budget tricks in the books — exaggerating economic growth — to hide the true cost of his tax and spending plans. Budget forecasts are hugely sensitive to predictions about GDP growth, inflation, unemployment and interest rates. Even slight differences can have a huge impact on projected outlays and revenues.
And in his budget, Obama is positively Pollyannaish about the economy, predicting 3.2% real GDP growth next year, compared to the CBO's 2.9% and the Blue Chip consensus forecast of 1.9%. While the CBO and Blue Chip think unemployment will be 9% in 2010, Obama claims it will be only 7.9%. And so on.
Shorn of these tricks, the CBO finds that what remains is a fiscal plan that will leave the country mired in gargantuan deficits and debt.
Over the next decade, Obama's plan will produce annual deficits averaging 5.3% of the economy — compared with a post-war average of 2%. Even Obama's own budget director says that's unsustainable. Meanwhile, the national debt will hit 82.4% of GDP in 2019 under Obama's plan, according to the CBO, more than double the post-war average.
Worse, none of this includes Obama's pledge to expand health coverage. In his budget, he sets $606 billion over the next decade for health reform — through Medicare cuts and new taxes. But that's less than half the money most experts say is needed to fulfill Obama's universal health care pledge, leaving still more federal debt on the books.
Worse still, Obama would pile on all this debt just before the baby boomers start retiring in earnest, putting intense new pressures on federal deficits. Social Security's annual deficits will top $100 billion in 2020 and quickly go up from there, according to the Social Security Administration.
In response to all this, the administration says it's not giving an inch on its huge spending plans. And it goes on to dismiss the CBO as unreliable. "The CBO's projections," Obama budget director Peter Orszag wrote on the White House Web site, "are subject to a high degree of uncertainty."
Monday, March 23, 2009
Sen. Judd Gregg, New Hampshire Republican and one-time Obama pick to lead the Commerce Department, said the combination of new spending could cause the nation to go bankrupt.
“The practical implications of this is bankruptcy for the United States,” Mr. Gregg said on CNN's “State of The Union” on Sunday. “There's no other way around it. If we maintain the proposals which are in this budget over the 10-year period that this budget covers, this country will go bankrupt. People will not buy our debt; our dollar will become devalued.”
Sunday, March 22, 2009
Here is what I would do, first I would be smart enough to say we can not fix the social security system we have in place now. There is just no way, but since social security works kind of like a pyramid scam where we use the social security taxes of working people pay today to give benefits to those who have retired yesterday. In essence we are robbing Peter to pay Paul in the end Peter will run out of money. We need a new system one we can start from scratch one that will serve all those who will retire in the next 20 years. How do we do that and still pay out all we have to now? I don't think it would be that hard.
First we group every single person who is collecting social security right now in one group. We then figure out how much we are going to need to meet our obligations to that group every year. Lets take a few round numbers here, Lets say there are 1 million people collecting social security right now at a cost of lets say 1 billion dollars a year. Where can we get that billion dollars a year from with out touching the social security taxes people are paying today? Well we can do that with taxes. No not raising taxes but rather using the taxes we already place on our working Americans. We tax everything and pool those taxes to help run the government, we need to stop that. Lets just say for an example we use the taxes we collect on toilet paper to help fund this endeavor. We already collect a sales tax on that item all we have to do is change it from a sales tax to a social security tax. We are all already paying that tax so we would not even feel it. I know toilet paper really? Yes really we need to make sure we use the taxes from things that we can not live with out. And unless you're a bear in the woods you need toilet paper. I can hear you all now by taking the taxes from that and using them for something else we are just short changing another area of government, Come on people we all know that if every dollar the federal government spent was looked at a lot closer we could find savings. Even I know it does not cost $100.00 for a hammer.
But his most liberal allies are asserting the opposite, saying they show the need for the sweeping change that Obama's $3.6 trillion blueprint represents.
"The best way to reduce the deficit is to grow our economy; the best way to grow our economy is to act on the priorities in the president's budget," House Speaker Nancy Pelosi said in a statement. "President Obama's budget will transform our economy and create jobs by cutting taxes for 95 percent of Americans, making healthcare more affordable and accessible, creating a new, clean energy economy, and modernizing our schools to prepare our workforce for global competition.
"Over the next two weeks, I expect the House Budget Committee to produce, and the entire House will approve, a budget resolution that reflects the President's priorities and will help usher in a new era of job creation and lasting prosperity for the American people."
US President Barack Obama defended his budget plans Saturday, insisting that he remained committed to halving the deficit within four years despite new data showing it was bigger than expected.
In his weekly radio and video address, Obama said his administration was scouring every corner of the budget to produce two trillion dollars in deficit reductions over the next decade.
"In total, our budget would bring discretionary spending for domestic programs as a share of the economy to its lowest level in nearly half a century," he said.
"And we will continue making these tough choices in the months and years ahead so that as our economy recovers, we do what we must to bring this deficit down."
The comments came as Congress was poised to launch debate next week on the 3.55-trillion-dollar multiyear budget unveiled by Obama's administration last month.
But the nonpartisan Congressional Budget Office (CBO) forecast Friday the deficit could hit 1.845 trillion dollars this year under the Obama proposal, quadrupling the 2008 record shortfall.
The CBO said its latest budget deficit estimate for fiscal 2009, which ends on September 30, would amount to 13.1 percent of the country's total economic output.
Since its early January estimate of a 1.2-trillion-dollar gap, the CBO said the enactment of the 787-billion-dollar stimulus plan, other measures to revive the economy and additional factors had hiked deficit projections for 2009 and 2010 by over 400 billion dollars.
Republicans immediately seized on the report to blast Obama's economic policies. "It's worse than even the most pessimistic predictions for this budget," said Senate Republican Leader Mitch McConnell.
In his weekly radio and Internet address on Saturday, Mr. Obama said he would spend the coming week pushing for the programs in his $3.6 trillion budget.“As the House and the Senate take up this budget next week, the specific details and dollar amounts in this budget will undoubtedly change,” Mr. Obama said. “That’s a normal and healthy part of the process.”
The national debt held by the public would double over the next decade if President Barack Obama's budget is enacted into law, the nonpartisan Congressional Budget Office projected Friday.
The U.S. government would run budget deficits approaching $1 trillion every year for a decade under Obama's budget, the CBO said.
Deficits and debt that big are unsustainable over the long term, economists agree. They'd threaten to send inflation spiraling upward, threaten the nation's creditworthiness and the value of the dollar — China's prime minister publicly voiced concern about the safety of U.S. debt last week — and force up interest rates, as investors come to see the United States as a risky, debt-ridden economy. They'd saddle future generations with a debt payable only by cutting federal spending or raising taxes sharply.
Friday, March 20, 2009
The White House has estimated that the Obama budget will produce deficits of about $6.9 trillion over 10 years. But a powerful congressional office that is due to file its budgetary estimate on Friday will report a uch larger deficit.
The Congressional Budget Office has warned the White House in advance of Friday's estimate that the deficit projections will outpace the White House estimate, perhaps by as much as 20%, Politico reports. Democrats expect that the CBO projections will add around $1.5 trillion more to the Obama deficit.
One of the things pushing up the deficit is a lowered baseline for economic performance over the next few years. In addition, some spending programs may be viewed as more costly than earlier anticipated.
"In 2014, at which point the White House projects a deficit of $570 billion, it’s now expected that CBO will show a number in excess of $700 billion," Politico reports. "Five years later, in 2019, Obama’s budget concedes that the deficit will have widened to $712 billion; Democrats expect CBO to put the number over $1 trillion."
President Obama is expected to receive bad news on the budget front on Friday as the nonpartisan Congressional Budget Office releases what sources say will be a grim assessment of his $3.6 trillion budget's affect on the nation's deficit, a $1 trillion increase above previous projections.
The staggering figures will include the recently-passed $787 billion stimulus bill and the $410 billion omnibus spending package, both adding directly to the deficit, and to members' concerns that Obama is trying to do too much, too fast.
Obama has projected an historically-high federal deficit of $1.75 trillion this year, but he expects to cut that down to $533 billion by 2013.
Sen. Kent Conrad, D-N.D., chairman of the Budget Committee, said earlier this week that spending will have to be reexamined as a result,
U.S. Senate Budget Committee Chairman Kent Conrad said on Thursday he expects federal deficit spending will be about $1.6 trillion greater over the next ten years than President Barack Obama's budget plan forecasts.
Obama submitted his budget outline to Congress last month which forecast almost $7 trillion in deficits through 2019, however a worsening economic picture is expected to make the budget outlook darker.
Conrad told reporters that the additional $1.6 trillion over the next decade was based on projections of the Democratic majority's budget committee staff.
New Hampshire Sen. Judd Gregg and Connecticut Sen. Joe Lieberman have introduced legislation aimed at reducing federal spending.
Gregg, a Republican, and Lieberman, an independent, says the proposal would allow Congress to take a second look at some of the current spending and judge it based on its merits. Then, any amounts that Congress has second thoughts on can be used to pay down the deficit, instead of passing on the debt burden to future generations.
The senators say too often earmarks and new mandatory spending proposals are jammed into omnibus spending and tax bills that are frequently passed with no time to review. The proposal gives Congress another chance to vote on those earmarks, based on merit, not because they were carried by a "must-pass bill."
Unfortunately, the government's overheated spending, relying on future revenues and of course, that of future generations, reminds me a little too much of the Ponzi scheme mentality. And if entrepreneurship and business suffers, then our economy will be awfully close to a Ponzi scheme, where money is simply handed around without any real productive enterprise going on. Only this time it's going to include ugly side effects like worthless greenbacks resulting from out-of-control inflation. (And the Fed's $1 trillion move yesterday certainly stirs up still more concerns about runaway inflation even if the stock market did rise on the news.)
And of course, things could most certainly get far worse from there.
I know this sounds harsh, but I'm a proponent of trying to recognize the truth instead of fighting to stay in a state of overly optimistic delusion. I'm not stuffing cash in my mattress or giving up on the idea of investing; I try to remind myself that panic is destructive, not constructive, and won't help our current situation.
Wednesday, March 18, 2009
The Federal Government’s flood of red ink hit another high-water mark as the Treasury Department quietly reported today that the National Debt hit $11-trillion for the first time ever.
To be exact, the Debt now stands at $11,033,157,578,669.78. Divide it by the U.S. population and it comes up to over $36,000 in debt for every man, woman and child among us.
And the government is running up mountains of debt with increasing speed. It took just over 5 ½ months for Uncle Sam to go another trillion dollars deeper in debt since hitting $10-trillion last September 30th. It’s the fastest jump in U.S. history.
The hundreds of billions of dollars being spent as part of the federal bailout of the financial markets is a leading factor in the rapid increase. Over $400-billion in debt has been accrued in the 57 days since President Obama took office.
And the federal budget he unveiled last month projects even faster increases in the National Debt. It’ll hit $12.7-trillion by the end of the fiscal year on September 30th. The Administration’s four year estimate shows that by the end of September 2012, the Debt will have soared to $16.2-trillion – which amounts to nearly 100% of the projected Gross Domestic Product that year.
The U.S. is running up so much debt so quickly, some investors are worried. Over the weekend, Chinese Premier Wen Jiabao, who says his country has about a trillion dollars invested in U.S. Treasury notes, said he wanted a guarantee.
President Obama said Wen’s got nothing to worry about.
“Not just the Chinese government, but every investor, can have absolute confidence in the soundness of investments in the United States,” he said on Saturday.
That’s because the U.S. government’s power to tax stands behind all of its debt. If Uncle Sam ever needs a bailout, then as now, taxpayers get nailed.
It took the U.S. government 191 years – from 1791 until 1982 – to run up its first trillion dollars in debt. The second and third trillions got on the scoreboard much more quickly – each in just four years.
By the time George W. Bush was inaugurated in 2001, the National Debt stood at $5.7-trillion. He ran up more debt faster than nearly all of his predecessors combined: just under $4.9-trillion.
The National Debt stood at $10.6-trillon on the day Barack Obama took office. But if his budget projections are accurate, he’ll run up nearly as much government debt in four years as President Bush did in eight.
President Barack Obama has just recently released his $3.55 trillion fiscal 2010 budget, and already there's full employment among all the people who matter to officials in Washington, D.C. A front-page story for the March 2 Washington Post began: "President Obama's budget is so ambitious, with vast new spending on health care, energy independence, education and services for veterans, that experts say he probably will need to hire tens of thousands of new federal government workers to realize his goals."
The Post quoted officials of the Department of Veterans Affairs as saying they would hire some 17,000 new workers alone. A Heritage Foundation study estimates that nearly a quarter million new government workers will be needed to spend out the budget. But despite the prospects of full employment among government workers in the Washington, D.C., beltway, the rest of the country is in a bit rougher shape.
The GDP shrunk in the last quarter of 2008 at a 6.2 percent annualized rate, the worst in more than a generation. "Every major component of the economy shrank," the New York Times for February 28 noted, "except government spending." President Obama's $3.55 trillion budget proposal would at least protect that final growing node of the national "economy."
Tuesday, March 17, 2009
Like an aging rocker who misses the road, President Obama is getting the old campaign band back together for another big show, this one designed not to win the White House but to pass a paradigm-shifting, $3.6 trillion budget. That's the news this morning, with the Democratic National Committee ready to use its 13-million address email list to to mobilize supporters and flood Capitol Hill with phone calls. On the surface, this seems perfectly normal: The president is firing up his base to help get a legislative priority passed. But at whom is this campaign really aimed?
Simply put, the President’s budget spends too much, taxes too much, and borrows too much.
Our nation is dealing with one of its most difficult economic times. American families are hurting, and small businesses are struggling to create the jobs needed to help revive our struggling economy. But, while families and small businesses are making the appropriate sacrifices with their budgets, Washington continues to spend trillions of taxpayer dollars for bailouts and measures disguised as “economic stimulus.” The budget spends $3.5 trillion in 2010. This marks a nearly 20 percent growth in the federal
governmentsince the end of 2008.
President Obama has framed his budget as a break from the "failed policies" of the Bush Administration. Actually, his budget doubles down on President George W. Bush's borrow, spend, and bailout policies. For example:
- President Bush expanded the federal budget by a historic $700 billion through 2008. President Obama would add another $1 trillion.
- President Bush began a string of expensive financial bailouts. President Obama is accelerating that course.
- President Bush created a Medicare drug entitlement that will cost an estimated $800 billion in its first decade. President Obama has proposed a $634 billion down payment on a new government health care fund.
- President Bush increased federal education spending 58 percent faster than inflation. President Obama would double it.
- President Bush became the first President to spend 3 percent of GDP on federal antipoverty programs. President Obama has already increased this spending by 20 percent.
- President Bush tilted the income tax burden more toward upper-income taxpayers. President Obama would continue that trend.
Monday, March 16, 2009
During his presidential campaign, President Barack Obama promised the American people a "net spending cut." Instead, he signed a "stimulus" bill that spends $800 billion, and he has proposed a budget that would:
- Increase spending by $1 trillion over the next decade;
- Include an additional $250 billion placeholder for another financial bailout;
- Likely lead to a 12 percent increase in discretionary spending;
- Permanently expand the federal government by nearly 3 percent of gross domestic product (GDP) over pre-recession levels;
- Raise taxes on all Americans by $1.4 trillion over the next decade;
- Raise taxes for 3.2 million taxpayers by an average of $300,000 over the next decade;
- Call for a pay-as-you-go (PAYGO) law despite offering a budget that would violate it by $3.4 trillion;
- Assume a rosy economic scenario that few economists anticipate;
- Leave permanent deficits averaging $600 billion even after the economy recovers; and
- Double the publicly held national debt to over $15 trillion ($12.5 trillion after inflation).
A staggering 48% of American workers would prefer to stop paying into Social Security even if it meant they wouldn’t receive those benefits when they retired, according to a new survey by Sun Life Financial.
The survey, part of what Sun Life calls its Unretirement Index, is a random-dial poll of 1,200 Americans age between 30 and 65 that is blind to economic status and education level. Its aim is to gauge the effect of economic, financial and societal forces on working Americans.
Surprisingly, Americans of all economic levels eschewed Social Security. At the top end, 52% of people earning more than $125,000 a year wanted to stop paying Social Security, which might make sense as this group is more likely to be financially self-sufficient. But 47% of people earning $25,000 or less felt the same way. In fact, those numbers were consistent across all income levels.
What did make a slight difference was age: 59% of working Americans in their thirties wanted to stop paying into the system and only 33% of those age 60 and older, the people most likely to start receiving benefits, would give up those benefits if they could opt out of paying for them. Older people at least see the value of Social Security, says David Jacobson, a spokesperson for Sun Life.
When asked to rank Congress’ most important areas of focus after the economy, 33% of advisors named Social Security as law-makers’ priority, followed by alternative energy (28%), securities regulation (22%) and Medicare (17%). Returning to the retirement theme, 63% of respondents said their clients’ greatest economic concerns were “inability to retire on time,” while 34% said “inability to retire at all.” Seventy-five percent of respondents noted that their clients will likely have to work beyond the typical retirement age of 65.
Hertzberg does his best to paint this proposal as having bipartisan support, but political realities in Washington mean that Congressional Republicans would never actually vote for it. It's certainly ambitious: it would not only introduce a large-scale carbon tax but would also essentially abolish the idea of individual Social Security accounts. Given that radical Social Security reform and carbon taxes both lie on the outer edge of the politically feasible, doing both at once seems needlessly ambitious.
At the end of a lengthy meeting at a luxury resort outside London, the so-called Group of 20 nations, who together represent about 85 percent of the world economy, failed to offer specifics about the size or timing of coordinated economic stimulus, and some major players, including Germany and France, remain deeply reluctant to add to their national debt.
They did agree on Saturday to commit more money to help developing countries and the emerging markets of Eastern Europe, where the downturn has spilled into street protests. They also pledged to step up efforts to revive bank lending and regulate hedge funds.But the vagueness of the commitment meant that it will be up to President Obama — and the leaders of China, Russia and European nations, among others — to convince the markets that they have a coordinated strategy as they prepare to meet in London on April 2.
BEIJING CONCERNED OVER SAFETY OF DEBT HOLDINGS
In a front page article by Geoff Dyer in Beijing and Alan Beattie in Washington, it was reported:
"Premier Wen Jiabao yesterday urged the U.S. to take measures to guarantee its `good credit,' expressing concern about the `safety' of his country's huge holdings of U.S. government debt.
"Mr. Wen's shot at the U.S.'s deteriorating fiscal position -- on the evening of this weekend's G20 finance ministers -- was paired with a promise to increase China's public spending this year to boost its economy if needed.
"The Chinese government is the largest holder of U.S. public debt and Chinese officials have shown increasing signs of concern that the sharp increase in U.S. government spending. About 70 percent of China's near $2,000 bn foreign exchange reserves are believed to be in U.S. dollar assets.
"'We have lent a huge amount of money to the United States,' Mr. Wen told the annual press conference that marks the close of the National People's Congress, China's parliament."
How on earth did the U.S.A., which for years was internationally recognized as an industrial giant and a rich nation, descend to the level of a kept nation -- borrowing billions to salvage its former economic stature?
Thursday, March 12, 2009
Washington, March 11 - The Treasury Department today reported a record deficit for the month of February as well as a record high deficit for the first five months of the fiscal year.
The February deficit totaled $192.8 bln, up 10% from the same month one year ago, but still below the $205.7 bln deficit economists were expecting. The milder increase in the deficit may require less borrowing and curb some Treasury supply.
Revenues fell 17% compared to one year ago to $87.3 bln, while outlays totaled $280.1 bln in the month, essentially unchanged from the $281.3 bln outlays reported in February 2008.
The deficit for the first five months of the fiscal year 2009 totaled a record $764.5 bln, well exceeding the deficit recorded for all of 2008. Outlays for the fiscal year to date totaled $1.6 trln while receipts totaled $860.9 bln.
Wednesday, March 11, 2009
When the leaders of 20 nations met in Washington in November to face down a grave economic crisis that imperiled them all, the air was filled with promises of a new era of global regulation intended to match a new era of global risk.
The downturn is much sharper, its effects much more broadly felt. But the divide over how to regulate markets is deep. The United States and Britain, the world’s two biggest financial centers, will almost reflexively resist efforts to subject themselves to global regulators.
One European ambassador said last weekend that “in three weeks we’ll see whether the love affair with Mr. Obama can withstand our demand that the United States clean up its system fast, and his demand that we contribute more to Afghanistan, even faster.”
At any rate, earmarks have been continually on the rise. There were 4,126 earmarks in the 1994 federal budget, and in the 2009 budget now under consideration there are 9,286 earmarks worth $12.8 billion. This is said to be just 2% of the overall proposed spending of the 2009 budget at a cost of 'only' $7.7 billion.
This unprecedented growth in the size and expense of the federal government is truly stunning. And what makes it all the more stunning is the absolute disconnect between the President's rhetoric and his actions. He and his liberal allies who control both houses of Congress pay lip service to fiscal responsibility, government transparency and ending government waste. These are all principles which members of both parties should be happy to work together to achieve. Unfortunately, the President's actions demonstrate that he has no such intentions. His actions make it abundantly clear that the failed economic policies of high taxes and limitless deficits are once again the order of the day. Indeed, the era of big government is back with a vengeance.
Abraham Lincoln once said, "You cannot escape the responsibility of tomorrow by evading it today." Those are wise words for Congress to consider as action is taken to get the economy moving. In the coming weeks the House and Senate will begin taking up portions of President Obama's budget proposal. This will be a new opportunity for members of Congress to push back, cut waste and trim the taxpayers' burden. I am willing to work with the President and those on the other side of the aisle to make sure the interests of American taxpayers are given first priority.
The Stimulus bill was merely the beginning. We will soon have to consider the $1 trillion budget, including a $634 billion “down payment” on the Administration’s universal health care plan. On the horizon lies the Administration’s housing plan, which will reportedly cost upwards of $250 billion. And in the coming months, the White House will likely ask for another $1 to $2 trillion to shore up the financial sector.
I, along with so many Americans, am in sticker shock over the trillions of dollars at play in these efforts. Congress should pause and consider the consequence of every dollar we tax, borrow, or spend. Will these policies spur growth? Will they create jobs? Will they protect American families and small businesses? If not, the President must step back and reconsider these initiatives before it is too late.
First and foremost, Obama and his advisors based their plans on an extremely optimistic economic forecast. While I admire their confidence, most economists in this country anticipate increasing unemployment and only modest gains in economic growth through next year. When planning the budget, I would rather this administration hope for the best and plan for the worst.
Secondly, tax increases during a time of economic crisis will only further damage the economy. In the Obama plan, taxes would increase for individuals in the highest two tax brackets and also for individuals earning capital gains. These tax increases will reduce the amount people investing in business markets. Why penalize investors when they are helping the very markets this administration seeks to invigorate?
Finally, this plan’s outrageous deficits will become a huge obstacle in the future. At current levels, the government pays out over $170 billion every year in interest on our national debt. That is nearly a quarter of the price of the stimulus package in taxpayer dollars we are seeing go out the door before it can benefit anybody. By the end of a decade under this plan, our national debt would nearly double.
No intelligent citizen or business would operate in this manner, constantly running up debt, only to be buried under interest payments. So why is the government given a pass? If you or I found ourselves in this kind of debt, we would reign in our spending, increase our savings and work to pay back our debt as soon as possible so that no more of our earnings would be wasted to interest. And that is exactly what this budget plan should do.
New public opinion research conducted by Peter Hart and Bill McInturff shows that 66 percent of registered voters surveyed see our deficit and debt as a “very big threat to our country and its future,” compared with 58 percent who say the same about an unfriendly nation developing nuclear weapon capabilities; 57 percent and 52 percent saying the same about declines in manufacturing and American schools, respectively; and 24 percent saying the same about global climate change.
Nonetheless, contrary to the spin of big-government types, these deficits are not just temporary. In fact, the Obama administration uses every trick in the book to convert an understandable and potentially temporary budget lapse this year into a structural lack of fiscal responsibility.
Despite the rosiest economic projections we have possibly ever seen, as well as one of the largest tax hikes in history, President Obama's budget fails to achieve balance at any time in the next decade. The smallest deficit (at least as far as the eye can see) will be $533 billion in 2013. This is amazing, especially when the economic growth forecast is considered. Team Obama suggests that real GDP will grow significantly faster in the years ahead than it has in the past.
Gov. Mark Sanford told lawmakers Tuesday that he will reject $700 million in federal stimulus money unless President Obama grants the state permission to use the money to pay down debt.
State lawmakers, who are planning the state’s $6 billion budget around spending stimulus cash to shore up health care and education, said they will go around the governor to request the money. The S.C. House speaker characterized the governor’s opposition to the stimulus money as disingenuous.
In a letter to lawmakers, Sanford said it was important that the state not increase future budget deficits by using federal money to patch the budget over the next two years.
“Once that money runs out,” Sanford said, “South Carolina will be in a deeper hole than if it chose to deal with budget deficits now.”
Sanford has planned a series of stops across the state today to announce his decision.
“In the unfortunate case that the president would deny our request,” Sanford wrote, “I will not seek the funds, as I believe doing so would not help our current economic problems and would do real harm to our future financial picture.”
The average American does not know much about the Federal Reserve. The government and the Federal Reserve prefer to operate in the shadows. If the American public understood what their policies have done to their lives, they would be rioting in the streets. Most Americans believe that the Federal Reserve is part of the government. They are wrong. It is a privately held corporation owned by stockholders. The Federal Reserve System is owned by the largest banks in the United States. There are Class A,B, and C shareholders. The owner banks and their shares in the Federal Reserve are a secret. Why is this a secret? It is likely that the biggest banks in the country are the major shareholders. Does this explain why Citicorp, Bank of America and JP Morgan, despite being insolvent, are being propped up by Ben Bernanke and Timothy Geithner?
There is no solution that will not be painful to everyone in the United States. The only solution that would put America back on a path of sustainable prosperity would be a gold/precious metals backed currency that would force government and its citizens to live within its means. Congress would need to vote for something that would take away its power. With our current political system, this is impossible. Money is power. This leads to only one conclusion. The existing Ponzi scheme will have to collapse before we can adopt a rational financial system for America. It may take decades, or it may happen in 2010. No one knows.
Saturday, March 7, 2009
Senate Banking Committee Chairman Christopher Dodd is moving to allow the Federal Deposit Insurance Corp. to temporarily borrow as much as $500 billion from the Treasury Department.
The Connecticut Democrat's effort -- which comes in response to urging from FDIC Chairman Sheila Bair, Federal Reserve Chairman Ben Bernanke and Treasury Secretary Timothy Geithner -- would give the FDIC access to more money to rebuild its fund that insures consumers' deposits, which have been hard hit by a string of bank failures.
Mr. Obama indicated that the end was not in sight when it came to the economic crisis and suggested that he expected it could take another $750 billion to address the problem of weak and failing financial institutions beyond the $700 billion already approved.
The budget plan he released last month included a placeholder estimate of $250 billion for additional bank bailouts — an amount that represents the projected long-term cost to taxpayers of a $750 billion infusion into the financial sector — and in the interview Mr. Obama indicated that those figures were what he was likely to seek from Congress.
“We have no reason to revise that estimate,” he said.
-- John Adams
2. If you don't read the newspaper you are uninformed, if you do read the newspaper you are misinformed.
-- Mark Twain
3. Suppose you were an idiot. And suppose you were a member of Congress. But then I repeat myself.
4. I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.
-- Winston Churchill
5. A government which robs Peter to pay Paul can always depend on the support of Paul.
-- George Bernard Shaw
6. A liberal is someone who feels a great debt to his fellow man, which debt he proposes to pay off with your money.
-- G. Gordon Liddy
7. Democracy must be something more than two wolves and a sheep voting on what to have for dinner.
-- James Bovard, Civil Libertarian (1994)
8. Foreign aid might be defined as a transfer of money from poor people in rich countries to rich people in poor countries.
-- Douglas Casey, Classmate of Bill Clinton at Georgetown University
9. Giving money and power to government is like giving whiskey and car keys to teenage boys.
-- P.J. O'Rourke, Civil Libertarian
10. Government is the great fiction, through which everybody endeavors to live at the expense of everybody else.
-- Frederic Bastiat, French Economist (1801-1850)
11. Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.
-- Ronald Reagan (1986)
12. I don't make jokes. I just watch the government and report the facts.
-- Will Rogers
13. If you think health care is expensive now, wait until you see what it costs when it's free!
-- P.J. O'Rourke
14. In general, the art of government consists of taking as much money as possible from one party of the citizens to give to the other.
-- Voltaire (1764)
15. Just because you do not take an interest in politics doesn't mean politics won't take an interest in you!
-- Pericles (430 B.C.)
16. No man's life, liberty, or property is safe while the legislature is in session.
-- Mark Twain (1866)
17. Talk is cheap...except when Congress does it.
18. The government is like a baby's alimentary canal, with a happy appetite at one end and no responsibility at the other.
-- Ronald Reagan
19. The inherent vice of capitalism is the unequal sharing of the blessings. The inherent blessing of socialism is the equal sharing of misery.
-- Winston Churchill
20. The only difference between a tax man and a taxidermist is that the taxidermist leaves the skin.
-- Mark Twain
21. The ultimate result of shielding men from the effects of folly is to fill the world with fools.
-- Herbert Spencer, English Philosopher (1820-1903)
22. There is no distinctly native American criminal class...save Congress.
-- Mark Twain
23. What this country needs are more unemployed politicians.
-- Edward Langley, Artist (1928-1995)
24. A government big enough to give you everything you want, is strong enough to take everything you have.
-- Thomas Jefferson
Friday, March 6, 2009
At an event this morning, President Obama again demanded that the government he now heads “turn the tide on an era of fiscal irresponsibility.”
But his credibility on the issue is at risk if he goes ahead with plans to sign the $410 billion spending bill now making its way to final passage in Congress.
The measure is rife with earmarks – special spending provisions attached by members of Congress, usually to benefit a home district project. There are 8,570 earmarks on this bill that if enacted will cost taxpayers $7.7 billion.
The White House says the legislation is leftover from last year and that President Obama will work to reduce future wasteful spending.
In other words, the White House says the president will really get tough on spending right after he looks the other way and green lights $410 billion in spending for the current fiscal year.
“We’ll change the rules going forward,” says spokesman Robert Gibbs.
Earlier today, President Obama announced a new push to eliminate cost overruns and other wasteful spending in federal contracting. He said he wants to “enhance accountability and avoid leaving our children a mountain of debt.”
Actually, the mountain taking shape on his watch will give Everest a run for the money.
The budget plan the president issued last week shows the National Debt climbing to record heights of $16.2-trillion by the end of his four-year term. That amounts to an increase of $5.6-trillion on his watch – more than the $4.9 trillion run up by President Bush.
And when it comes to changing congressional rules on earmarks, Mr. Obama is being told to butt out – by none other than a top Democrat.
“I don’t think the White House has the ability to tell us what to do,” said House Majority Leader Steny Hoyer, telling reporters, “I hope you all got that down.”
“I saw those remarks,” said Gibbs, who then reiterated the president’s commitment to work with Congress to reduce wasteful spending.
Just none contained in the earmarks of the spending bill headed his way.
But in congressional testimony Tuesday, Mr. Bernanke wisely warned of the risks in the president's long-run budget plan for borrowing another $7 trillion through 2019, more than doubling the national debt. "It's very hard to know" how much more debt the nation can take on "before the international financial markets begin to balk," he said. "And so I think the prudent thing to do is to try to maintain stability."
A similar theme was sounded in a Wednesday Wall Street Journal opinion article by Sen. Evan Bayh, D-Ind. Sen. Bayh cited the historic high amount of U.S. debt held by countries such as China and Japan:
"The more of our debt that foreign governments control, the more leverage they have on issues like trade, currency and national security," he wrote. "Massive debts owed to foreign creditors weaken our global influence, and threaten inflation and steep tax increases for our children and grandchildren. The solution going forward is to stop wasteful spending before it starts."
Wednesday, March 4, 2009
The Chicago Transit Authority retirement plan had a $1.5 billion hole in its stash of assets in 2007. At the height of a four-year bull market, it didn’t have enough cash on hand to pay its retirees through 2013, meaning it was underfunded to the tune of 62 percent.
The misleading numbers posted by retirement fund administrators help mask this reality: Public pensions in the U.S. had total liabilities of $2.9 trillion as of Dec. 16, according to the Center for Retirement Research at Boston College. Their total assets are about 30 percent less than that, at $2 trillion.
With stock market losses this year, public pensions in the U.S. are now underfunded by more than $1 trillion.
That lack of funds explains why dozens of retirement plans in the U.S. have issued more than $50 billion in pension obligation bonds during the past 25 years -- more than half of them since 1997 -- public records show.
The quick fix for pension funds becomes a future albatross for taxpayers.
As the global economic crisis deepens, public pension funds will lose more money. The solution shouldn’t be more accounting tricks, Kramer says.
“Virtually every pension system has suffered losses in excess of 20 percent since they created the last set of artificial numbers,” he says.
The best step forward would be for states to negotiate benefits down, increase pension contributions and reduce the expected rate of return, Texas pension oversight board member Rowe says.
Public pension funds have to stop pushing the costs of retirement benefits for current workers into the future, actuary Gold says.
“You’re putting a bigger burden on your children,” he says. “It amounts to a transfer from tomorrow’s taxpayers to today’s employees.”
France and Germany at odds on budget deficits at a crucial timen the past when the European Union was paralyzed by a crisis, France and Germany would come to the rescue. Their leaders have not always seen eye to eye, but over the decades they have generally found compromises that have kept the European integration project alive.
Now, with the financial crisis showing no signs of bottoming out, the opportunity for Paris and Berlin to promote unity should have been ideal. Instead, they have adopted opposing approaches over how Europe should respond to the global meltdown.
The thrifty northern countries applaud Merkel's policies; the profligate southerners scoff at her parsimony. Berlin, now more than ever, is conducting its economic policies according to its perception of its national interests. The effect is to deepen the fissure that divides Northern and Southern Europe.
Swelling fiscal deficits are a necessary evil in the short term as the price of boosting economic growth, Ben Bernanke said on Tuesday.
"Of course, all else equal, this is a development that all of us would have preferred to avoid," he said. "But our economy and financial markets face extraordinary challenges, and a failure by policymakers to address these challenges in a timely way would likely be more costly in the end."
Tuesday, March 3, 2009
A new lending program from the Federal Reserve and the U.S. Treasury could generate up to $1 trillion in loans for small businesses and consumers, the government announced Tuesday.The Term Asset-Backed Securities Loan Facility, or TALF, will provide its first loans March 25, the government said. The Fed announced the program involving asset-backed securities, also known as ABS, in November, then unveiled an expansion last month, but the highly anticipated program was delayed.
Companies or investors interested in participating will apply to the Fed on March 17.
The New York Fed will lend up to $200 billion to owners of high-rated asset-backed securities, such as those backed by consumer loans, auto loans, student loans, credit-card receivables or small-business loans. Investors or companies holding these loans will be able to use them as collateral to obtain fresh funding from the government to extend credit to new customers worth up to $1 trillion.
Monday, March 2, 2009
"I do think the appetite with getting on with Social Security reform after that is very high and they will focus on trying to get something done before the next presidential election," Astrue said.The past two presidents have had a very hard time addressing this problem...I think Obama will face the same thing.
Sunday, March 1, 2009
Let me be very clear on the economics of President Obama’s State of the Union speech and his budget.
He is declaring war on investors, entrepreneurs, small businesses, large corporations, and private-equity and venture-capital funds.
That is the meaning of his anti-growth tax-hike proposals, which make absolutely no sense at all — either for this recession or from the standpoint of expanding our economy’s long-run potential to grow.
Raising the marginal tax rate on successful earners, capital, dividends, and all the private funds is a function of Obama’s left-wing social vision, and a repudiation of his economic-recovery statements. Ditto for his sweeping government-planning-and-spending program, which will wind up raising federal outlays as a share of GDP to at least 30 percent, if not more, over the next 10 years.This is nearly double the government-spending low-point reached during the late 1990s by the Gingrich Congress and the Clinton administration. While not quite as high as spending levels in Western Europe, we regrettably will be gaining on this statist-planning approach.
Study after study over the past several decades has shown how countries that spend more produce less, while nations that tax less produce more. Obama is doing it wrong on both counts.
And as far as middle-class tax cuts are concerned, Obama’s cap-and-trade program will be a huge across-the-board tax increase on blue-collar workers, including unionized workers. Industrial production is plunging, but new carbon taxes will prevent production from ever recovering. While the country wants more fuel and power, cap-and-trade will deliver less.
The tax hikes will generate lower growth and fewer revenues. Yes, the economy will recover. But Obama’s rosy scenario of 4 percent recovery growth in the out years of his budget is not likely to occur. The combination of easy money from the Fed and below-potential economic growth is a prescription for stagflation. That’s one of the messages of the falling stock market.
Essentially, the Obama economic policies represent a major Democratic party relapse into Great Society social spending and taxing. It is a return to the LBJ/Nixon era, and a move away from the Reagan/Clinton period. House Republicans, fortunately, are 90 days sober, as they are putting up a valiant fight to stop the big-government onslaught and move the GOP back to first principles.
Noteworthy up here on Wall Street, a great many Obama supporters — especially hedge-fund types who voted for “change” — are becoming disillusioned with the performances of Obama and Treasury man Geithner.
President Barack Obama's budget blueprint sets an ambitious agenda for spending and taxes over the next decade, proposing big boosts in the federal role in education, health care and energy, while projecting large budget deficits for years to come.
The plan envisions large tax increases and profound policy changes to stem health-care inflation, while reducing the ranks of the uninsured, and to combat global warming and expand education access. One war would end, as combat forces are withdrawn from Iraq, but another would ramp up as many of them are sent to Afghanistan. Foreign aid would nearly double.
The administration insists it isn't so, but some private economists are wondering if the Obama administration has brought "Rosy Scenario" back to town.
In unveiling his budget, President Barack Obama pledged to bring "honesty and fairness" back to the budget process by getting rid of the gimmicks past administrations had used to hide the real costs of government programs and proposed tax cuts.
But many economists who examined the economic assumptions that undergird the spending plan believe that Obama may have resorted to one of the oldest gimmicks around — relying on overly optimistic economic assumptions to make it look like you are dealing with soaring budget deficits when in reality you are only closing the gap on paper.
If you are among the 305,730,388 American citizens, your share of the national debt is $35,612.33 as of February 28, 2009.
The debt itself amounts to $10,88,770,017,536.32. That is close to 11 trillion dollars. However with the new spending going on in Washington, it will soon approach 13 trillion dollars.
If those figures are too staggering to comprehend, here is another way of looking at it.
If you spent $1 every second, you'd have to keep spending for 412,000 years to get to $13 trillion. That means you'd have to start shortly after the time human beings first started using stone tools and fire to get to $13 trillion today.
$13 trillion in one dollar bills weights 28 million pounds. That's as much as 87 blue whales or 462 Statues of Liberty.
If you laid 13 trillion one-dollar bills end-to-end they'd reach from the earth to the sun and back...five times over. That translates into 946 miles of greenbacks.
The interest on the current $10.7 trillion debt cost Americans $451.1 billion last year alone.
That is $1478 dollars in interest for every man, woman and children in the United States.
Battle lines are rapidly hardening over the broad policy shifts, massive deficits and tax increases President Obama unveiled last week in his first budget request, a 10-year spending plan thick with political friction points.
Yesterday, the president used his weekly radio and Internet address to declare his budget plan a fundamental reordering of federal priorities that would deliver "the sweeping change that this country demanded when it went to the polls in November."
As Congress this week begins reviewing Obama's request, Republicans are blasting the proposal as a historic and irresponsible enlargement of the federal bureaucracy that ultimately will force Obama to break his pledge to avoid a broad-based tax increase.
"If you think with this kind of incredible growth in government that they're going to only tax wealthy people, then I have some old lottery tickets I want to sell you," said Rep. Paul D. Ryan (R-Wis.), the senior Republican on the House Budget Committee.
The Democrat-controlled Congress, with help from President Obama's big government vision, is on track to double the national debt in four years.
USA Today published an interactive chart that provides annual revenue, spending, deficit and national debt numbers. The most frightening number is the national debt.