Pelosi: Americans Would Accept More Red Ink in Exchange for Jobs

From Foxnews.com

"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.

Voter Anger Is Building Over Deficits

From Online.wsj.com

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.

Eureka!

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.

National Debt Now Tops $12 Trillion

Another landmark amount surpassed.

Freshman House GOP’ers Urge Pelosi For Separate Vote On Debt Ceiling

From Talkradionews.com

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.

The Coming Deficit Disaster

From Online.wsj.com

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.

Wave of Debt Payments Facing U.S. Government

From Nytimes.com

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.”

House v. Senate: Who Should We Tax for Health Care?

From Business.theatlantic.com

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).

Can We Save Social Security?

From Parade.com

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 taxes

Right 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 benefits

Altering 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.”

Number of workers supporting each retiree 1960: 5.1 workers 2008: 3.2 workers 2030: 2.2 workers

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.

Raise the retirement age

Of 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.”

The Hidden Costs of Too Much Government Debt

From Marketoracle.co.uk

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.

After spending binge, White House says it will focus on deficits

From Reuters.com

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.