White House forecasts higher U.S. budget deficit

From Uk.reuters.com

The White House on Monday pushed up its forecast for the U.S. budget deficit for this year by $89 billion, reflecting the recession, a raft of new unemployment claims and corporate bailouts.

A fresh estimate of the deficit showed it coming in at $1.84 trillion -- representing a massive 12.9 percent of gross domestic product -- in the current 2009 fiscal year that ends on Sept. 30. A prior White House forecast released in February projected a deficit of $1.75 trillion, or 12.3 percent of GDP.

The report may add to the political challenges facing President Barack Obama as he seeks to push through a new healthcare plan and other big domestic initiatives.

A White House official said the gloomier deficit picture reflected weaker tax receipts as the economy declined and higher costs for social safety-net programs such as unemployment insurance. Spending on the government rescues for the financial and automobile industries was also a factor in the higher deficit, said the official, who spoke to reporters on condition of anonymity.

Time for budget restraint

From Postandcourier.com

For most of the past fifty years Congress has preferred to borrow instead of balancing the annual federal budget. That has led to deepening national debt. Americans have recently had warnings, from the Chinese government and other world markets, that our borrowing spree can't go on forever. We can only hope Congress finally gets the message.

President Obama clearly has not. He has just sent Congress his $3.5 trillion budget for the fiscal year that begins on October 1, along with news that he is asking for $17 billion in savings by trimming 121 government programs. The cuts represent just over 1 percent of the $1.4 trillion deficit estimated by the Congressional Budget Office. The interest on these borrowed funds will be an estimated $172 billion, ten times more than the proposed savings.

The cuts proposed by the president are justified. In remarks Thursday he highlighted some: the "obsolete" LORAN navigation system, which has been mostly supplanted by the Global Positioning System; a duplicative National Institute for Literacy; a Department of Education office in Paris; and an alternative engine for the Joint Strike Fighter. The latter is opposed by the Pentagon but has been kept alive for a decade by Congress to help maintain General Electric's jet engine works.

Mr. Obama pointed out, accurately, that $17 billion is "significant" and enough money to fund larger tuition tax credits, additional Pell Grant scholarships and the national park service's annual budget.

But his spending budget grows by a lot more than that, and faster than government revenues. Mr. Obama's fiscal 2010 budget, moreover, is just the down payment on a spending plan that envisions trillions more in debt over the next decade.

Lack of increases could hurt Social Security recipients

From Thetowntalk.com

The Congressional Budget Office forecasts that there will be no cost-of-living increase in Social Security benefits for the next three years. It is expected to be 2013 before the next increase. The cost-of-living adjustment is meant to keep benefits for the more than 50 million Americans who receive Social Security current with inflation. When inflation is low, as it is due to the recession, the COLA is low.This is the first time since the adjusted increases started in 1975 that the COLA has been 0 percent, making 2010 the first year most seniors have not seen their benefits go up.

Craig Barrett on the Deficit

From Azcentral.com

The thing I'd be most concerned about right now is deficits. What we're doing for short-term stimulus is cool and necessary, and I think everybody buys into that. It's what we're doing longer term . . . government infrastructure, government costs we're putting in place. Personally I'm frightened to death of the trillion-dollar deficits everybody's looking at years two through 10 of the next decade. I don't see how those are sustainable . . .

It means a lot for people like Americans because when we start to get up with a deficit which is approaching 100 percent of GDP then . . . the Chinese are going to wake up some day and say, 'I don't want your IOUs anymore,' and all the sudden the dollar's going to be worth 50 percent of what it was worth the day before, which means the standard of living of every U.S. citizen crashes and the government can't print money to make up for that.

Social Security, Medicare deficits portend inflation

From Statesman.com

How bad will future inflation be? I don't know. Neither does anyone else. It could be a "normal" inflation of 3 to 4 percent a year. It could also be a banana republic's 10 percent a month.

What we know is that all governments make promises they can't fulfill. Our government certainly has. Under both political parties, it has taken promise-making to a high art. This is not hyperbole. The figures can be found in regularly published government reports.

The figures exist, but they are ignored. News reports regularly inform us of the growing federal deficit, projected at

$1.8 trillion for fiscal 2009 and $1.17 trillion for 2010. But regularly reported, less visible government obligations have been growing much faster.

In the four years between January 2003 and December 2007, Medicare trustees reported that the unfunded liabilities of Social Security and Medicare grew by a stunning $10.4 trillion. The average annual growth was $2.8 trillion.

That's well over the expected formal deficit of $1.75 trillion this year.

In the 2008 trustees' report, the unfunded liabilities of Social Security and Medicare — promises of future retirement and health care benefits — total $42.9 trillion. In a few days, we should be able to read the 2009 report. It's a good bet that the unfunded liabilities will increase by $3 trillion in the new report.

Defying predictions of the world's birthrates

From Usnews.com

"Something dramatic has happened to the world's birthrates. Defying predictions of demographic decline, northern Europeans have started having more babies. Britain and France are now projecting steady population growth through the middle of the century," Walker writes, noting that the phenomenon of rising birthrates is not exclusive to Europe. "In North America, the trends are similar. In 2050, according to United Nations projections, it is possible that nearly as many babies will be born in the United States as in China. Indeed, the population of the world's current demographic colossus will be shrinking. And China is but one particularly sharp example of a widespread fall in birthrates that is occurring across most of the developing world, including much of Asia, Latin America, and the Middle East."

Policymakers here in Washington would do well to read Walker's analysis. The idea, for example, that the birthrate among Muslim immigrants living in Europe and elsewhere is declining should have a profound impact on U.S. policies in Iraq and Afghanistan and toward Iran and Israel. The uptick in the U.S. birthrate, which reached 2.1 children per woman in 2006—2.1 being the "magic number" to keep a nation's population steady, sometimes called "the replacement rate"—could have a major impact on a number of government entitlement programs, like Social Security, where the retirement of the baby-boom generation is projected to bankrupt the program when there are far too many retirees in the system for each person still working to make the books balance.

"Perhaps the most striking fact about the demographic transformation now unfolding," Walker reports, "is that it is going to make the world look a lot more like Europe.

"The world is aging in an unprecedented way. A milepost in this process came in 1998, when for the first time the number of people in the developed world over the age of 60 outnumbered those below the age of 15. By 2047, the world as a whole will reach the same point," he says, while the United States may be the only country in the West "to have been in the top 10 largest countries in terms of population size in both 1950 and 2050."

Would retiring at 70 help tackle our national debt?

From Nwemail.co.uk

UK

A GOVERNMENT-FUNDED research body has recommended that the age of retirement is lifted to 70 to control national debt.

In a report released yesterday, the National Institute for Economic and Social Research concluded that lifting the retirement age, which is currently 60 for women and 65 for men, can get the country’s debt under control within 10 years.

Alternatives to lifting the age in the report were slashing public spending by 10 per cent or a basic income tax rate of 37 per cent.

“But whether people choose to work or are forced to work until 70 are two very different things.”

Boomers Lousy At Preparing For Retirement

From Ibdeditorials.com

The numbers show a genuinely frightening gap between what people have saved for retirement and what they will need. And many of these studies don't take into account last year's stock market crash, which will make the problem worse.

Let's start with the basic fact that only about half of Americans have any employer-sponsored retirement plan at all. The other folks will have to depend on Social Security. For a typical boomer worker, that would mean a monthly benefit of about $2,400 if you reach retirement age of 66 in 2020.

What's going to happen? Certainly, people will try to save more. But my guess, knowing my generational cohort, is that we'll want a government bailout to supplement our too-meager retirement savings. Unfortunately, the Treasury won't have enough money to fund our Medicare benefits, let alone a top-up in Social Security.

A poll released in January by the National Institute for Retirement Security shows the anxiety about this issue. Because of the recession, 83% of those polled said they were worried about having a secure retirement; of those with a 401(k) account, only about half thought they would have enough money to retire. And 71% said it was harder to retire now than for previous generations.

Are you whining yet? I am. As my pension mentor Foot says:

"This is a time bomb that has been building for years. The recession has made it more acute. It has pricked the bubble of hope that high investment returns could get us out of the crisis."

Obama's first 100 days all spending, taxing, borrowing

From AP

In the party's weekly radio and Internet address, Rep. Lynn Jenkins chided Obama and Democrats in Congress for pushing through a $787 billion stimulus package and a $3 trillion federal budget for next year that she said will waste taxpayers' dollars and burden future generations.

"The plans they've passed in the first 100 days will add more to our nation's public debt than all previous presidents combined in 200-plus years," said the Kansas Republican, a former state treasurer. "They've taken away President Obama's promised middle-class tax cut and paved the way for a new national energy tax to be paid by every American who dares to flip on a light switch."

Obama Faces Challenges On Budget Vows

From Npr.org

Democrats defend the president's budget, arguing that to cut spending now would undermine efforts to heal the economy. House Speaker Nancy Pelosi said the budget would help fix it.

"In the first 100 days it enables us to make the claim that more has been done in this period of time for health care than in decades," she said. "More has been done on education than in generations. And in terms of energy, there's absolutely no contest."

So Obama's goal of redirecting the budget is well on its way. Fixing those deficits? Not so much.

And that has left members of the president's own party feeling queasy. Seventeen House Democrats voted against the budget. And the so-called Blue Dogs, fiscal conservatives, are watching spending carefully.