"We have to shed any weakness that anybody may have about not wanting to be confrontational on this subject for fear that we'd be labeled not sensitive to the deficit," Pelosi said, in a recording posted by Think Progress.
"The American people have an anger about the growth of the deficit because they're not getting anything for it. ... If somebody has the idea that the percentage of GDP of what our national debt is will go up a bit, but they will now -- and their neighbors and their children -- will have jobs, I think they could absorb that, and then we ride it out and bring money in," she said.
Monday, November 30, 2009
After engineering an unprecedented spending surge for nearly a year, President Barack Obama now wants to signal that he takes deficits seriously. So this week the White House announced that it is considering creating a commission to figure how to fix the budget mess.
Well, almost. What seems to concern the president is not the problem runaway spending poses for taxpayers and the economy. Rather, what bothers him is the political problem it poses for Democrats.
Last year, Mr. Obama made fiscal restraint a constant theme of his presidential campaign. "Washington will have to tighten its belt and put off spending," he said back then, while pledging to "go through the federal budget, line by line, ending programs that we don't need." Voters found this fiscal conservatism reassuring.
However, since taking office Mr. Obama pushed through a $787 billion stimulus, a $33 billion expansion of the child health program known as S-chip, a $410 billion omnibus appropriations spending bill, and an $80 billion car company bailout. He also pushed a $821 billion cap-and-trade bill through the House and is now urging Congress to pass a nearly $1 trillion health-care bill.
Monday, November 23, 2009
On Thursday Rep. Leonard Lance (R-N.J.) urged House Speaker Nancy Pelosi (D-Calif.) to remove raising of the national debt ceiling language from the Defense spending bill. Lance said he’d like the Speaker to allow for a separate vote on the issue.
Going forward, there is no relief in sight, as spending far outpaces revenues and the federal budget is projected to be in enormous deficit every year. Our national debt is projected to stand at $17.1 trillion 10 years from now, or over $50,000 per American. By 2019, according to the Congressional Budget Office's (CBO) analysis of the president's budget, the budget deficit will still be roughly $1 trillion, even though the economic situation will have improved and revenues will be above historical norms.
The planned deficits will have destructive consequences for both fairness and economic growth. They will force upon our children and grandchildren the bill for our overconsumption. Federal deficits will crowd out domestic investment in physical capital, human capital, and technologies that increase potential GDP and the standard of living. Financing deficits could crowd out exports and harm our international competitiveness, as we can already see happening with the large borrowing we are doing from competitors like China.
At what point, some financial analysts ask, do rating agencies downgrade the United States? When do lenders price additional risk to federal borrowing, leading to a damaging spike in interest rates? How quickly will international investors flee the dollar for a new reserve currency? And how will the resulting higher interest rates, diminished dollar, higher inflation, and economic distress manifest itself? Given the president's recent reception in China—friendly but fruitless—these answers may come sooner than any of us would like.
The United States government is financing its more than trillion-dollar-a-year borrowing with i.o.u.’s on terms that seem too good to be true. But that happy situation, aided by ultralow interest rates, may not last much longer.
In concrete terms, an additional $500 billion a year in interest expense would total more than the combined federal budgets this year for education, energy, homeland security and the wars in Iraq and Afghanistan.
“The government is on teaser rates,” said Robert Bixby, executive director of the Concord Coalition, a nonpartisan group that advocates lower deficits. “We’re taking out a huge mortgage right now, but we won’t feel the pain until later.”
Reid proposes $370 billion in new tax revenues over the next decade. $150 billion would come from a 40 percent excise tax on high-cost employer-sponsored insurance. Fees on makers of branded drugs and medical devices and on insurance companies would raise another $100 billion. Boosting the Medicare payroll tax by 0.5 percent on wages in excess of $200,000 ($250,000 for couples) would bring in another $55 billion. Among the cats and dogs: $15 billion from an increase in the floor on deductible medical expenses from 7.5 percent to 10 percent, and $6 billion from an excise tax on cosmetic surgery (the tummy tuck tax).
Reid picked very different revenue sources than the House. It would raise far more in taxes--about $540 billion through 2019. And 85 percent--$460 billion-- would come from a 5.4 percent surtax on incomes in excess of $500,000 ($1 million for couples).
Unfortunately, none of the proposals currently under consideration is likely to be popular. “ Congress is going to have to tell people things they don’t want to hear,” says David John of the Heritage Foundation, a conservative think tank.
Increase taxesRight now, employees pay a 6.2% Social Security tax on income up to $106,800 (the “income cap”). To generate more revenue, Congress could increase the rate at which income is taxed, raise the income cap, or add a new tax on income above $250,000. President Obama proposed this last idea during his Presidential campaign, but conservative economists say it would not dent the Social Security deficit.
More likely is a modest increase in either the payroll tax rate (from it’s current rate of 6.2%) or the income cap (from $106,800). Raising the cap is popular among Social Security reformers but would increase the tax burden on the middle class, since more of their income would be subject to the tax. Raising the payroll tax rate would disproportionately affect lower-income workers.
Change future benefitsAltering the way benefits are calculated could be a powerful tonic for Social Security’s fiscal ailments. “Financing current benefits isn’t such a big problem,” says Rudolph G. Penner of the left-leaning Urban Institute. “The problem is financing our promise of ever-increasing benefits.”
The current system ties benefits to wages: As people’s salaries increase, Social Security benefits grow. Under a popular idea called “price indexing,” consumer prices would be factored in, too. Benefits would increase more slowly, since prices tend to rise at a lower rate than wages. The idea may sound innocuous, but critics say it would change the very nature of Social Security and result in significant benefit decreases for people entering the system in the future.
Number of workers supporting each retiree
1960: 5.1 workers
2008: 3.2 workers
2030: 2.2 workers
Raise the retirement ageOf all the proposals under consideration, pushing back the retirement age seems the most likely to happen. People are staying in the workforce longer anyway, and the retirement age is already rising gradually—from 65 to 67 by 2027. Proposals are circulating to accelerate the jump to 67 by 2020. Requiring people to work longer before collecting Social Security doesn’t generate quite the ideological division tax increases do and doesn’t tamper with future benefits as price indexing would.
Any Social Security reform package is likely to contain some or all of these ideas. And it had better happen soon. Experts agree that the longer we wait, the more difficult it will be to solve the system’s financial ills. David M. Certner of the AARP believes that talk of a Social Security crisis is overblown. Still, he agrees that changes to the system are inevitable and says they should come sooner rather than later. “The sooner you make them,” he says, “the more modest the changes that are needed.”
You don’t need me to tell you that our public debt is enormous. As of this week, it came to $12,031,299,186,290.07. That’s more than $12 TRILLION in case you have trouble grasping a number that big. In just the past decade, it’s up more than 111 percent.
Things are only going to get worse, too, because Washington has completely abandoned any semblance of fiscal discipline! We’re running ever-larger budget deficits, including $1.42 trillion in fiscal 2009 alone.
The interest cost alone on our debt last year was $202 billion. That’s enough to send every man, woman, and child in this country a $656 check. Keep in mind that those costs were artificially low because of the lowest short-term rates in history due to the Fed’s rate cuts. Moreover, the flight-to-quality rally in government bonds helped keep longer-term rates low.
As bond prices fall, rates rise, and absolute debt levels climb ever-higher. That number is going to spiral upward. In plain English, we’re going to be dedicating a larger and larger share of the U.S. budget just to pay interest on our debt. Forget about defense, health care, Social Security or anything else.
Friday, November 13, 2009
President Barack Obama plans to announce in next year's State of the Union address that he wants to focus extensively on cutting the federal deficit in 2010 - and will downplay other new domestic spending beyond jobs programs, according to top aides involved in the planning.
On the practical side, Obama has spent more money on new programs in nine months than Bill Clinton did in eight years, pushing the annual deficit to $1.4 trillion. This leaves little room for big spending initiatives.
The US government deficit hit a record for October as the new budget year began where the old one ended: with the government awash in red ink.
The deficit for the 2009 budget year set an all-time record in dollar terms of $1.42 trillion. That was $958 billion above the 2008 deficit, the previous record.
That’s what former President Bush said today in explaining why he signed off on the bailout for Wall Street…calling the decision “one of the most difficult of his presidency.”
The former President made the remarks at the unveiling of the George W. Bush Presidential Center at Southern Methodist University.
“I went against my free-market instincts and approved a temporary government intervention to unfreeze the credit markets so that we could avoid a major global depression,” Bush said.
If you have extra money, and want to help pay down the enormous national debt, an under-the-radar law from 1961 lets you do just that. The federal government will accept contributions that are directly applied to government debt--which, of course, are tax deductible.
On average, most donations are less than $100, though there have been a few substantially large contributions since the law was enacted. According to CNN Money, the largest such gift occurred in 1992, in the amount of $3.5 million.
So far, total contributions for 2009 are slightly over $3 million. Though this number is significantly higher than any yearly total in the last 10 years, it pales in comparison to total donations in 1994, which were just shy of $21 million.
While every little donation does help, the contributions are not doing much to really reduce the amount of debt. “We might have to finance a tiny bit less that week,” Mckayla Braden, a spokesperson for the Bureau of the Public Debt, said to CNN Money.
First, let’s start with some facts.
As of today, the U.S. National Debt is nearly $12 Trillion dollars. That’s a monster in itself, but it’s nothing compared to what the U.S. really owes…
You see most people have no idea what the U.S. government owes on “unfunded obligations”. That’s government-ese for entitlement programs like Medicare, Social Security, etc.
Right now, the total unfunded obligations sits at $106 Trillion dollars! That’s 780% MORE than the “national debt.”
Now, let’s do a little math…
If you charged Americans for the national debt, each citizen would have to shell out $38,940. If you just charged taxpayers, that tab would climb to $104,000 per person.
Our nation’s Total Assets now stand at $74 Trillion dollars, or $240,000 per citizen.
Now add in the “unfunded obligations” at $106 Trillion, and every citizen would have to shell out $344,000 to keep us afloat.
In other words…as a country, we are flat-broke!
By the way, if you don’t believe me, you can go to the National Debt Clock website and see for yourself. But I warn you don’t go there if you have a weak stomach.
Wednesday, November 11, 2009
"Economic history is being written right before our eyes. Hence, I refer to this episode as the largest economic experiment since the implementation of communism. And here’s what really frightens me: None of the experimenters saw this crisis coming, but all of them claim to know the remedy!"
Monday, November 9, 2009
The United States is poised to hit the debt limit in December and Congress will need to raise the ceiling to keep the federal government functioning, the Treasury Department said Wednesday.
The national debt ceiling authorized by Congress is 12.104 trillion dollars, more than 80 percent of 2008 US economic output.
"Based on current projections, Treasury expects to reach the debt ceiling in mid to late December," the department said in a quarterly report on refinancing the federal government's debt.
"Treasury is working with Congress to pass legislation to increase the debt ceiling," it said.
National debt has ballooned as the government borrows money to fund massive stimulus and bailout measures to support the recession-stricken economy.
US national debt topped the 10.0 trillion-dollar milestone in late 2008.
In February, Congress raised the debt limit to 12.104 trillion dollars as the government launched a 787-billion-dollar stimulus program to help pull the economy out of recession that began in December 2007.
Governments are running breathtaking deficits…and accumulating alarming debts. Japan has a national debt of nearly 200% of its GDP. Where did that debt come from? It came from 20 years of trying to buy its way out of a slump with borrowed money. Of course, it didn’t work. But now, Britain and America are following the Japanese lead…and the Japanese are still at it! At the present rate, Japan’s government debt will grow to 300% of GDP in 10 years. America’s debt could grow to 100%…and then 200% of GDP…over the next decade (depending on whose projections you believe). And Britain, if we read the report in The Financial Times correctly, will have debt equal to 200% of GDP within 3 years.
By one measure, the government already plays an outsize role in our so-called free-market economy—and it has little to do with the recession. Economist Gary Shilling has calculated that 58 percent of the population is dependent on the government for "major parts of their income," including teachers, soldiers, bureaucrats, and other government employees; welfare andrecipients; government pensioners; public housing beneficiaries; and people who work for government contractors. By 2018, Shilling estimates, an astounding 67 percent of Americans could be dependent on the government for their livelihood. The implications aren't comforting.
Monday, November 2, 2009
Pledge: "When George Bush came into office, our debt -- national debt was around $5 trillion. It's now over $10 trillion. We've almost doubled it. ... But actually I'm cutting more than I'm spending so that it will be a net spending cut." -- Obama, during an Oct. 7, 2008, debate in Nashville
Verdict: Promise Broken. The federal budget deficit for fiscal 2009 tripled to a record $1.4 trillion, according to a Congressional Budget Office estimate out in early October. That's nearly $1 trillion more than the $459 billion deficit recorded in President Bush's last full year. The recession-driven declines in revenue accounted for a large part of Obama's red ink, but so did increases in spending -- on everything from the economic stimulus to Wall Street bailouts (sealed before Obama took office). Though Obama still says he wants to bring the deficit down significantly before the end of his first term, projections show the fiscal 2010 deficit will also exceed $1 trillion. Even if Obama does make major changes to fiscal policy and cut the deficit in half, that's still hundreds of billions of dollars every year to the national debt.
"Free lemonade to help pay down the national debt!" shouts an A&M student in front of the Wehner building on A&M University's West Campus.
A&M students got creative today trying to raise awareness of the rising national debt. Offering free lemonade in exchange for an I-O-U to pay 25 cents toward the $11 trillion deficit.