Archive for the ‘Budget – Deficit’ Category

Will the U.S. default if debt limit isn’t raised?

October 11, 2013

Lots of hysteria re: the debt limit.

Key question: will the U.S. really default on its debt obligations if the debt limit isn’t raised?

Answer: Only if that’s what the Treasury Department wants to do.

Basic facts:

The Treasury receives about $250 billion in tax receipts every month.

Interest on the debt is about $30 billion per month (@ an average interest rate of about 2%)

So, plenty of money to cover interest on the debt.

What’s the rub?

Some calamitists say: “No legal way to prioritize who gets paid.  Gotta pay all obligations.”

Easy answer: Cut the flow of obligations.

As the shutdown is showing, we can tell NASA, HUD, EPA, and Education to stay home for awhile and we won’t miss a beat.

Cut expenses, cut obligations. Easy as that.

But, Business Insider says that the government doesn’t have sophisticated enough computer systems to prioritize the cutting of checks.

If the ObamaCare exchanges are representative, they may be right on that one.

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Here’s a clip worth watching.

David Stockman – former OMB head – speaks to the issue … he says default won’t happen.

 

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Turnabout is fair play … remember “Reconciliation”?

October 8, 2013

I’ve been amused by the Dems squawking about the way that the GOP Congress has linked ObamaCare  to the Budget’s “continuing resolution”.

Foul.  Fight fair. Never done.  Blah-blah-blah.

Here’s the ironic twist …

Remember how Obama Care was passed?

 

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To refresh your memory, and see the irony …

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Nums: How much of the government is actually shut down?

October 7, 2013

Question: in a partial government shutdown, like the one underway at the moment, how much of the government is actually shut down, and how much is not?

Answer: About 17%.shut down; 83% up and running

Details below …

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Based on estimates drawn from CBO and OMB data, 83 percent of government operations will continue.

This figure assumes that the government pays amounts due on appropriations obligated before the shutdown ($512 billion), spends $225 billion on exempted military and civilian personnel, pays entitlement benefits for those found eligible before the shutdown (about $2 trillion), and pays interest costs when due ($237 billion).

This is about 83 percent of projected 2014 spending of $3.6 trillion.” Source

Hmmm.

And, let’s drill down on who actually got furloughed …

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Deja Vu: Anybody remember zero-based budgeting?

October 3, 2013

First, a quick refresher course courtesy of the Government Finance Officers Association (of Canada, that is).

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When using zero-base budgeting (ZBB), a government builds a budget from the ground up, starting from zero.

There has been renewed interest in ZBB in today’s environment of fiscal constraint, not least because the “zero” in zero-base budgeting sends a powerful message that taxes and spending will be held in check.

Zero-base budgeting, also known simply as ZBB, has had a long …  history in the public sector.

Zero-base budgeting first rose to prominence in government in the 1970s when U.S. President Jimmy Carter promised to balance the federal budget in his first term and reform the federal budgeting system using zero-base budgeting, a system he had used while governor of Georgia.

ZBB, as Carter and budget theorists envisioned it, requires expenditure proposals to compete for funding on an equal basis – starting from zero. In theory, the organization’s entire budget needs to be justified and approved, rather than just the incremental change from the prior year.

Today, there is an apparent resurgent interest in ZBB.

GFOA’s survey shows that traditional budgeting methods, namely line-item and incremental budgeting, have declined in use in the last few years, while all forms of budgeting that are thought to be better adapted to cutting back the budget, not just ZBB, have increased Source

OK, they’re talking about Canada, not the U.S.

Still a couple of takeaways:

1. The process – in government, at least – traces back to Jimmy Carter.

2. Many Canadian governments are using ZBB

3. In Canada, the use of ZBB is increasing

Now. here’s what I think is interesting …

 


Although they stumbled into it, the GOP may have landed on a masterful plan.

In effect, the GOP’s piecemeal approach to unraveling the government shutdown is nothing more than real-time ZBB.

Think about it for a second.

A week ago the gambit was to fund everything except ObamaCare.

Non-starter, right?

Now, in concept at least, the piecemealing approach allows everything to be funded … except ObamaCare.

Everything that matters – either really or because of political optics – can be quickly restored with short, separate authorization bills.

Anything that’s questionable stays squashed.

Anything that’s essential gets an appropriation,

Eventually everything that’s essential gets funded.

Gee, that sounds like zero-based budgeting, doesn’t it?

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Deficit: Simpson-Bowles … be careful what you wish for, because you might get it.

March 28, 2013

Last week with Ryan & the Dems offering dueling budget plans, there was renewed chatter: “Why don’t they just implement Simpson-Bowles?”.

It’s usually stated in a way that it’s a painless gimme.

The convenient compromise.

My hunch: About as many people read the Simpson-Bowles Report as read the ObamaCare law.

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I expect that S-B will become a template for any “grand bargain” … so I started refreshing my memory

Here’s what you need to know …

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Let ’em eat cake: Michelle O says “rock on” …

March 11, 2013

Let me get this straight …

The Sequester is causing unprecedented Fed fiscal heartburn.

So bad, the public tours of the White House have been cancelled … saving a reported $75,000 weekly.

No place else to look for scratch.

Not to worry, though, the party lights will still be shining bright at the White House.

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Here’s what’s going down …

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Kerry threatens 6,000 teachers’ jobs … Where’s the outrage?

March 4, 2013

Last week, Secretary of Education Arne Duncan was shrilling on behalf of the Chicken Little crowd that because of the Sequester  40,000 teachers would lose their jobs.

His claim was quickly debunked, but he left a lasting impression .. on me, at least.

“Dollars” don’t have emotional impact any more.

So, let’s start thinking in terms of full-time teacher equivalents (FTTEs).

Duncan got his estimate by assuming that an average teacher makes $70,000.

Maybe in Chicago they do.

But, according to PayScale.com the national average  is in the mid-40s.

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Let’s do a hard round for arithmetic convenience and call it $50,000.

Here’s what Kerry did, evaluated using the new metric full-time teacher equivalents (FTTEs) …

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OMG: Sequester puts the football season is at risk …

February 28, 2013

OK, here’s the silliness of the day ….

The fiscal pin prick (aka, the “Catastrophic Sequester”) puts this fall’s college football season at risk …  at least for the National Champions — the University of Alabama.

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Apparently, the only thing that can possibly be cut from the FAA budget are the air traffic controllers at the Tuscaloosa, Alabama airport on Crimson Tide football weekends.

According to Channel 42 WIAT News:

Looming budget cuts from the Federal Aviation Administration could have an impact on the next college football season.

Budget cuts could include eliminating local air traffic controllers at the Tuscaloosa Regional Airport.

We’re told that the airport wouldn’t shut down, but pilots would fly in and out using “visual flight rules” and Birmingham’s air traffic system.

Hundreds of flights come in and out of the Tuscaloosa  Airport during the football season.

This development is mind-blowing for a couple of reasons …

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WARNING: Graphic image of a catastrophe …

February 27, 2013

With only a day or two until Armageddon

… until life as we know it ends

… or until, at least, the sky falls

… let’s put the Sequester in perspective.

This single graphic says more than a thousand words … or, in Obama’s case, a couple of thousand words,

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Source

Please, sleep well tonight … I think the Nation can absorb this fiscal pin prick.

Thanks to MC for feeding the lead.

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Ouch: Sequestration gets personal …

February 22, 2013

The band, the football team, the honors program, hot lunches … and the Blue Angels.

Every year, a friend holds a BBQ at their home on Annapolis’ Severn River on the Naval Academy’s graduation day.

Why?

Because the Blue Angels put on an awesome show as part of the graduation ceremony.

Well, maybe not this year.

According to the Baltimore Business Journal:  Blue Angels shows in Annapolis, Ocean City are jeopardized by sequestration.

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I’m bummed … and a bit perplexed by the accounting.

The Feds claim the Navy will save $28 million.

Other than the fuel that the Angels burn, where’s the cost savings.

They’re not going to fire jettison the pilots or sell the planes, right?

Sounds like the Feds need a crash course on marginal accounting.

Thanks to SMH for feeding the bad news.

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Answer to Sequestration: pray for snow !

February 22, 2013

The news broadcasts today are talking a lot about Sequestration and Snowstorm Q.

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Let’s connect those dots …

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Football, band, honors classes, hot lunches … and dead cows … say, what?

February 21, 2013

This is getting downright silly.

Sequestration will cut less than 3% of Federal spending … about the amount that was granted to Hurricane Sandy states in the whisk of a pen.

Still, President Obama had to broadcast dire consequences in front of a group of firemen … who will have to be laid off, probably causing small children to die in fires.

Give me a break.

We covered this topic earlier this week Football, band, honors classes and hot lunches … here we go again.

Apparently, the folks at Business Insider didn’t read the post.

Evidence?

An article titled “11 Ways The Sequestration Will Ravage The US Government“ … replete with an alarming picture of dead cows.

Technical note: It’s no clear o me how the sequestration will do the cows in.

Also, it’s not clear to me that the cows aren’t just taking a snooze.

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What are the 11 Ways The Sequestration Will Ravage The US Government? 

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Football, band, honors classes and hot lunches … here we go again.

February 18, 2013

When I was a kid, the local school board would biennially warn that football, the band, the honors program and hot lunches would be cut unless a levy was passed to boost real estate taxes.

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I remember that – even as a kid – it sounded like a bunch of bull.

Sometimes the levies passed. Sometimes they didn’t.

Regardless of the vote, the stadium lights still glowed bright on Friday nights, the smart kids still got their honors courses, and the cafeteria kept serving up hot slop.

Today’s equivalent of football, band, honors and lunches is Obama’s dire warning that there will be dire consequences if sequestration happens.

Just for openers, the White House says it has no choice but to put the following on the chopping block:

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Obama pledges (again): “Won’t increase the deficit by one dime” … say, what?

February 14, 2013

First, I have to admit that I was part of the vast majority of Americans who didn’t watch Obama’s State of the Union address this week.

About 37.75 million viewers watched President Obama’s 2012 State of the Union address, which was aired live across 14 broadcast and cable networks.

That was down 12% from last year’s speech,  and down 21% from Obama’s first State of the Union in 2010.

No, I wasn’t watching the LA police torch Christopher Dorner.

I was watching a Castle re-run … and, proud of it.

I am a bit disappointed that I missed Obama refrain his signature line that his free-spending on a smorgasbord of whacky programs “won’t add one dime to the deficit”

Yeah, right.

The GOP was quick to pounce with a commercial showing Obama  spin that whopper several time over the years.

click to view
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The ad points out that the deficit has increased more than 58 trillion dimes since Obama took office.

Maybe that’s what he meant … that the programs would boost the deficit by a couple of trillion dimes … not just one dime.

Where was Joe Wilson last night?

Maybe he was home watching Castle, too.

P.S. To the President: if there are programs that can be cut to fund these whacky programs, why not just cut them and reduce the deficit?

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Where was Joe Wilson when Obama said “It will not add to the deficit”?

September 12, 2011

President Obama – and most lib-pundits – seem to have completely forgotten the debt ceiling and credit downgrade.

Pssst … we have no money !!!

And, they appear  hopelessly confused re: what’s  “debt” and what’s a  “deficits”.

Let’s review …

A deficit is an annual shortfall —  when spending exceeds revenues.

In a gov’t context, a deficit happens when spending exceeds tax receipts in the current year !.

Debt is the amount of money that is owed to other people or entities.  It is the sum of annual deficits.

Now, the important point …

A deficit needs to be funded by borrowing, which adds to outstanding debt.

OK, with that as clarifying background …

Obama said a couple of times that his laundry list of potential job creating ideas ” …  will not add to the deficit.”

Here’s what the AP had to say about that:

It’s hard to see how the program would not raise the deficit over the next year or two because  most of the envisioned spending cuts and tax increases are designed to come later rather than now, when they could jeopardize the fragile recovery.

Deficits are calculated for individual years.

The accumulation of years of deficit spending has produced a national debt headed toward $15 trillion.

Perhaps Obama meant to say that, in the long run, his hoped-for programs would not further increase the national debt, not annual deficits.

Said differently, the only way that the 2012 deficit doesn’t increase is if other spending is cut or taxes are raised in 2012.

Neither is likely to happen (a) because there isn’t time (b) because there isn’t will, and (c) because either would neutralize any impetus from O’s spending.

So, it’s practically certain that the deficit will increase, and that short-term debt will increase.

Most interesting: the added borrowing may push Obama up against the debt ceiling again before the 2012 election … his only real line in the sand during the debt ceiling negotiations.

Hmmm.

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Nums: U.S. Federal Spending & Deficits under Clinton, Bush & Obama

July 26, 2011

If you missed yesterday’s post “How’d we get into this fix?”, check it out now.

Apparently, Pres. Obama missed it.

How do I know?

Simple: his historical recollections in last night’s speech didn’t seem to match the numbers.

Somebody forwarded him the link, ok?

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Following up on yesterday’s post, some HF readers asked for a summary table.

So, here it is …  click below for a PDF version

Conclusions stay the same as yesterday …

Bush overspent Cinton by about $1 Trillion annually and Obama makes him look like a tightwad.

Obama is spending $1 Trillion per year more than Bush and $2 Trillion per year more than Clinton.

Still, Obama wants taxpayers to bail him out.  Don’t constrain him with spending restraints …

What planet ?

click chart to enlarge or click below to download a PDF version

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click to download PDF

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Grab hold of your wallet … Moody’s says: “Give the President a blank check,

July 19, 2011

CNBC reports that “Moody’s Suggests US Eliminates Debt Ceiling”

Ratings agency Moody’s on Monday suggested the United States should eliminate its statutory limit on government debt to reduce uncertainty among bond holders.

The rationale:

The United States is one of the few countries where Congress sets a ceiling on government debt  , which creates “periodic uncertainty” over the government’s ability to meet its obligation.

And, any way …

In the United States, Moody’s said the debt limit had not effectively curbed the rise in government debt because lawmakers regularly raise it and because that limit is not related to the level of expenditures approved by Congress.

Are you kidding me?

First, giving a drunken sailor an open line of credit at the booze store makes no sense at all.  I have zero confidence that the Feds will show any fiscal restraint ever.  The debt ceiling at least helps to protect them from themselves.

Second, isn’t this the same Moody’s that rated sub-prime mortgage backed securities AAA …  right up to the meltdown?  Does anybody take these jabrones seriously any more?

Third, isn’t Warren Buffett one of Moody’s owners?  Why doesn’t he just turn his personal fortune over to the Treasury if he thinks the spending binge should continue.  It would give Obama some walking around money and shut Buffett up re: his strong desire to pay higher taxes.

Geex.

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Flashback: Will the Republicans get hosed again?

July 7, 2011

Today is Pres. Obama’s bipartisan summit to go long ball on debt and deficit reduction.

My bet: history will repeat itself and Republicans will get snookered again.

Remember the budget deal that averted the government shutdown last December?

Headlines said it would cut spending by $38 billion (with an “b”).

Turns out that the real impact was only $352 million (with an “m”).

According to the Washington Post:

Budget deal: CBO analysis shows initial spending cuts less than expected

A federal budget compromise that was hailed as historic for proposing to cut about $38 billion would reduce federal spending by only $352 million this fiscal year, less than 1 percent of the bill’s advertised amount, according to the Congressional Budget Office.

And, a mere 6 months after the agreement – that was supposed to hold until the end of 2012, Obama is walking back the full extension of the Bush tax plan and the tax-based stimulus provisions.

As the original Grandma Homa would say: fool me once, shame on you, fool me twice, shame on me.

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Clever planning: The President shrewdly invited the GOP political hacks, but left Ryan, Coburn and Portman —  the only guys who understand the numbers – off the guest list.

I guess that a fact-free summit will go smoother

Also, the President scheduled the summit the day before another likely-to-be-dismal jobs report … hoping that the jobs report will get ignored.

Trust, HomaFiles won’t ignore it.

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What to watch: I’m betting that most of the Dems “cuts” will be capping growth in spending (which isn’t a cut !) and the usual phantom attack on waste & fraud (how are we doing on the $500 billion of w&f that was supposed to come out of Medicare?).

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Superpower or welfare state ? … Take your pick.

June 2, 2011

Punch line: In a series of adios speeches, Defense Secretary Gates speaks a consistent refrain: America can be a superpower or a welfare state, but not both..

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Excerpted from WSJ:

“The reality is that the entitlement state is crowding out national defense.

What’s really happening now is “entitlement overstretch”.

The American entitlement state was born with the New Deal, got fat with the Great Society of the 1960s and hit another growth spurt in the first two years of the Obama era.

The big three entitlements — Social Security, Medicaid and Medicare, plus other retirement and disability expenses — accounted for 4.9% of GDP by 1970, eclipsed defense spending in 1976 and stood at 9.8% as of last year.

Under current projections, entitlements will eat up 10.8% of GDP by 2020, while defense spending goes down to 2.7%.”

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Ken’s Take: Note the “secret” to how Clinton was able to balance the budget – simply cut defense & intelligence spending and hope for sustained peace.

Oops.

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Con job: Gross = $38.5 billion, Net = $352 million … Boehner should resign!

April 14, 2011

The National Journal Reports

A Congressional Budget Office analysis of the fiscal 2011 spending deal that Congress will vote on Thursday concludes that it would cut spending this year by less than one-one hundredth of what both Republicans or Democrats have claimed.

A comparison prepared by the CBO shows that the omnibus spending bill, advertised as containing some $38.5 billion in cuts, will only reduce federal outlays by $352 million below 2010 spending rates. The nonpartisan budget agency also projects that total outlays are actually some $3.3 billion more than in 2010, if emergency spending is included in the total.

The astonishing result, according to CBO, is the result of several factors: increases in spending included in the deal, especially at the Defense Department; decisions to draw over half of the savings from recissions, cuts to reserve funds, and mandatory-spending programs; and writing off cuts from funding that might never have been spent.

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Ken’s Take: Either Boehner was in on the con, or he’s so stupid that he was had.

Either way, he should resign as Speaker of the House,

That’s what I think …

70,000 children will die … oh, really.

April 6, 2011

When I was a kid, the local school board would biennially warn that football, the band, the honors program and hot lunches would be cut unless a levy was passed to boost real estate taxes.

I remember that – even as a kid – it sounded like a bunch of bull.

Sometimes the levies passed.  Sometimes they didn’t.

Regardless of the vote, the stadium lights still glowed brighton Friday nights, the smart kids still got their honors courses, and the cafeteria kept serving up hot slop.

Here is today’s equivalent of football, band, honors and lunches:

According to the Daily Kos, USAID Administrator Rajiv Shah testified before the House Appropriations State and Foreign Ops subcommittee that “Adopting H.R. 1 (the budget passed by the GOP House) would lead to 70,000 kids dying.”

Geez.

It’s not even enough these days to warn of seniors eating dog food, schools being shuttered, etc.

Nope. The bidding is up to 70,000 kids dying.

Only children and seniors programs can be cut.

Everything else is more essential, more critical.

Except that is, for the $100 to $200 billion in wasteful spending that the GAO reported last month:

WSJ, Billions in Bloat Uncovered in Beltway, March 1, 2011

A GAO report uncovered billions of dollars in wasteful spending by the U.S. government due to duplicate work done by dozens of overlapping agencies on redundant and  ineffective federal programs

For example, the U.S. government has 15 different agencies overseeing food-safety laws, more than 20 separate programs to help the homeless and 80 programs for economic development.

The agency found 82 federal programs to improve teacher quality; 80 to help disadvantaged people with transportation; 47 for job training and employment; and 56 to help people understand finances.

The report took particular aim at government funding for surface transportation, including the building of roads and other projects, which the administration has made a major part of its push to update the country’s infrastructure. The report said five divisions within the Department of Transportation account for 100 different programs that fund things like highways, rail projects and safety programs.

The report chided the government over encouraging federal agencies to purchase plug-in hybrid vehicles while having policies that agencies reduce electricity consumption. It said government agencies have purchased numerous vehicles that run on alternative fuels only to find many gas stations don’t sell alternative fuels. This has led government agencies to turn around and request waivers so they didn’t have to use alternative fuels.

The GAO identified between $100 billion and $200 billion in duplicative spending.

GAO’s prior recommendations have generally been ignored or postponed by federal agencies and lawmakers, particularly when they could require difficult political votes.

Hmmm.

Just not hearing a lot about that report this week …

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To see the full report, click the pic.

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Whatever happened to Obama’s vow of a line-by-line budget review?

April 4, 2011

As Sen. Schumer and the other caucus-instructed Dems rant about $60 billion in gov’t spending cuts being “extreme” – “likely to kill over 70,00 children” — don’t you wonder what ever happened to Obama’s pledge to go through the budget line by line to eliminate wasteful spending?

To refresh memories, here is an excerpt from news reports dated November 2008:

President-elect Barack Obama vowed today to get rid of federal programs that no longer make sense and run others in a more frugal way to make Washington work in tough economic times.

Obama said that to make the needed investments to create jobs, “we also have to shed the spending we don’t need.”

“In these challenging times, when we are facing both rising deficits and a sinking economy, budget reform is not an option. It is an imperative,” Obama said. “We cannot sustain a system that bleeds billions of taxpayer dollars on programs that have outlived their usefulness, or exist solely because of the power of a politicians, lobbyists, or interest groups. We simply cannot afford it. This isn’t about big government or small government. It’s about building a smarter government that focuses on what works. That is why I will ask my new team to think anew and act anew to meet our new challenges…. We will go through our federal budget – page by page, line by line – eliminating those programs we don’t need, and insisting that those we do operate in a sensible cost-effective way.”

Spending restraint is even more important with the federal deficit expected to top $1 trillion in 2009 — more than double the previous record. And that’s before an economic stimulus package that could cost upwards of $500 billion over two years.

Obama vows line-by-line budget review, November 25, 2008

I figure there are over 50,000 lines (and over 6,000 earmarks) for the President to review.

And, the GAO recently reported that they spotted over $200 billion in gov’t agency duplications and redundancies – sometimes, more than 50 departments doing exactly the same job … and often doing it ineffectively.

Think President Obama has his reading glasses on and a sharp pencil in his hand?

I’m betting no …

BHO: “I’ll walk that picket line with you” … oh, just kidding.

February 28, 2011

As a stumping candidate, Obama declared: “And understand this: If American workers are being denied their right to organize and collectively bargain when I’m in the White House, I’ll put on a put on a comfortable pair of shoes myself. I’ll walk on that picket line with you as president of the United States.”

See it with your own eyes

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http://www.youtube.com/watch?v=SA9KC8SMu3o

So, why hasn’t he kicked off his Motown Gala dancin’ shoes and slipped into some comfy walkers to join his buds in Madison, Wisc. ?

Especially after firing the early shot about “assaulting union rights”?

Well, turns out that Obama has some explaining to do.

As the WSJ reports:

President Obama, the great patron of the working man, also happens to be the great CEO of one of the least union-friendly shop floors in the nation.

Fact: President Obama is the boss of a civil work force that numbers up to two million (excluding postal workers and uniformed military).

Fact: Those federal workers cannot bargain for wages or benefits. Fact: Washington, D.C. is, in the purest sense, a “right to work zone.” Federal employees are not compelled to join a union, nor to pay union dues.

Fact: Neither Mr. Obama, nor the prior Democratic majority, ever acted to give their union chums a better federal deal.

Fact:  Democratic President Jimmy Carter, backed by a Democratic Congress, …  severely proscribed the issues over which employees could bargain, as well as prohibited compulsory union support.

Fact: Federal employee unions . Unions are limited to bargaining over personnel employment practices such as whether employees are allowed to wear beards, or whether the government must pay to clean uniforms.

Perhaps, Pres.. Obama will explain how it is that Wisconsin is wrong to ask for the same budget flexibility that he enjoys as president.

If he’s unable or unwilling) to do that, perhaps he’ll tell the thugs he dispatched to Wisconsin to back off.

Honk if you want your money going to pay for gov’t employees’ pay and benefits …

February 22, 2011

Punch line: Gov’t employee unions collect dues from members … then fund political campaigns … and sponsored officials, when elected, increase members pay & benefits … so that the union can collect  more dues, etc. 

Not exactly a virtuous cysle.

Washington Examiner, In Wisconsin, it’s the unions vs. the people, 02/18/11

Liberals and the White House try to blur the issue by lumping together government unions and labor unions in general.

Obama wrongly calls Walker’s bill “an attack on unions.” It is, at its heart, a measure changing the way the state government procures labor — Walker would end single-source contracts with a politically connected special interests.

Government unions in Wisconsin perfectly match the definition of “special interests”.

Four of the top six Wisconsin contributors to the 2010 elections were labor unions … led by the state’s teachers union and  the Wisconsin chapter of the American Federation of State, County, and Municipal Employees.

Almost all of the money went to Democrats.

Government employees, as a group, matched the union contributions with most of their money going to Democrats, too.

In the romantic liberal vision of this union uprising, determined workers are standing up to the powerful.

For much of the Left, though, this about protecting the power of labor. But there’s no fat-cat owner wanting to pocket more profits here. The unions’ target in Wisconsin is the taxpayer.

At bottom, this is the unions versus the people.

Even Franklin Roosevelt said, “The process of collective bargaining, as usually understood, cannot be transplanted into the public service.”

Campaign contributions by government-sector unions, collected through mandatory dues, help elect the public officials who are then supposed to negotiate with them. “The unions sit, in effect, on both sides of the bargaining table.”

When unions overreach in the private sector, they drive their employers out of business, and so unions only flourish under those employers — governments — that can’t go out of business.

While governments won’t go out of business, they are going broke.

So, many taxpayers see the likes of Gov. Walker as a rare grown-up under attack by opportunistic and utterly politicized unions populated by overpaid government workers.

With state budgets in crisis and the Democratic machinery already in all-out campaign mode, war has already been declared — and if the unions win, the people lose.

Wisc. gov’t unions to Dem Senators: “We own you !” … Dem Senators: “Let’s get outta here"

February 18, 2011

The rubber seems to have hit the road in Wisconsin.

Scott Walker was elected governor last November.

His platform: get the state budget under control.

So, he and GOPers in the Wisc statehouse drafted a law that would make public workers pay half the costs of their pensions and at least 12.6 percent of their health care coverage – about half of what private sector folks pay.

Currently, the Wisc gov’t workers pay ZERO towards health insurance and pensions.

So, they’re taking the proposed law pretty seriously – shutting down schools (thousands of suddenly sick teachers), marching en masse on the statehouse and the homes of the governor and legislators, carrying signs depicting the governor as Hitler and Mubarek. They’re being praised in lib media as “Midwestern Egyptians”.

In response, all of the Dem state Senators left the state for an Illinois resort — to preclude a quorum.  So, the legislature couldn’t vote the law up or down.

Police were dispatched to round up the escaped Senators, but got stalled at the Wisc state line.

President Obama piped in –- not to praise the fiscal responsibility or condemn the protesters incivility – but to assert that Wisc GOPers are simply trying to break the unions.

I guess that’s why FDR – Obama’s idol – thought that gov’t employee unions shouldn’t be allowed.

Geez.  You can’t make this stuff up.

AP, Wis. lawmakers flee state to block anti-union bill, Feb. 17, 2011

If you’re running short of $$$ this month, will you (a) pay your mortgage or (b) buy a new big screen TV?

January 26, 2011

Interesting point raised by new Senator Pat Toomey in the WSJ regarding the debate on raising the national debt limit:

For months, some political leaders have argued that failure to raise the debt ceiling would necessarily cause the U.S. to default on its debt.

President Obama’s Council of Economic Advisors chairman, Austan Goolsbee, recently warned, “If we get to the point where you’ve damaged the full faith and credit of the United States, that would be the first default in history caused purely by insanity. I don’t see why anybody’s talking about playing chicken with the debt ceiling.”

In fact, if Congress refuses to raise the debt ceiling, the federal government will still have far more than enough money to fully service our debt.

Next year, for instance, about 6.5% of all projected federal government expenditures will go to interest on our debt.  Why would we ever default?

To make absolutely sure (we don’t), I intend to introduce legislation that would require the Treasury to make interest payments on our debt its first priority in the event that the debt ceiling is not raised.

This would not only ensure the continued confidence of investors at home and abroad, but would enable us to have an honest debate about the consequences of our eventual decision about the debt ceiling.

WSJ, How to Freeze the Debt Ceiling Without Risking Default, Jan. 19, 2011

In rough numbers, the U.S. is paying about about 1.5% in annual interest to service the $13 billion national debt … that’s about $200 billion.

Tax collections are a tad over $2 billion annually; spending is running about $3.5 billion … for an annual deficit of $1.5 billion.

In other words, $3.3 billion – almost 95% of total expenditures are for stuff other than interest on the debt.

Why not follow Toomey’s advice?  Pay the interest, and shave 6% off the rest of the spending.

Makes sense to me

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For numbers galore:
http://www.federalbudget.com/HistoricalTables.pdf

“It’s raining. Brother, can you spare me an umbrella?

January 11, 2011

As usual, Thomas Sowell hits the nail on the head.

Why should responsible taxpayers bail out fiscally irresponsible non-taxpayers (and fiscally irresponsible states)?

Excerpts from RCP: Saving” the Housing Market, January 4, 2011

Sometimes, some people are especially deserving.

But this cannot be said about those who borrowed money to buy homes that they could not afford, or who borrowed against the equity in their homes, and now find that what they owe is more than the home is worth.

If anyone is especially deserving, it is those who had the common sense to avoid taking on bigger financial obligations than they could handle, but who are now expected to pay as taxpayers for other people’s irresponsibility.

No doubt some people who are facing foreclosures might have been able to continue making their mortgage payments if they had not lost their jobs.

But since when were we all guaranteed never to lose our jobs?

People used to put money aside “for a rainy day.” But now people who have spent like there are no rainy days are supposed to have the taxpayers pay to give them an umbrella.

What about the people who saved and put their money in a bank?

Those who blithely say that the banks ought to modify the mortgage terms to accommodate people who are behind in making their monthly payments forget that, however “rich” a bank may be, most of its money actually belongs to vast numbers of depositors, most of whom are not rich.

Those depositors deserve to get the best return on their money that supply and demand can offer.

Why should people who save be sacrificed for the benefit of those who spent more than they could afford?

http://www.realclearpolitics.com/articles/2011/01/04/saving_the_housing_market_108421.html

Whatever happened to Obama’s vow of a line-by-line budget review?

December 16, 2010

As Reid & Company rush through a  $1.1 Trillion (with a “T”) pork-laden, Xmas Eve budget, don’t you wonder what ever happened to Obama’s pledge to go through the budget line by line to eliminate wasteful spending?

To refresh memories, here is an excerpt from news reports dated November 2008:

President-elect Barack Obama vowed today to get rid of federal programs that no longer make sense and run others in a more frugal way to make Washington work in tough economic times.

Obama said that to make the needed investments to create jobs, “we also have to shed the spending we don’t need.”

“In these challenging times, when we are facing both rising deficits and a sinking economy, budget reform is not an option. It is an imperative,” Obama said. “We cannot sustain a system that bleeds billions of taxpayer dollars on programs that have outlived their usefulness, or exist solely because of the power of a politicians, lobbyists, or interest groups. We simply cannot afford it. This isn’t about big government or small government. It’s about building a smarter government that focuses on what works. That is why I will ask my new team to think anew and act anew to meet our new challenges…. We will go through our federal budget – page by page, line by line – eliminating those programs we don’t need, and insisting that those we do operate in a sensible cost-effective way.”

Spending restraint is even more important with the federal deficit expected to top $1 trillion in 2009 — more than double the previous record. And that’s before an economic stimulus package that could cost upwards of $500 billion over two years.

Obama vows line-by-line budget review, November 25, 2008
http://www.boston.com/news/politics/politicalintelligence/2008/11/obama_vows_line.html

I figure there are over 50,000 lines (and over 6,000 earmarks) in Reid’s budget.

Think President Obama has his reading glasses on and a sharp pencil in his hand?

I’m betting no …

The deficit committee surfaces … let the games begin

November 11, 2010

Well, the election is done. so it’s “safe” for the deficit committee to reveal its initial ideas.

Here’s the slide deck that Chairmen Bowles and Simpson pitched:

http://online.wsj.com/public/resources/documents/WSJ_CoChair_Draft.pdf

Draw your own conclusions … for now.

First Germany, now Britain … austerity is becoming cool.

September 15, 2010

Punch line: Germany pitched austerity over spending sprees … appears that the UK may be catching ‘austerity fever’.

Any chance the US catches it?

* * * * *

From Slate …

Austerity is being touted as the solution to Britain’s economic woes.

On Oct. 20, the government will announce $128 billion worth of spending cuts, and many seem positively excited about it. 

“We will be able to look our children and grandchildren in the eye and say we did the best for them.”

“We have run up debts, despoiled the planet, and allowed too many of our institutions to wither.”

By contrast, the government’s forthcoming austerity budget will value “long-termism” over “short-termism” and eliminate “the dead weight of our debt, and our failings” so that future generations can flourish.

Nobody is talking about austerity in America.

On the contrary, Republicans are still gunning for tax cuts, and Democrats are still advocating higher spending.

Politicians use euphemisms about “eliminating waste” or “making government more efficient,” as if no one had ever thought of doing that before.

You just don’t hear anyone in America talking about cuts in Medicare, Medicaid, or Social Security, the biggest budgetary items

In Britain, by contrast, everything is on the table: pensions, housing benefit, disability payments, tax breaks.

Source: Slate, Why are the British so excited about spending cuts and austerity measures?, Sept. 13, 2010
http://www.slate.com/id/2267165/

The Federal budget … what comes in, what goes out … and what doesn’t come in but still goes out.

September 3, 2010

I thought that this snapshot from BigPicture.com was pretty interesting …  a nice summary (and a great chart, to boot). 

click image to enlarge

image

http://www.ritholtz.com/blog/wp-content/uploads/2010/07/budget2010.gif

“Make no mistake, we’re headed in the right direction” … oh, yeah ?

August 2, 2010

Ken’s Take: Q2 GDP growth was 2.4% … 3% is required to hold the unemployment rate constant … that means that next week’s unemployment rate will tick up … unless more unemployeds get discouraged, stop looking for work and don’t get counted in the denominator.

Doesn’t sound like the right direction to me …

* * * * *

Highlights from WSJ: The 2.4% Recovery, July 31, 2010

Savings by households also increased again, to above 6%, which is back to the range of the early 1990s and is a healthy sign.

The great deleveraging that began with business last year is now continuing with consumers.

While some economists fret that this is bad for consumer “demand,” savings don’t vanish from the economy. They are recycled into lending and investment that can drive future growth if businesses see the right opportunities and have enough confidence.

Ken’s Note: the savings do “vanish” if repaid lenders are also shoring up their balance sheets, i.e. holding the capital in reserve – by law or by desire.

* * * * *

The Obama Administration, in its Keynesian confusion, is simultaneously saying the economy is so weak it needs more spending “stimulus” but also strong enough to absorb a huge tax increase.

The message of 2.4% second quarter growth is closer to the opposite: The epic government stimulus has failed to produce the robust expansion the White House promised, and the prospect of higher taxes and more regulation is inhibiting the private animal spirits needed for growth to accelerate.

Ken’s Note: the fight over the Bush tax cuts will be fun to watch … my bet: it’ll be another GITMO … lots of rhetoric, but Bush had it right.

* * * * *

Full article:
http://online.wsj.com/article/SB10001424052748703999304575399490468359832.html?mod=WSJ_Opinion_LEADTop

No budget … no budget director … no problem (unless you’re in the half that pays taxes)

June 22, 2010

Previously,  Congress decided that it wouldn’t pass a budget this year – for the first time since 1974.

Apparently, our elected reps concluded that no budget would be easier to defend during this year’s election campaigns than a budget with a staggering deficit.

No Budget from Congress for the first time since 1974.

Congress to busy spending and regulating they have no time for budgeting.

House Majority Leader Steny Hoyer announced that, for the first time since 1974, the House will not pass a budget resolution this year. 

Without a House budget, no final and binding budget can be enacted. 

As the House Rules Committee website explains, “The budget resolution provides Congress with the opportunity to lay out its spending, revenue, borrowing and economic goals and serves as the vehicle for imposing internal budget discipline through established enforcement mechanisms.” 

No budget means no caps on discretionary spending, and makes it severely unlikely that the Bush tax cuts will be extended, raising taxes on low- and middle-income families in the midst of a recession.

http://www.valuesvoternews.com/2010/05/no-budget-from-congress-for-first-time.html

Now, the WSJ reports that White House budget director Peter Orszag will be leaving his post in July. 

Though he lied thru his teeth on ObamaCare economics, he’s known as one of the few deficit hawks hanging around the White House.

So, this can’t be good news.  We’ll be getting another spend, spend, spend ideologue, for sure.

WSJ, Obama’s Budget Chief to Step Down June 22, 2010

White House budget director Peter Orszag, one of the most visible members of President Barack Obama’s economic team, will be leaving his post in July—the most senior official to leave the Obama administration, according to two knowledgeable administration officials.

Mr. Orszag helped steer through Congress a $797 billion economic-stimulus bill in his first weeks at the White House job before becoming one of the driving forces in shaping the health-care law.

In the fall, the administration will begin the arduous process of putting together the fiscal 2011 budget amid some of the greatest budget pressures in modern U.S. history.

Mr. Orszag, a man who made his name as a budget hawk, first at the Brookings Institution, then at CBO, failed to make a dent on a deficit swollen by spending that shot up during the economic downturn and stayed high as Mr. Obama pushed spending … to restore economic growth.

The deficit is lingering at nearly 10% of the gross domestic product.

Even under the president’s assumptions on declining health-care spending and a freeze on non-security domestic spending, the deficit would not drop to what Mr. Orszag has called sustainable levels over the next decade without a sharper policy response.

 http://online.wsj.com/article/SB10001424052748704895204575321672983811544.html?mod=WSJ_hps_MIDDLETopStories

Congress yells “fire” … then starts dousing with dollars.

May 26, 2010

Earlier this week, the President is unveiled a new line-item veto proposal to “rein in wasteful spending and hold Congress accountable.”

Concurrently Congress was putting the finishing touches on another $200 bullion faux-stimulus bill … that contains some of the hidden costs of ObamaCare and emergency relief to bond traders and racetrack operators.

This mega-spending is exempt from pay-as-you-go because it’s all emergency spending (huh?) and exempt from the line item veto since it hasn’t been enacted (and wouldn’t be applied to this junk any way).

I’m not sure if this stuff should be classified under “hope” or “change” …

* * * * *

Excerpted from WSJ: American Jobbery Act,  May 25, 2010

The House plans to vote this week on $190 billion in new spending, $134 billion of which it won’t even pretend to pay for.

  • Note: “pay as you go” doesn’t apply to anything that is considered an emergency

The biggest item is $65 billion to prevent a 21% cut in Medicare physician reimbursements … complemented with $24 billion to help states pay the exploding tab for Medicaid

  • Note: remember how ObamaCare was going to cut healthcare costs ?  Oops … just kidding.

There’s  $47 billion to extend unemployment insurance to nearly two full years.

  • Note: economic studies consistently find that extending unemployment benefits tends to, well extend unemployment.

The rest is a grab bag of political payoffs, corporate welfare and transfer payments: including subsidies for municipal bond traders, cotton farmers, yarn producers, sheep growers, Hawaiian sugar cane cooperatives, motor sports businesses, renewable energy firms, the steel lobby, and so on.

  • WSJ Note: Any industry that doesn’t get a tax credit or other handout in this bill should fire its lobbyist.

image

Of course, taxes will  increase to partially fund this new spending.

  • There’s a new 24 cent a barrel tax on oil companies because Congress says the industry’s profits are excessive.
  • U.S. multinational companies would pay a higher tax rate on their overseas income.
  • Managers of private equity and venture capital firms will see their tax rate on carried interest rise to as high as 35% from 15% today.

Full article:
http://online.wsj.com/article/SB10001424052748704113504575264532051783298.html?mod=djemEditorialPage_h

Let’s defy history and tax our way to a stable economic footing … NOT !

May 19, 2010

Punch lines:

(1) In a year or two, the US national debt will be larger than the annual output of the US economy (i.e. debt > 100% GDP) … up from 60% in the prior decade.

image

(2) Empirical evidence demonstrates that increases in marginal tax rates won’t collect ‘revenues’ more than 20% of GDP … since the dwindling number of tax payers change their behavior to minimize their tax bite.

Hauser’s Law (below) is a great piece of economic analysis …

* * * * *

Excerpted from WSJ: The Revenue Limits of Tax and Spend, May 17, 2010

Washington has adopted the Greek model of debt, dependency, devaluation and default.

Prospects for restraining runaway U.S. debt are even poorer than they appear.

Based on President Obama’s fiscal 2011 budget, the Congressional Budget Office (CBO) estimates a deficit that starts at 10.3% of GDP in 2010 … then narrows to 5.6% in 2020.

As a result the net national debt (debt held by the public) will more than double to 90% by 2020 from 40% in 2008.  

And, these debt estimates are incomplete and optimistic. They do not include deficit spending resulting from the new health-insurance legislation. And, as usual, they ignore the unfunded liabilities of social insurance programs.

The revenue numbers rely on increased tax rates beginning next year resulting from the scheduled expiration of the Bush tax cuts. The feds assume a relationship between the economy and tax revenue that is divorced from reality.

Six decades of history have established that increases in federal tax rates, particularly if targeted at the higher brackets, produce no additional revenue. For politicians this is truly an inconvenient truth: conventional methods of forecasting tax receipts from increases in future tax rates are prone to over-predict revenue.

The chart below shows how tax revenue has grown over the past eight decades along with the size of the economy.

image

Note the close proportionality between revenue and GDP since World War II, despite big changes in marginal tax rates in both directions.

Known as “Hauser’s Law”  the relationship reveals an upper limit for federal tax receipts at about 19% of GDP.

Why the limit?

The tax base … represents a living economic system that makes its own collective choices.

In a tax code of 70,000 pages there are innumerable ways for high-income earners to seek out and use ambiguities and loopholes. The more they are incentivized to make an effort to game the system, the less the federal government will get to collect.

Changes in marginal tax rates do not make a perceptible difference to the ratio of revenue to GDP.

* * * * *

Full article:
http://online.wsj.com/article/SB10001424052748704608104575217870728420184.html?mod=WSJ_hps_MIDDLEFifthNews

 

Final Notice: You owe $38,225.04 … actually, a little more than that by the time you read this.

August 31, 2009

Kinda says it all, doesn’t it ?

* * * * *

image

* * * * *

For realtime Federal Debt tracking:
U.S. National Debt Clock
http://www.brillig.com/debt_clock/

* * * * *

Mission accomplished: Bank the $100 million in line-by-line spending cuts.

August 25, 2009

Three months ago, President Barack Obama ordered his cabinet secretaries to find $100 million in budget cuts for the current fiscal year to emphasize the point that he, too, was serious about belt-tightening.

I missed the report when it came out.

The answer: Agencies overachieved, cutting $102 million – roughly 0.006% of the estimated federal deficit.

* * * * *

From Bizblog, Obama Completes $100 Million Budget Cut, July 29, 2009

The list of 77 spending cuts, which the White House is calling “the $100 million savings challenge,” reflects the vastness of government — and its vast inefficiency…

The Air Force has proposed replacing its specially formulated jet fuel with commercial aviation fuel, which it will top up with some military additives. That will save nearly $52 million next year, when the program begins.

The Office of Thrift Supervision, a division of the Treasury, identified unused phone lines costing $320,000.

By increasing the number of soldiers traveling on each airplane chartered for rest-and-relaxation leave, the Army will save $18 million in the next few months.

The Navy will save $5 million a year by deleting inactive Internet accounts.

The Justice Department will save $573,000 through fiscal 2010 by setting up its printers and copiers to use both sides of the paper.

By emailing some documents instead of printing them out, the Department of Homeland Security will save $318,000.

Both Homeland Security and the National Highway Traffic Safety Administration have pledged to take the same step that has sent the newspaper industry into a tailspin: They will start getting their news online free, rather than renew their subscriptions. Homeland Security will save $47,160.

The Coast Guard realized that maintenance schedules for its 1,800 small boats assumed they were for recreational use such as water-skiing or bass-fishing. By adjusting maintenance schedules to reflect what the Coast Guard actually does, the agency discovered it can save $2 million a year.

The Federal Emergency Management Agency is going to save $3.8 million by refurbishing and reusing or selling its emergency trailers — like the ones provided to people displaced by hurricanes — instead of ditching them.

Congratulations – great job, Obama. You are the cost cutting president, indeed.

http://bizblogger.blogspot.com/2009/07/obama-completes-100-million-budget-cut.html

* * * * *
See also:
http://online.wsj.com/article/SB124882436513388423.html

For the official report with all cuts:
http://www.whitehouse.gov/omb/assets/blog/admin_savings_appendix_–_final.pdf

* * * * *

Deficit estimate upped 28% to $9 trillion … that’s trillion with a “t”

August 24, 2009

Late Friday afternoon – after the weekly new cycle – Team Obama admitted that the CBO and external economists are right: the projected 10 year budget deficit looks ,ore like $ 9 trillion than $ 7 trillion. 

I guess the administration thinks the $ 2 trillion difference – a whopping 28% increase – is simply “rounding error”.

* * * * *

Reuters, Obama to raise 10-year deficit to $9 trillion,  Aug 21, 2009

The Obama administration will raise its 10-year budget deficit projection to approximately $9 trillion from $7.108 trillion in a report next week, a senior administration official told Reuters on Friday.

The higher deficit figure, based on updated economic data, brings the White House budget office into line with outside estimates and gives further fuel to President Barack Obama’s opponents, who say his spending plans are too expensive in light of budget shortfalls.

The White House took heat for sticking with its $7.108 trillion forecast earlier this year after the Congressional Budget Office forecast that deficits between 2010 and 2019 would total $9.1 trillion.

The White House budget office will also lower its deficit forecast for this fiscal year, which ends September 30, to $1.58 trillion from $1.84 trillion next week after removing $250 billion set aside for bank bailouts.

Record-breaking deficits have raised concerns about America’s ability to finance its debt and whether the United States can maintain its top-tier AAA credit rating.

Treasury markets have been worried all year about the mounting deficit. The United States relies on large foreign buyers such as China and Japan to cheaply finance its debt, and they may demand higher interest rates if they begin to doubt that the government can control its deficits.

“It’s one of those underlying pieces of news that is liable to haunt the bond market at some point in the future.”

Many economists think it is unlikely the government will curtail spending, which means taxes would have to go up to cover the rising costs.

Higher taxes, of course, could slow economic recovery and growth.

Source article:
http://www.reuters.com/article/newsOne/idUSTRE57K4XE20090821

* * * * *

Note: the $9 trillion doesn’t include the proposed $1 trillion cost of ObamaCare. Ouch.

* * * * *