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Author Topic: Government programs & regulations, spending, deficit, and budget process  (Read 100823 times)
DougMacG
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« Reply #500 on: October 03, 2011, 10:23:20 AM »

Crony capitalism socialism.

Even socialism implies a more equal outcome than having your government take from you to prop up your competitor.
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DougMacG
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« Reply #501 on: October 05, 2011, 11:42:16 AM »

http://www.usnews.com/opinion/slideshows/10-wasteful-stimulus-projects/2

1, A Visitor's Center With No Visitors

$554,763 to the U.S. Forest Service to allow it to replace the windows in a visitors center at Mount St. Helens, Wash., that is currently closed and which the Forest Service has no plans to reopen.
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2. A Museum Off the Rails

$1.2 million to convert an abandoned train station in Glassboro, N.J., that has been boarded up and unused for 40 years, into “a museum, public meeting space and welcome center.”
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3. Analyzing Ants

$1.9 million to allow the California Academy of Sciences to send researchers to the Southwest Indian Ocean Islands and east Africa, to capture, photograph, and analyze thousands of exotic ants--with the photographs to be posted on AntWeb, a Web site devoted to organizing and displaying pictures and information on the world’s thousands of ant species.
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4. Monkey Business

$677,462 to researchers at Georgia State University to study why monkeys respond negatively to inequity and unfairness.
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5. Artificial Comedy

$712,883 to researchers at Northwestern University using stimulus money in an effort utilizing “artificial intelligence” that will mine jokes from the Internet and “use them to create hilarious presentations that mimic real-life comedians.”
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6. Divining Neptune

$456,663 to University of California, Berkeley to support their getting a better understanding of the global circulation in the atmosphere and altitude of clouds on the planet Neptune.
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7. Yoga vs. Hot Flashes

$294,958 so that researchers at Wake Forest University can study whether Integral Yoga “can be an effective method to reduce the frequency and/or severity of hot flashes” in menopausal women.
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8. Big Brother's Recycling Bins

$500,000 to pay for blue, 96-gallon, microchip-embedded recycling bins for the city of Dayton, Ohio. “The microchips, which use radio frequency identification technology, are installed in the bin handles, and will be used by the city to track citizen participation in the recycling program.” In addition to paying for at least 8,000 bins and equipping collection trucks to read the microchips, another “$500,000 will pay for a consultant to design a campaign promoting recycling.”
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9. Better Skiing Through Tax Dollars

$25 million to Mt. Snow in West Dover, Vt., “to replace the Summit Local and Sunbrook chairlifts, construct a 120-million-gallon storage pond for snowmaking, and install additional snowmaking fan guns” that take advantage of a provision in the stimulus that make funds available for “ski area capital improvements.”
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10. Meta-Stimulus

$193,956 to researchers at Houston’s Rice University and the University of Texas in Dallas, who are getting money through the National Science Foundation to “estimate the impact of stimulus funds on the perceptions of citizens and the choices of local community decision makers” or, in other words, to do a stimulus-funding study of how people feel about the stimulus.
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How's YOUR stimulus going? In spite of equal protection under the law being an essential part of our society enshrined in the highest law in the land, I did not receive any money or benefit from any of these.
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DougMacG
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« Reply #502 on: October 17, 2011, 08:30:45 AM »

http://www.bailoutcost.com/
Current loss:  14, 421,881,925.36

How the loss is calculated:
The United States Treasury owns roughly 500 million shares of common stock in General Motors. (Source: U.S. Treasury) The Treasury would need to sell these shares at roughly $53 per share in order to "break even" on the investment. (Source: WSJ) Using Google Finance API, we multiply the current GM stock price by 500,065,254, and subtract that total from $26,503,458,462 (or, 500,065,254 x $53).

Our calculations estimate the loss taxpayers would suffer if UST sells its GM common stock shares at the current ticker price. We track the common stock price and update our calculations on an ongoing basis, providing an up-to-the-minute snapshot of the money the UST lost in Government Motors.
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Rob Peter, pay Paul.  Someone tell me how coerced help from taxpayers to one enterprise is equal protection to all others...  sad
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Crafty_Dog
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« Reply #503 on: October 18, 2011, 12:35:12 PM »


Maybe it's a sign of the tumultuous times, but the federal government recently wrapped up its biggest spending year, and its second biggest annual budget deficit, and almost nobody noticed. Is it rude to mention this?

 
Corbis
 .The Congressional Budget Office recently finished tallying the revenue and spending figures for fiscal 2011, which ended September 30, and no wonder no one in Washington is crowing. The political class might have its political pretense blown. This is said to be a new age of fiscal austerity, yet the government had its best year ever, spending a cool $3.6 trillion. That beat the $3.52 trillion posted in 2009, when the feds famously began their attempt to spend America back to prosperity.

What happened to all of those horrifying spending cuts? Good question. CBO says that overall outlays rose 4.2% from 2010 (1.8% adjusted for timing shifts), when spending fell slightly from 2009. Defense spending rose only 1.2% on a calendar-adjusted basis, and Medicaid only 0.9%, but Medicare spending rose 3.9% and interest payments by 16.7%.

The bigger point: Government austerity is a myth.

In somewhat better news, federal receipts grew by 6.5% in fiscal 2011, including a 21.6% gain in individual income tax revenues. The overall revenue gain would have been even larger without the cost of the temporary payroll tax cut, which contributed to a 5.3% decline in social insurance revenues but didn't reduce the jobless rate.

Enlarge Image

Close...The nearby table shows the budget trend over the last five years, and it underscores the dramatic negative turn since the Obama Presidency began. The budget deficit increased slightly in fiscal 2011 from a year earlier, to $1.298 trillion. That was down slightly as a share of GDP to 8.6%, but as CBO deadpans, this was still "greater than in any other year since 1945."

Mull over that one. The Obama years have racked up the three largest deficits, both in absolute amounts and as a share of GDP, since Hitler still terrorized Europe. Some increase in deficits was inevitable given the recession, but to have deficits of nearly $1.3 trillion two years into a purported economic recovery simply hasn't happened in modern U.S. history. Yet President Obama fiercely resisted even the token spending cuts for fiscal 2011 pressed by House Republicans earlier this year.

The table also shows how close the federal budget was to balance as recently as fiscal 2007, with a deficit as low as $161 billion, or 1.2% of GDP. Those are the numbers to point to the next time someone says that the Bush tax rates are the main cause of our current fiscal woes.

Under those same tax rates in 2007, the government raised $2.57 trillion in revenue but it spent only $2.73 trillion. Four years later, the government raised $265 billion less thanks to the tepid recovery, but it spent nearly $900 billion more thanks to the never-ending Washington stimulus.

The lesson for Congress's super committee contemplating fiscal reform is that faster economic growth and spending restraint are the keys to reducing deficits. Higher taxes will hurt growth and feed a Washington spending appetite that is as voracious as ever, despite the claims of political sacrifice.

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DougMacG
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« Reply #504 on: October 23, 2011, 03:35:17 PM »

Former Obama adviser highly critical of current policy:
http://www.nytimes.com/2011/10/23/business/volckers-advice-for-more-financial-reform.html?_r=1

“This is an opportunity to get rid of institutions (Fannie Mae, Freddie Mac) that shouldn’t exist,”  

“You ought to be either public or private; don’t mix up private profit-making opportunities with an institution that is going to be protected by the government but not controlled by it.”
« Last Edit: October 23, 2011, 05:44:45 PM by Crafty_Dog » Logged
Crafty_Dog
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« Reply #505 on: October 23, 2011, 05:47:14 PM »

I took the liberty of reformatting so that each statement stands visually distinct from the other.  Both are worthy of independent consideration.

The first is a sound political action point.

The second is pithily precise.  To have one sentence that gets everything as exactly right in terms that everyone can understand as that one does is a gift.
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DougMacG
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« Reply #506 on: October 23, 2011, 06:26:08 PM »

Thumbs up for accuracy and clarity.  Hard to believe Volcker was ever an Obama supporter with these views.  Everyone was quiet about the falling out, but at what point and over what issue in the Solydra Presidency did he resign or fade away?  My understanding is that they just never sought his advice.  They haven't really had any economic troubles - the unraveling of our economy into crises and government takeovers is going pretty much according to plan.

Volcker Oct 2011: “You ought to be either public or private; don’t mix up private profit-making opportunities with an institution that is going to be protected by the government but not controlled by it.”
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DougMacG
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« Reply #507 on: October 24, 2011, 09:40:34 AM »

Crafty on Fed thread: "A big part of the problem is that we lie to ourselves with baseline budgeting.  Until we stop using baseline budgeting for our thinking we continue down the road to destruction.

If we were simply to make some genuine cuts to entitlements (e.g. block grants to states for Medicaid and Medicare, set in place gradual increases in the age for social security) truly freeze overall spending from there and set off growth by putting in a genuine massive tax reform (e.g. 9-9-9) would could turn this around in short order."
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It is amazing that after all the end of the world hoopla around the debt ceiling panic that we find out we are still spending at a rate 5% higher than ever before in history (4 posts up in this thread).  Both sides think we can't handle the truth and brag about cuts that aren't cuts.  Putting an end to Baseline budgeting would be more exciting if we hadn't already campaigned on it, won, and passed it in Newt's Contract with America: http://en.wikipedia.org/wiki/Contract_with_America.  Ask your congressman anyone, what percentage "cut" is it to spend exactly the same this year as last!  Liberals decided years ago that to own the language is to control the direction, and elected Republicans keep going along with them.

Obama has opened the door to both entitlement reform and flat tax running with the assertion that Buffet pays a lower tax rate than his secretary.  If we admit social security is a tax and a welfare system not an retirement insurance contribution, and there is no firewall or lockbox, then it can compete for tax dollars and spending dollars with every other program.  As pointed out, 9-9-9 is one way of eliminating a direct tax for social security and spreading it all the way up and down the system.  Liberals want to do this in an additive way rather than a replacement tax; they want to end the cap on income taxed and tax or means test benefits.  Both of those moves also IMO also move it from sacred cow status to a general welfare program subject to budget restraints and scrutiny.  Meanwhile, if we admit that the rich always find away around punitive taxation even if it means to stop producing, why not once and for all accept that a dollar earned is a dollar taxed and treat all people and all dollars the same.
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G M
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« Reply #508 on: October 24, 2011, 11:15:03 AM »

http://blogs.the-american-interest.com/wrm/2011/10/23/rhode-island-athens-of-america/

October 23, 2011


Rhode Island: Athens of America?

 Walter Russell Mead


Rhode Island is looking more and more like Greece, and not in a good way.  That is one message of this important piece by Mary Williams Walsh in the New York Times.  Years of blue social policy have wrecked local and state government finance in the country’s smallest state, and now the bills are coming due.  Services are being cut to the bone and elderly retirees are losing money they thought was secure.
 
In Rhode Island, it is Democrats, not nasty union-hating Republicans, who are doing the dirty work.  Democratic mayors are telling their unions that there isn’t any money — not because they are vicious corporate stooges who hate working people and want to see them suffer, but because There. Isn’t. Any. Money.
 
Because Rhode Island listened to timeserving blue politicians too long, and union leaders and public sector workers lost their grip on any mathematical realities beyond the numbers at the ballot box, the pension system grew more and more out of control. State and local governments lurched into a crisis.  Vote yourself a raise, vote yourself a pension: why not?
 
But there is financial math as well as political math and in any war with financial arithmetic, the money numbers win.  If there isn’t any money, the checks won’t clear.  Ultimately, you will have to fire existing workers, stop paying pensions or a mix of both. That is where Rhode Island is now: its economy can’t generate the revenue to support its existing governance system and to pay its pension obligations.
 
The Ostrich Party has long ruled Rhode Island; their heads planted firmly in the sand - if not in even darker and damper regions – Rhode Island politicians, government and union officials have done everything possible to conceal the true state of affairs from the voters, the bondholders, retirees and even themselves.  Unrealistic assumptions about rates of return helped hide the ugly truth about the looming pension meltdown — and anybody who tried to raise the alarm about the coming crisis was hooted down as an enemy of the workers.  Even now the true blue firing squads are assembling to shoot the messenger; Mary Williams Walsh can expect angry push back from a whole sector of American political life that thinks this whole problem will go away if we tax the rich, clap our hands and all say together, “I believe in government”.
 
But “objectively”, as our Marxist friends would say, the union leaders and their political chums were the worst enemies of the workers: they told state workers that their benefits were secure even as it became increasingly obvious that, as a matter of arithmetic, they were not.
 
Let’s be crystal clear about this.  To tell a 50 year old pretty lies about the soundness of a pension plan is one of the most wicked and irresponsible things you can do without actually shedding blood; people who believe these phony promises will not make the extra savings, work the extra years or otherwise take steps to protect themselves until it is too late.  Telling those pretty lies is exactly what Rhode Island’s establishment has been doing for some time; it is what Ostrich Party legislators, trade unionists, journalists and governors are still doing across much of the country.
 
Reasonable reforms could have made things much less painful, but the unions typically threaten to destroy the careers of any politician who tampers with the pension system until the truck actually starts falling over the cliff.  Now the long fall has begun and Rhode Island and its retirees are caught in a cascade of bad news, lawsuits, and financial crisis.  No Rhode Island retiree can rely on getting the benefits promised; nobody can predict how this will all work out.
 
That is not the kind of uncertainty that 70 year old retired teachers and firefighters should have to face.  A decent society would not let that happen — but the blue social model in its decadent late shark-jumping years of fake promises is anything but decent. Political chicanery, fuzzy math, denial, rhetoric, ambition: this is how a union betrays its members, this is how politicians betray their constituents.
 
To give the devil his due, this monumental crack up was the result, in its early stages, of ignorance and complacency more than anything else.  The union leadership and the statehouse pols took growth for granted.  They had grown up in the post war boom; good times were what they expected.  They believed that the American economy would continue to grow richer every year and that there was a never-failing cornucopia of “more” somewhere that would somehow make sure that there was always enough money in the kitty to redeem the promises made.  You could always squeeze another quart out of the milk cow.
 
This was a natural mistake to make — in 1972.  But state and local government ignored a generation of warnings that the wheels were coming off the car of the blue social model, and especially in rust belt states like Rhode Island.  Factories closed, the economy changed, the state fiscal picture grew steadily worse, but these facts were not allowed to penetrate the closed shop in which the union leaders and their political allies made plans for the future.  The state’s economy would continue to grow at a rate which would make it possible to pay new state workers higher and higher salaries even as a growing number of retirees could collect increasingly generous pensions — adjusted, of course, for inflation every year.  You could tax the rich, defer maintenance, hit the bond markets — and when all else failed, you could assume that your underperforming pension reserves were invested in magic growth beans that would automatically gain 8.5 percent in value forever.
 



Providence City Hall (Wkimedia)
 
The union leadership in Rhode Island, as in the majority of US public and private workplaces, failed in the first task of the stakeholder: they failed to undertake and support changes that would ensure the health of the enterprise down the road.  This is partly about wages, pensions and work rules: making unrealistic demands only stores up trouble down the road.  But more profoundly it is about not thinking seriously about the future of the company or, in Rhode Island’s case, of the state.
 


What economic development options did Rhode Island have to build a sustainable new economy as the old one withered away?  Locked into the assumptions of the blue social model, Rhode Island planners, like their counterparts across the country, fell for white elephant concepts like convention centers, those cliched “new urbanism” pedestrian malls and downtown redevelopments that never seem to work, Solyndra style industrial policy and all the other failed nostrums that strike upper middle class social engineers as cool but that rarely make anything as vulgar and utilitarian as money.
 
There was a lot of expensive churn, many consultants deposited checks, but the underlying economy never turned around.  The serial failure of one plan after another to regenerate solid growth, turn around the population trend, put Medicare on a sustainable path, and reverse the decline of the cities never led to a questioning of basic assumptions — and it never led the Ostrich Party to think through the implications of economic stagnation and decline for the state’s pension system and its future budgeting.
 
More care and foresight could have spared Rhode Island’s workers and retirees some of the sacrifices that will now have to be made.  But that would have forced the many members of the Ostrich Party to pull their heads out of the warm and comfortable dark in order to look around and act.  Denial was psychologically more comfortable and politically safer.  The more untenable the old system became, the more tightly they shut their eyes and closed their minds.
 
The lesson goes farther than Rhode Island.  As Walsh points out in the Times, Rhode Island style pension meltdowns look increasingly possible in hard pressed cities and states across the country.  Can public sector union leaders in other states begin to think proactively about how to build a post-blue economic future and put their muscle behind genuinely forward looking development ideas or will they wait, as in Rhode Island, for the truck to go over the cliff?
 
We can dream.  Yes, we can.
 
After Rhode Island, What Next?
 
As the American political system attempts to grapple with the growing pension, debt and entitlement crisis, three types of responses seem to be emerging.  There is the true blue ostrich approach of the unions themselves and their closest allies: denial and rage.  There is the attitude of more centrist Democrats like Governor Cuomo and Mayor Emanuel: make prudent cuts, hold the line on spending, work to quietly make government more efficient without jumping into a full scale confrontation with the unions.  And there is the Scott Walker, dragonslayer approach: take them on.
 
The rage and denial crowd in the Ostrich Party, rumps in the air, have nowhere to go.  Both the Cuomo and the Walker approaches have their merits — though it seems to me that neither is exactly what we need.  Cuomo style gradualism may soften the hard landing, but it doesn’t do enough to reverse the decline of the blue state economies.  Upstate New York is in desperate shape, and it cannot prosper without a radical reduction of its cost structure.  New York City is simply becoming more and more of an appendage to Wall Street, even as public opinion in the city turns against the one healthy industry it still has. Governor Cuomo’s policy mix holds out hope to slow the decline — but there is little to suggest that New York can go back to the innovation and leadership that once made it the country’s most dynamic growth engine and a wonder of the world.
 
The Cuomo/Emanuel Democrats want to fight the unions and the government lobby over specific issues, but they don’t want to pay the ideological and political costs of taking on the worldview behind the blue model machine.  I think leadership today has to do more: political leaders need to talk to the public about what has changed and why, and talk also about where we can go from here.  Intelligently managing the decline of the blue social model is better than nothing, but what is really needed is to prepare a transition to a new kind of growth.
 
But if the Mama Bear New Democrats serve their porridge too cool, the Papa Bear Republicans like Wisconsin’s Scott Walker and Ohio’s John Kasich risk serving it too hot.
 
Polarizing politics and demonizing state and local government workers is not a good idea.  It is unfair for one thing; it is bad politics for another.  Toxic blue model legacy costs are the problem: rigidly bureaucratic government structures, unrealistic costs, years of underfunded pension plans, regulations that choke growth and initiative, outdated progressive ideas about how change works — these are the roots of our problems, not the middle school teacher down the street or the retired post office worker living modestly on a pension that may be underfunded but is hardly a bonanza.
 
The fifty year old teacher, fireman or police officer may have been naive to believe his or her union leaders, the politicians and the journalists who all said there was nothing to worry about — but most of those workers cannot be called “greedy” or “selfish”.  They are victims of a complex, multi-player Ponzi scheme and have been lied to by a lot of people for a long time.  They also face some serious financial costs.  Not only are their pensions likely to be less generous and solid than they were led to expect; they may well face layoffs and wage freezes as states struggle to cope with legacy costs.
 



The first church in Rhode Island, founded by Roger Williams (Wikimedia)
 




Reform cannot and should not be understood simply as an assault on state and local government workers — although these workers cannot be insulated from the general consequences of a major failure of our political system.  The problem is not that teachers and firefighters earn “too much” money; the problem is that we have developed a dysfunctional social system which cannot pay its bills.  The public economy needs to be rationalized and restructured, but the most important job is to revitalize and energize the private sector.
 
Ultimately the only solution is for the country to move on to a new post-blue economic model that can generate enough wealth to cover our existing debts. In the absence of a serious growth agenda, both the Cuomo and the Walker approaches can’t get the job done. And what the country needs is a competition between growth strategies, not a contest between strategies for cutbacks.
 
In the meantime, there is one thing that state and municipal workers and taxpayers can and should demand: honest and transparent accounting standards that make absolutely clear and explicit what the state of public pensions systems really are, what the assumptions are that underpin them, what the chances are that the systems may fall short, and what the fiscal consequences of any shortcomings are likely to be.  Those reports ought to be annual, they ought to be impartial, they ought to be conducted in accordance with the strictest accounting principles, and the results ought to be public.
 
This is something that everybody should support: from the Tea Party to OWS and beyond; accurate public reporting on the state of worker pensions should be a no-brainer.  If we can’t solve our problems overnight, let’s at least have a no-denial zone when it comes to public pensions.
 
Defend your country: kick an ostrich.
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G M
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« Reply #509 on: October 25, 2011, 06:56:23 AM »

http://www.cnbc.com/id/45019599

US States Are Facing Total Debt of Over $4 Trillion

The total of U.S. state debt, including pension liabilities, could surpass $4 trillion, with California owing the most and Vermont owing the least, a new analysis says.

 
The nonprofit State Budget Solutions combined states' major debt and future liabilities, primarily for pensions and employee healthcare, unemployment insurance loans, outstanding bonds and projected fiscal 2011 budget gaps. It found that in total, states are in debt for $4.2 trillion.

The group, which follows state fiscal conditions and advocates for limited spending and taxes, said the deficit calculations that states make "do not offer a full picture of the states' liabilities and can rely on budget gimmicks and accounting games to hide the extent of the deficit."

The housing bust, financial crisis and economic recession  caused states' tax revenue to plunge, and huge holes have emerged in their budgets over the last few years. Because all states except Vermont must end their fiscal years with balanced budgets, states have scrambled to cut spending, hike taxes, borrow and turn to the federal government for help.

Taxpayers are worried the states' poor fiscal health will persist for a long time and some Republicans in Congress have questioned whether the situation is worse than the states say.

State Budget Solutions relied on financial reports and income tax rates provided by the Federation of Tax Administrators in determining its rankings.

The true debt totals may be lower, though, because the group also used the highest estimates of pension gaps. The conservative think tank American Enterprise Institute says public pensions are short $2.8 trillion.

Others, including the nonpartisan research group Pew Center on the States, put total unfunded pension liabilities at around $700 billion.

The wide range is based on different assumptions of the returns of pension fund investments, which provide the bulk of money for benefit payments. Conservative economists say the investments will have annual returns of around 4 percent, while many funds expect returns in line with the average of the last 20 years — closer to 8 percent.

Using the higher pension gap number, State Budget Solutions said California is in the biggest financial hole — with total debt of more than $612 billion. New York follows with $305 billion of debt, and then Texas, with total debt of $283 billion. Vermont has the lowest amount of total debt at just over $6 billion.

The group also looked at the financial shape of states using the Pew pension projections. It came up with a total debt of $2 trillion for all states.

California still owes the most under the alternative computation, but the state's total debt drops significantly, to $307 billion. With the Pew numbers, New Jersey follows with $183 billion of debt and Illinois is next at $150 billion.

According to the analysis, California has also borrowed the most from the federal government to pay for unemployment benefits, $8.6 billion. Michigan was next, taking out $3.1 billion, and then New York, borrowing $2.9 billion.

As unemployment shot up, some states could not pay for the surge in demand for jobless benefits. The federal government loosened its lending rules to keep states from having to cut other areas of their budgets. But last month the U.S. government again began charging interest on the outstanding loans and may levy extra taxes on businesses in states with outstanding loans.

Looking at just state annual financial statements, the group found Connecticut has the highest debt per capita, at $5,402, and nine states have debt of more than $3,000 per capita.

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Crafty_Dog
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« Reply #510 on: October 25, 2011, 08:32:35 AM »



http://usdebt.kleptocracy.us/
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Crafty_Dog
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« Reply #511 on: October 25, 2011, 10:07:12 AM »

Following up on GM's posts

The pension time bomb
State governments have promised public employees trillions in retirement benefits. Only problem: The money to pay them doesn’t exist
 
Why are pensions a problem?
For decades, local and state governments have guaranteed employees that they can retire on comfortable—and in some cases, lavish—pensions. Officials assumed that taxes, investments, and other revenues would rise over time, covering the cost. That assumption has turned out to be wrong. Taxpayers are now on the hook to provide pensions to 80 percent of the nation’s 27 million state and local government workers and retirees. The combined shortfall in funding those pensions could be as much as $3.4 trillion—more than double this year’s federal deficit. Even using a rosy projection that pension-investment portfolios will return 8 percent annually, seven states, including Illinois, Connecticut, and Louisiana, are on track to exhaust their pension funds within a decade. More than half of state pension funds will run dry by 2027. “This charade can’t last,” wrote former Los Angeles Mayor Richard Riordan and investment advisor Alexander Rubalcava in The New York Times. “In many cities, pension obligations will soon consume a quarter or more of the annual budget—money that will be unavailable for parks, libraries, street maintenance, and public safety.”

How did governments miscalculate so badly?
Pension funds subsist on three revenue streams: employee contributions, employer contributions, and investment earnings. During the 1990s, soaring stock prices swelled the value of pension funds, enabling states and municipalities to reduce their own contributions and those from employees. They also acceded to public union demands to increase benefits. “Everybody was raising benefits without thinking of the long term,” said Kil Huh, director of research for the Pew Center on the States. Governments began assuming they could count on rising markets and high investment returns indefinitely. But in the wake of the 2008 financial crisis, stock prices plummeted, eventually declining 56 percent from their 2007 peak; pension portfolios were devastated. The loss in equity was exacerbated by the plunge in tax revenues that also accompanied the Great Recession.

How generous are benefits?
They vary dramatically. The average annual benefit in 2008 was $22,780, according to the Center for Retirement Research at Boston College, a figure that includes part-time workers. But some public employees receive benefits far beyond average. More than 9,000 beneficiaries of CalPERS, California’s state retirement plan, which is the nation’s largest, receive six-figure annual pensions. In Yonkers, N.Y., taxpayers were outraged to learn that some police officers who had retired in their 40s were collecting six-figure pensions for life; former cop Hugo Tassone, for example, retired at 44 with a $101,333 pension. Edward A. Stolzenberg, a former public hospital administrator in New York’s Westchester County, receives $222,143 annually. “It may not be viable,” Stolzenberg acknowledged. “But that’s the way the state structured it.”

What about the cost of current workers?
It’s also part of the problem. While median family income actually declined over the past decade, salaries for public workers continued to rise. Blue-collar public workers with a high school education now earn, on average, more than their private-sector counterparts—$53,880 annually compared with $50,596. White-collar public-sector employees, however, fare less well. Those with professional degrees earn an average of $121,192 in the public sector, compared with $192,977 in the private sector. But with state budgets under duress and unemployment stuck at around 9.6 percent, public workers’ salaries and benefits are now coming under increased scrutiny. Taxpayer groups in California, which has a projected $19 billion budget deficit, want to cut salaries and take an ax to the most generous public pensions. But most state constitutions explicitly guarantee benefits that have accrued from work already completed. Even when municipalities have declared bankruptcy, their employee pension benefits have been paid.

Can benefits be scaled back?
Only for future employees. New Jersey Gov. Chris Christie recently signed legislation reducing pension benefits for new state employees. In California this month, voters in nine municipalities approved ballot measures to limit benefits for future public employees. And governments are starting to take a harder line in collective bargaining with public unions. “I’ve seen a sea change in the local collective bargaining process,” said Dwight Stenbakken, deputy executive director of the League of California Cities. Some analysts recommend following the lead of Georgia, which requires that prior to being enacted, any changes to retiree benefits be studied for long-term impacts. According to the Pew Center on the States, the policy has helped Georgia avoid “costly and irreversible” mistakes. 

What if reform efforts fail?
Look out. If states run out of pension reserves, they’ll be forced to dip into operating budgets to pay benefits—siphoning money from schools, health care, and other vital services. Because most states are required to balance their budgets, tax increases or cuts to government services are the only options. In every region of the country, the high-rolling days are gone and the public-pension bill is coming due. “This is not a conservative-versus-liberal issue,” said Dan Liljenquist, a Utah state senator and pension-reform advocate, “this is a reality issue.”
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G M
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« Reply #512 on: October 25, 2011, 06:42:42 PM »

http://www.weeklystandard.com/articles/losing-economic-battle_598447.html?nopager=1


Losing the Economic Battle

The global debt apocalypse approaches.

Oct 31, 2011, Vol. 17, No. 07 • By DAVID M. SMICK

On the issue of public debt, Washington is experiencing what psychologists call “learned helplessness.” The financial news is so relentlessly terrible that people have become numb to it and assume nothing can be done to regain control over our fate.




Today the world’s public and private debt exceeds an incredible 300 percent of GDP. We are at risk of succumbing to an ugly, downward, global mark-to-market in asset prices. Yet the discussion in Washington fails to reflect the immensity of the threat.
 
Some money managers have a theory that this mark-to-market process has been under way for some time. Stage One was the 1990s Asian crisis. Global financial markets concluded that Asia’s debt was dangerously high and its banks’ balance sheets not reflective of reality. Global traders pounced. Interest rates soared, equity markets plummeted, banks failed, and currencies collapsed.
 
Stage Two is happening in Europe today.
 
Stage Three will eventually hit the United States. Washington policy-makers seem confident America’s public debt risk is years away. They believe that the U.S. economy, with the dollar the reserve currency, enjoys some immunity from these concerns. The central bank, moreover, can buy bonds to keep interest rates from rising in response to growing debt. Yet these are risky assumptions.

A year ago, senior European officials never dreamed they’d be in their current mess. Greece represents only 3 percent of the Eurozone economy. Bailout tricks and clever central bank interventions were supposed to calm nervous markets. That happened, but didn’t last. A powerful global financial market brought officials to their knees. Today, many European policymakers can’t believe America is risking a similar outcome. True, as a means of protection the Fed itself will try to manipulate credit markets by keeping long-term interest rates artificially low. But global financial markets will simply penalize bank stocks, a phenomenon that may result in a credit contraction and double dip recession.
 
The larger danger is that ballooning debt reaches a tipping point beyond which financial markets conclude the debt cannot be repaid without instigating political chaos. That is Europe’s predicament today. Markets realize that the austerity policies needed to bring the debt under control are making the task of debt reduction impossible, as tax revenues plummet.
 
Some analysts, including Criton Zoakos, argue that the global economy has reached a “point of no return.” Debt suffocates growth, which destroys equity values (particularly financial stocks), which diminishes lending, investment, and consumption. Falling tax receipts lead to even more debt. Optimists argue not to worry. The world since January 2008, they say, has been undergoing an important period of public and private deleveraging. Growth will resume once deleveraging is completed.
 
If only life were that simple! Global indebtedness, according to Zoakos, has actually increased by 17 percent since the beginning of 2008. Nations have enacted generous bailout and stimulus programs while growth has averaged an anemic 1.2 percent.
 
With the world having fallen into a giant liquidity trap, monetary policy has been ineffective. Because of the growing slack in the economy as the developing world joins in the global slowdown, the central bankers couldn’t inflate their way out of today’s debt problem through bond purchases even if they wanted to.
 
What the Greek situation has shown (debt 120 percent of GDP before the crisis and 170 percent today after reforms) is that austerity without a strategy for vigorous economic growth is a recipe for failure. But Washington’s political environment is so poisonous, bipartisan fiscal compromise seems impossible.
 
Washington is overflowing with tax reform policies, proposals to bend the cost curve of entitlements, and ideas for smart infrastructure spending. There even seems to be a beneath-the-surface bipartisan consensus to move forward on these items, which probably won’t happen short of a stock market crisis that forces Congress to act.
 
Yet these reforms may not be enough. Policymakers also need to reform today’s slow-to-lend, too-big-to-fail banks. Here’s an important question: Should governments and central banks continue to try to prop up the value of the assets on bank balance sheets even though those values are unsustainable? This losing battle has already contributed to global public debt-to-GDP ratios that boggle the mind. We may be saving our banks, but we’re losing our economy.
 
Like a giant bow wave building up on each side of the vessel, the growing debt is threatening to swamp the entire world economic ship. A feeling of helplessness has taken hold at the precise moment policymakers need to be audacious. The numbers behind presidential candidate Herman Cain’s 9-9-9 plan may not add up, but his gut instinct is on the mark. America needs radical reform on the issues of both growth and debt.

David M. Smick, chairman of the macroeconomic advisory firm Johnson Smick International, is the founder and editor of the International Economy magazine.
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ccp
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« Reply #513 on: October 31, 2011, 04:45:19 PM »

Yet we have Brock running around the country screaming the Republicans are blocking us from investing in our futures in education.  Over a trillion in student debt.  So what is Brock saying we need forgive loans and spend more tax dollars?

From the Economist:
 
****IN LATE 1965, President Lyndon Johnson stood in the modest gymnasium of what had once been the tiny teaching college he attended in Texas and announced a programme to promote education. It was an initiative that exemplified the “Great Society” agenda of his administration: social advancement financed by a little hard cash, lots of leverage and potentially vast implicit government commitments. Those commitments are now coming due.

“Economists tell us that improvement of education has been responsible for one-fourth to one-half of the growth in our nation’s economy over the past half-century,” Johnson said. “We must be sure that there will be no gap between the number of jobs available and the ability of our people to perform those jobs.”
»Nope, just debt
 
To fill this gap Johnson pledged an amount that now seems trivial, $1.9m, sent from the federal government to states which could then leverage it ten-to-one to back student loans of up to $1,000 for 25,000 people. “This act”, he promised, “will help young people enter business, trade, and technical schools—institutions which play a vital role in providing the skills our citizens must have to compete and contribute in our society.”

Almost a half-century later these modest steps have metastasised into a huge, federally guaranteed student-loan industry. On October 25th the Obama administration added indebted students to the list of banks, car companies, homeowners, solar manufacturers and others that have benefited from a federal handout.

Johnson’s lending programme was altered almost straight away. The intention of providing students with an education through “business, trade and technical schools” was expanded to include the full, imaginative panoply of American education, regardless of economic utility. Interest rates and terms have all been adjusted numerous times.

The result is a shifting, difficult landscape only barely understood even by insiders. For students, the task is that much larger. They must choose between an array of products, including subsidised and unsubsidised “Stafford” loans (named after a Republican senator) via the William D. Ford loan programme (named for a Michigan congressman), loans directly from the government, “Plus” loans (for parents of dependent children) and “Perkins” loans (named after a congressman from Kentucky), plus an array of private options.

On top of all this, there are choices about how to consolidate, restructure and pay the debts. Many students are understandably overwhelmed. Deanne Loonin of the National Consumer Law Centre has one client with $300,000 in debt from a failed effort to become an airline pilot. That liability could have been reduced by a better understanding of products.

Two things, however, are clear. The size of student debt is vast (see chart), and lots of borrowers are struggling. More than 10m students took out loans for the latest academic year, according to a report issued on October 26th by the College Board, a consortium of academic institutions. Almost a third of students graduating from college, and 69% of the ones dropping out, hold debt tied to their education.

The total amount of debt is staggering. The New York Federal Reserve Bank puts it at $550 billion, but includes a footnote in the “technical notes” section suggesting this may be an underestimate. Sallie Mae, the school-loan equivalent of the housing industry’s Fannie Mae and Freddie Mac, reckons there are $757 billion-worth of outstanding loans. A bank heavily involved in the area says there is at least another $111 billion in purely private loans, and with new lending estimated in excess of $112 billion for this year alone, the total amount outstanding will surpass $1 trillion in the not-so-distant future.

Critics allege a viciously wasteful circle: the size of the loan pool expands to enable students to pay ever higher fees to schools whose costs expand because money is coming their way. That was just about sustainable in the good times, a lot harder when there are fewer jobs to be had.

Signs of strain are everywhere. In September the Department of Education reported that in 2009 the default rate, which is defined as non-payment for 270 days, had reached 8.8%. By some estimates delinquency rates, an earlier indicator of stress, for student loans exceed 10%, ten times that for credit cards and car loans. Ms Loonin’s average client has a low-paying job, $30,000 of debt and is in arrears.

This is despite punitive laws to enforce repayment. In response to clever students burying their obligations in court during the 1970s, anti-default provisions were imposed to make it almost impossible to shed student loans in bankruptcy. In 1991 the statute of limitations for non-repayment was eliminated.

Many troubled borrowers could avoid default if they used government options to consolidate their loans and make minimum payments, says Ms Loonin, but they are unaware of the possibility. Their primary contact with the industry after being granted a loan is through collection agents who are compensated based on how much they collect, and who therefore have little incentive to explain alternatives.

There are increasingly loud calls for reform of the system, with demands that range from a full-fledged bail-out of borrowers to a phased curtailment of government lending. For now the bail-out is the bigger priority for politicians. For many years government-backed loans were distributed through banks which earned a fee and occasionally had to assume a little bit of risk, but in 2009 the business was entirely absorbed by the federal government.

The changes announced this week are designed to ease the pressure on struggling graduates. Borrowers who qualify will get payment relief, not debt relief. Their payments will be capped at 10% of income rather than 15%, but interest will continue to be applied to their underlying debt and may expand rather than contract over time. There will also be forgiveness after 20 years, rather than 25. The administration says these changes will have no cost to taxpayers. If there is one lesson of the past 46 years, it is to be dubious of that claim.*****

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Crafty_Dog
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« Reply #514 on: November 08, 2011, 08:28:26 AM »

"As parents, we can have no joy, knowing that this government is not sufficiently lasting to ensure any thing which we may bequeath to posterity: And by a plain method of argument, as we are running the next generation into debt, we ought to do the work of it, otherwise we use them meanly and pitifully. In order to discover the line of our duty rightly, we should take our children in our hand, and fix our station a few years farther into life; that eminence will present a prospect, which a few present fears and prejudices conceal from our sight." --Thomas Paine, Common Sense, 1776
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DougMacG
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« Reply #515 on: November 08, 2011, 11:35:54 AM »

"The president of the New York Public Library was busted for drunken driving after careening in reverse down an East Harlem street Sunday in a bid to maneuver around the marathon -- but ended up slamming his luxury car into a sanitation truck.  An inebriated Dr. Anthony Marx, 52, just missed one truck before plowing his 2009 Audi A4 sedan -- which is registered to the New York Public Library
http://www.nypost.com/p/news/local/manhattan/read_him_his_rights_OpcKXZyUhfz9dpSyvjXYcM

Who knew the public library owned a drunk driven 2009 Audi.  I have a potential explanation.  He only gets a new one every 3 years and the new one must be on its way...

There is your 1%!  Over here in the real world I buy used cars out of after-tax income.  This of course must have been for official business.  The story doesn't tell what kind of official public library business entails driving drunk backwards, .19 at 3pm.  You'd think the taxpayer purchased all wheel drive would have helped him avoid the sanitation truck.
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G M
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« Reply #516 on: November 08, 2011, 11:39:41 AM »

That's because you evil capitalists don't pay enough taxes to provide a driver for this hard working civil servant. Shame!

"The president of the New York Public Library was busted for drunken driving after careening in reverse down an East Harlem street Sunday in a bid to maneuver around the marathon -- but ended up slamming his luxury car into a sanitation truck.  An inebriated Dr. Anthony Marx, 52, just missed one truck before plowing his 2009 Audi A4 sedan -- which is registered to the New York Public Library
http://www.nypost.com/p/news/local/manhattan/read_him_his_rights_OpcKXZyUhfz9dpSyvjXYcM

Who knew the public library owned a drunk driven 2009 Audi.  I have a potential explanation.  He only gets a new one every 3 years and the new one must be on its way...

There is your 1%!  Over here in the real world I buy used cars out of after-tax income.  This of course must have been for official business.  The story doesn't tell what kind of official public library business entails driving drunk backwards, .19 at 3pm.  You'd think the taxpayer purchased all wheel drive would have helped him avoid the sanitation truck.
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DougMacG
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« Reply #517 on: November 08, 2011, 12:07:37 PM »

"That's because you evil capitalists don't pay enough taxes to provide a driver for this hard working civil servant. Shame!"

All I ask in my equal protection zealotry is that if one American gets a free new Audi from the taxpayer to drive drunk backwards, then we all get one.  That is a bad joke here because the public cost of light rail was higher than the cost to lease each car-less rider a new Lexus.
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G M
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« Reply #518 on: November 08, 2011, 03:44:22 PM »

"That's because you evil capitalists don't pay enough taxes to provide a driver for this hard working civil servant. Shame!"

All I ask in my equal protection zealotry is that if one American gets a free new Audi from the taxpayer to drive drunk backwards, then we all get one.  That is a bad joke here because the public cost of light rail was higher than the cost to lease each car-less rider a new Lexus.

Give everyone a Chevy Dolt! Give every gov't employee a driver! Unemployment solved, GM (the company) is solvent!

Wow, it's easy to solve problem when you think like a democrat. Where does the money come from? The rich!
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DougMacG
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« Reply #519 on: November 09, 2011, 12:28:52 PM »

"Deficit spending is an unconscionable form of fiscal child abuse."  - Stephen Moore, 1996

Contract with America
On the first day of their majority in the House, the Republicans promised to pass eight major reforms:
"8. guarantee an honest accounting of the Federal Budget by implementing zero base-line budgeting."
--------------

I assume that Newt kept his promise on that first day, held that vote and passed that item.  Then it died in the Senate??  No followup?  Focus and staying power were weaknesses of that leadership.  We needed that one reform and successfully posed and passed the question with the American people for it to become law and stay law.  A Google search of when it was repealed yields nothing!  It was swept under the carpet, allowed to quietly die even while we achieved a TEMPORARY balance of the budget.

Here is Stephen Moore in 1996, then of Cato, calling for the exact same reforms, zero baseline budgeting, dynamic scoring of tax reforms etc 2 years AFTER the Contract with America! Imagine that, they thought spending growth was out of control in 1996 at 1.5 trillion, now we approach $4 trillion.  They were right!

http://www.cato.org/pubs/policy_report/v18n4-1.html

Cato Policy Report, July/August 1996
Seven Reforms to Balance the Budget

by Stephen Moore

Stephen Moore is director of fiscal policy studies at the Cato Institute and author Government: America's #1 Growth Industry (1995). This article is based on testimony he delivered before the House Committee on Government Reform and Oversight on March 27, 1996.

Over the past 50 years Congress has lost all control over federal spending. As Table 1 shows, even after adjusting for inflation, the federal government spends almost four times more today than it did 40 years ago. Entitlement spending has seen the largest growth. My overall conclusion from the data is that government today is America's number-one growth industry.

A top priority for this Congress should be passage of a new budget act. The 1974 Budget Reform and Impoundment Control Act has been a monumental failure. One of the purposes of that act was to eliminate deficit spending, but this is the actual legacy of that legislation: in the 20 years before the act, the federal deficit averaged just 1 percent of gross domestic product, or $30 billion 1994 dollars. In the 20 years since the 1974 act, the average budget deficit has been $170 billion per year, or 3.5 percent of GDP. We have accumulated more than $4 trillion in debt since 1976. By any objective standard, the budget process has not worked better under the 1974 act--it has worked much worse.

Figure 1 (go to the link) shows how the budget deficit has grown since Harry S. Truman was president. Despite recent progress in reducing the deficit, the long-term prognosis remains grim. In fact, the Congressional Budget Office predicts that if we stick with the Clinton budget plan, the deficit will begin rising after 1996 and reach a record high of $350 billion within 10 years.

The 1974 Budget Act cannot be fixed. Tinkering won't do the trick. Congress ought to repeal the act before it does more damage to our national economy.

The centerpiece of any budget reform quite clearly should be an amendment to the Constitution outlawing deficit spending. Most members of this committee are keenly aware of the need for a balanced-budget requirement, so I will not dwell on it.

Deficit spending is an unconscionable form of fiscal child abuse. There are hundreds of groups in Washington that pretend to speak for the interests of children. But who in Washington, among the thousands of powerful special-interest lobbyists and self-proclaimed do-gooders, speaks for the children who are going to have to pay off our irresponsible debts? The single most pro-child policy that any of us can pursue in Washington today is to reduce the crushing burden of debt our government is now preparing to place on the next generation's backs.

I sincerely wish that we did not need a constitutional amendment to cure Washington's addiction to red ink. Unfortunately, the destruction of our nation's once firmly held moral rule against deficit spending--what James Buchanan called "the collapse of the constitutional consensus"--requires us to amend our Constitution and command Congress to do what it used to feel honor bound to do--balance the budget.

Tax-and-spend opponents of a balanced-budget amendment argue that a constitutional requirement is just "a gimmick." No one really believes that. If the amendment were a gimmick, Congress would have approved it long ago. Defense contractors, corporate lobbyists, federal workers, teachers' unions, the welfare industry, and other powerful special-interest groups ferociously attack the amendment, not because they think it won't work, but because they shudder at the thought that it will. What frightens the predator economy in Washington is that gift-bearing politicians may have the federal credit card taken away from them.

The U.S. House of Representatives last year wisely approved a balanced-budget amendment, but it was defeated in the Senate. The matter is now out of your hands. The real issue is, What can be done in the meantime to make the budget process work better and to end deficit spending?

Last year the House passed a courageous budget, crafted by Budget Committee chairman John Kasich, that promised a balanced budget by 2002. But one thing is a virtual certainty: no matter how sincere your intentions of balancing the budget, the deficit will not be eliminated by 2002 unless new budget enforcement rules are implemented to ensure that this admirable, though minimal, goal is honored.

I would urge that a new budget act contain the following seven provisions, which are discussed in order of priority.

1.) An Enforceable Legislative Balanced-Budget Requirement

Don't wait for a balanced-budget amendment. Act now. The most urgent reform for this Congress to undertake is passage of a balanced-budget law that enforces the deficit targets established in the House budget resolution.

What I have in mind is a new Gramm-Rudman-Hollings formula that establishes iron-clad enforceable deficit targets. One of the great myths in Washington is that Gramm-Rudman was repealed because it wasn't working. Gramm-Rudman was repealed by the pro-spending constituencies in Congress precisely because it was working too well.

Gramm-Rudman was enacted in 1985, when Congress was under intense public pressure to immediately reform the budget and reduce the $200 billion budget deficit. The controversial law required Congress to balance the budget by 1991 by meeting a series of annual deficit reduction targets. If Congress missed those targets, the law would trigger automatic spending cuts--a process called "sequestration"--to reduce the deficit to the mandated level.

Critics charge that the act was a dismal failure because Congress continually veered off the balanced-budget track. It is true that Congress routinely missed the deficit targets. Actual deficits under Gramm-Rudman were, on average, about $30 billion per year above maximum deficit targets.

Still, Gramm-Rudman had a positive effect on the federal budget. The best way to measure its impact is to compare the actual deficits recorded during the five years the act was in effect with what the deficit was projected to be by the Congressional Budget Office without Gramm-Rudman. The 1989 deficit was about $100 billion lower than had been expected in 1985 without Gramm-Rudman. The deficit fell from 6 to 3 percent of GDP under Gramm-Rudman.

The most dramatic effect of Gramm-Rudman was to curb government expenditures. Government spending in the five years before the act grew at a rate of 8.7 percent, but it slowed to only 3.2 percent in the five years Gramm-Rudman was in effect. Even entitlement spending was curtailed under Gramm-Rudman to a 5 percent growth rate, because Congress realized that if it allowed programs like Medicare and Medicaid to rise uncontrollably, that would eat up the rest of the budget and cause painful automatic cuts in discretionary spending.

Sen. Phil Gramm (R-Tex.) and House Majority Leader Dick Armey have introduced legislation to restore many of the features of Gramm-Rudman. The most vital reform is a series of deficit reduction targets that, if missed, would trigger automatic across-the-board spending cuts--a sequester. I would urge that any new sequester process include all federal outlays except interest payments and Social Security benefits. That would impose a much-needed dose of discipline on the budget process.

2.) A Supermajority Requirement to Raise Taxes

Americans have been hit with 12 tax hikes in the past 20 years; each one has succeeded in further expanding the size of government rather than reducing the debt. Requiring a three-fifths or two-thirds majority in both the House and the Senate to pass a tax increase would allow Congress to pass tax hikes in cases of national emergency but would make it very difficult for Uncle Sam to continue the annual ritual of peacetime tax hikes. Several states, including Arizona, California, and Oklahoma, have enacted such measures; they have stopped tax increases dead in their tracks. As one Arizona taxpayer advocate of the supermajority requirement recently told me, "Now the legislature doesn't even bother to propose new taxes."

Congress passed the part of the "Contract with America" that promised new rules requiring a 60 percent vote to raise income taxes. That was a good start. But now that hurdle should be made to apply to all revenue-raising bills.

3.) National Referendum on All Tax Increases

Another populist budget reform that is sweeping the states is the requirement that any tax increase be ratified by a popular vote of the people in the next election. That gives the taxpayers veto power over the state legislature's efforts to raise taxes. Congress, too, should be forced to take its case to the people when it wants to take more dollars out of our paychecks. It is a virtual certainty that George Bush and Bill Clinton's wildly unpopular record tax increases would have been blocked if such a rule had been in effect.

Minority Leader Dick Gephardt deserves hearty congratulations for suggesting this reform as part of his 10 percent tax plan. Perhaps a bipartisan consensus could emerge on the issue.

4.) Dynamic Scoring of Tax Law Changes

The 1986 capital gains tax rate increase has raised roughly $100 billion less revenue than the Joint Tax Committee estimated when the law was passed. Capital gains realizations are less than half the level expected, as shown in Figure 2. Why such gigantic forecasting errors? Congress still uses static analysis to score tax rate changes--that is, it assumes little change in behavior in response to tax changes and thus almost no overall economic impact of new tax laws. The assumptions have been shown time and again to be wrong. We know the procedures are wrong, but we still use them.

The capital gains tax cut promised in the "Contract with America" will almost certainly raise revenues for the government--and it might raise substantial new revenues. The rich will actually pay more taxes with the rate cut. But the Joint Tax Committee refuses to score those dynamic effects. Scholars at the Cato Institute have long endorsed a zero capital gains tax. But the static revenue estimators say that will reduce revenues by $150 billion over five years. Dynamic estimates indicate that a zero capital gains tax would so energize our economy that total tax revenues might actually increase. But as long as we are slaves to static scoring, pro-growth tax initiatives will be torpedoed by faulty computer models.

Dynamic scoring will yield more accurate tax revenue estimates and thus encourage better policy.


5.) An End to Baseline Budgeting

A 4.5 percent increase in spending on the School Lunch Program is a budget increase, not a budget "cut." Baseline budgeting is a fraud. Lee Iacocca once stated that if business used baseline budgeting the way Congress does, "they'd throw us in jail."

It's time to end the false and misleading advertising in the budget. Congress should be required to use this year's actual spending total as the baseline for the next year's budget. If Congress spends more next year than it did in the current year, it is increasing the budget; if it spends less, it is cutting it.

6.) A Statute of Limitation on All Spending Programs

It has been said that the closest thing to immortality on this earth is a government program. Congress doesn't know how to end programs--even years and years after their missions have been accomplished. A five-year sunset provision should apply to every spending program in the budget--both entitlements and discretionary programs. That would require the true "reinvention" of programs by forcing the reexamination of every program, including entitlements, every five years.

7.) Debt Buy-Down Provision

This is Rep. Bob Walker's idea that would allow taxpayers to dedicate up to 10 percent of their income tax payments to retirement of the national debt. Politicians earmark spending all the time. Taxpayers should have the same right.

Rules Matter

Those budget process reforms are vitally important to the balanced-budget exercise because the rules of the game matter. The rules dictate outcomes. For more than 20 years, forces that favor spending have consistently prevailed over forces that favor fiscal restraint. That pro-spending bias in Washington threatens to cripple our nation's economic future.

Let me conclude by retelling a story about the late great Washington Redskins football coach George Allen. Allen lived by the motto "the future is now." He traded all the Redskins draft picks for over-the-hill veterans. He spent millions of dollars of owner Jack Kent Cooke's money to purchase expensive free agents. After several years of that, Cooke finally fired Allen. When asked why, Cooke responded, "When George Allen came to Washington I gave him an unlimited budget. But George managed to exceed it." That's the way taxpayers now feel about our politicians in Washington.

This article originally appeared in the July/August 1996 edition of Cato Policy Report.
« Last Edit: November 09, 2011, 12:31:28 PM by DougMacG » Logged
Crafty_Dog
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« Reply #520 on: November 10, 2011, 01:21:46 PM »

Pessimism is growing about the Congressional super committee on deficit reduction, so we were eager to listen yesterday when Pat Toomey called with the latest lowdown. Most notably, the Pennsylvania Senator explained why he and his five fellow Republicans have decided to put new tax revenues on the table.

 Steve Moore on the prospects of real reform from the Congressional supercommittee.
.The rap from Democrats has been that Republicans refuse to touch revenues, preferring only to cut spending. But Mr. Toomey explained that this week the GOP Six offered to raise revenues by $500 billion over 10 years as part of a tax reform that would lock in lower tax rates in return for giving up deductions. Democrats have rejected it, which is puzzling since it would achieve so many of their stated goals.

The GOP offer would raise about $250 billion over 10 years by using some variation of economist Martin Feldstein's proposal that no combination of deductions could exceed, say, 2% of a taxpayer's adjusted gross income. (See Mr. Feldstein's Journal op-ed, "The Tax Reform Evidence From 1986," Oct. 24.) That's a big revenue hit, especially for earners in the top tax brackets who benefit more from tax breaks. Grover Norquist of tax-pledge fame would probably not be pleased.

In return for these cuts in deductions, Mr. Toomey says the top individual tax rate would fall to 28% from 35%, with the other tax-rate brackets falling by similar proportions. The current top rates for capital gains and dividends (15%) and the estate tax (35%) would remain unchanged. The GOP negotiators agreed to the Democrat request that these tax changes be statically scored—which assumes no revenue gains from economic growth—yet they would still yield $250 billion in additional revenue over a decade even with the lower tax rates.

"It's a bitter pill to accept new statically scored revenue," says Mr. Toomey, "but I think it's justified to prevent the tax increase that's coming" in 2013. Given the history of revenue gains after marginal-rate tax cuts, the tax windfall for the Treasury would likely far exceed $250 billion over a decade.

Enlarge Image

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 .Another $40 billion or so in new revenue would come from changing the formula for adjusting tax brackets for inflation. And $200 billion more would come from a variety of asset and spectrum sales, user fees, tax compliance and other things—all scored on a static basis by the Joint Tax Committee. Mr. Toomey says the Members have also made progress on a corporate tax reform that would cut the rate to 25% in return for eliminating deductions, though any agreement would probably have to be done in two stages to work out the details.

As for spending cuts, Democrats would only have to agree to $750 billion over 10 years. About $180 billion of that would come from changing the inflation calculation for benefits, so the other reductions would hardly be extreme. Keep in mind that any changes in ObamaCare (with its 3.8-percentage point payroll tax increase) and major reform of Medicare and Medicaid were long ago ruled out by Democrats.

Despite the modest spending cuts, the deal Mr. Toomey describes would be a big political win for all concerned. It would give the economy a major lift by taking the tax increase now scheduled for 2013 off the table, and it would show that Congress can at least make some progress toward controlling federal spending. With a ratio of $1.50 in spending cuts to $1 in tax increases, the offer is far better for Democrats than the $3 to $1 ratio that President Obama's own Simpson-Bowles deficit commission recommended.

Mr. Toomey says Democrats nonetheless rejected this offer on Tuesday night, a fact that leaves him "enormously frustrated." He says Democrats are insisting on at least $1 trillion in new revenues while refusing to allow any reduction in tax rates or to stop the tax increase that will hit in 2013. The freshman Republican now fears the talks will end with a whimper of small revenue and spending measures that will do little to help the economy or the federal fisc.

We report all this because it's news and because it illustrates the real political obstacles to more sensible economic policy in Washington. In media mythology, the only barrier to a budget deal is conservative opposition to raising taxes. But even when Republicans put $500 billion in statically scored new revenues on the table, at the risk of upsetting their political base, Democrats declare that tax reform without higher tax rates is impossible. So who are the real "ideologues" here?

Democrats must believe they can blame Republicans if the super committee fails, riding their campaign against "millionaires and billionaires" back to complete power in Washington. It's a reckless bet, but the American public may have to call it.

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« Reply #521 on: November 12, 2011, 09:01:19 PM »

November 12, 2011 12:00 A.M.
Deficit-Reduction Fever
President Obama launches the war on tchotchkes.





Have you been following this so-called Supercommittee? They’re the new superhero group of Superfriends from the Supercongress who are going to save America from plummeting over the cliff and into the multi-trillion-dollar abyss. There’s Spender Woman (Patty Murray), Incumbent Boy (Max Baucus), Kept Man (John Kerry), and many other warriors for truth, justice, and the American way of debt. The Supercommittee is supposed to report back by the day before Thanksgiving on how to carve out $1.2 trillion dollars of deficit reduction and thereby save the republic.
 
I had cynically assumed that the Superfriends would address America’s imminent debt catastrophe with some radical reform — such as, say, slowing the increase in spending by raising the age for lowering the age of Medicare eligibility from 47 to 49 by the year 2137, after which triumph we could all go back to sleep until total societal collapse.
 
But I underestimated the genius of the Superfriends’ Supercommittee. It turns out that a committee created to reduce the deficit is instead going to increase it. As The Hill reported:
 

Democrats on the supercommittee have proposed that the savings from the end of the wars in Iraq and Afghanistan be used to pay for a new stimulus package, according to a summary of the $2.3 trillion plan obtained by The Hill.
 
Do you follow that? Let the Congressional Budget Office explain it to you:
 

The budget savings from ending the wars are estimated to total around $1 trillion over a decade, according to an estimate in July from the Congressional Budget Office.
 
Let us note in passing that, according to the official CBO estimates, a whole decade’s worth of war in both Iraq and Afghanistan adds up to little more than Obama’s 2009 stimulus bill. But, aside from that, in what sense are these “savings”? The Iraq War is ended — or, at any rate, “ended,” at least as far as U.S. participation in it is concerned. How then can congressional accountants claim to be able to measure “savings” in 2021 from a war that ended a decade earlier? And why stop there? Why not estimate around $2 trillion in savings by 2031? After all, that would free up even more money for a bigger stimulus package, wouldn’t it? And it wouldn’t cost us anything because it would all be “savings.”
 
Come to think of it, didn’t the Second World War end in 1945? Could we have the CBO score the estimated two-thirds of a century of “budget savings” we’ve saved since ending that war? We could use the money to fund free master’s degrees in Complacency and Self-Esteem Studies for everyone, and that would totally stimulate the economy. The Spanish–American War ended 103 years ago, so imagine how much cash has already piled up! Like they say at Publishers Clearing House, you may already have won!
 
Meanwhile, back at the Oval Office, the president is asking for your votes for the 2011 SAVE Award. To demonstrate his commitment to fiscal discipline, he set up a competition whereby federal employees can propose ways to cut government waste. A panel of experts (John Kerry, Paula Abdul, etc.) then weigh the merits, and the four finalists go up on the White House website to be voted on by members of the public: It’s like Dancing with the Czars. Last year, Marjorie Cook of Michigan, a food inspector with the Department of Agriculture, noted that every year USDA inspectors ship 125,000 food samples to its analysis labs by “next day” express delivery, and that a day or two later the labs ship the empty containers back to the inspectors using the very same “next day” service. Marjorie suggested that, as the containers are empty, they can’t be all that urgent, and should be mailed back at regular old ground delivery rates.
 
But this reform was way too radical, so it didn’t win. And happily, even as we speak, mail couriers are rushing empty containers back and forth across the USDA-inspected fruited plain at your expense. This year’s SAVE Award nominees include Faith Stanfield of Toledo, a “General Technical Expert” with the Social Security Administration. As someone who’s technically expert in a very general sense, she sees the big picture. It’s on the front of the SSA’s glossy magazine. Did you know Social Security has its own glossy magazine? It’s called Oasis and it’s sent out to 88,000 SSA employees plus about a thousand government retirees. It’s like Vogue or Vanity Fair, but without the perfume and fashion ads, because who needs Givenchy and Yves St. Laurent to fund your mag when you’ve got the U.S. taxpayer? It’s the magazine that says you’re cool, you’re now, you’re living the SSA-bureaucrat lifestyle. But Faith thinks they should scrap the glossy pages and only publish it online.
 
Ooh, I dunno. Sounds a bit extreme to me. Could result in hundreds of Social Security lifestyle editors being laid off and reduced to living on Social Security.
 
Anyway, the winner of the SAVE Award gets to meet with the president to discuss his or her proposal. The proposal then gets submitted to a committee for further discussion on whether to set up a committee to discuss discussing it further. But, unlike the Superfriends’ Supercommittee, the lunch expenses are cheaper.
 
What with the proposal to use the nearly two centuries of budget savings from the end of the War of 1812 to fund the construction of high-speed monorails and the plan to turn the Social Security Administration’s in-house glossy into an in-house virtual-glossy, it’s no surprise that the president himself has got the deficit-reduction fever. On Wednesday, he signed an executive order “Promoting Efficient Spending” — and ending government waste. Just like that! According to Section Seven:
 

Agencies should limit the purchase of promotional items (e.g., plaques, clothing, and commemorative items), in particular where they are not cost-effective.
 
Sounds like someone’s seen one amusing Janet Napolitano bobblehead too many at the DHS holiday party. About to stick in one of those giant commemorative plaques on the side of the road saying “These next three miles of single-lane scarified pavement brought to you by the American Recovery & Reinvestment Act”? Don’t even think about it.
 
Fresh from launching the war on tchotchkes, the administration then proposed a 15-cent tax on Christmas trees in order to fund a federal promotional campaign to promote the sale of Christmas trees. Possibly Commerce Department research showed that there’s a dramatic fall-off in the sale of “holiday trees” round about December 26 every year, and Obama figured a little stimulus surely couldn’t hurt. He was forced to rescind the proposal, presumably after an ACLU chum pointed out that settling the Bureau of Christmas Tree Promotion lawsuit would wipe out all the budget savings from the French and Indian Wars.
 
Meanwhile, as these ruthless austerity measures start to bite, the government of the United States continues to spend one-fifth of a billion dollars it doesn’t have every hour, every day, every week, including Thanksgiving, Christmas, and Ramadan.
 
And remember, folks, Rick Perry is the dummy because he wants to abolish so many government departments, he can’t keep track of them all. Keep it simple, Rick. Just stick to a campaign pledge to set up a supercommittee to report back on the possibility of using savings from mailing back empty specimen beakers by three-day ground service to fund Medicare. Then people will take you seriously.


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« Reply #522 on: November 13, 2011, 10:20:59 AM »


http://www2.macleans.ca/2011/11/11/acropolis-now/

Acropolis now: Greece may be just the start


Other Eurozone countries are faltering, with far more worrying consequences

by Michael Petrou with Stavroula Logothettis on Friday, November 11, 2011 11:00am - 7 Comments



Orestis Panagiotou/Keystone Press
 
“We are finished as a nation,” says Marko Gjini, a 39-year-old unemployed construction worker in Athens. “The country has been sold off. We have no say in anything anymore. Greece is owned by the Germans.”
 
Like many Greeks these days, Gjini is bitter and despondent because of his country’s financial mess, and the austerity measures that have been imposed in an effort to contain it. His wife, Aleka, a public hospital nurse, has seen her income drop from 1,200 euros a month to 800 euros. Now, facing more taxes and cuts to public expenditures, the family expects to have a net monthly income of less than 500 euros. Marko and Aleka are investing whatever money they can toward English lessons for their twin eight-year-old boys in the hope that they might have a better future somewhere else. “Let the government fall,” says Gjini, “[German Chancellor Angela] Merkel is the boss now anyway.”
 
Greece’s financial troubles have been accelerating since 2008, and have now reached a crisis point. Unable to pay debts accumulated through years of wild spending and financial mismanagement, covered up by blatant cooking of the books, last May the country accepted a $150-billion bailout loan from the International Monetary Fund and other members of the eurozone—those European Union countries that use the common euro currency—in return for imposing harsh austerity measures. These weren’t popular among ordinary Greeks; strikes and street protests followed. Three bank officials died in May when rioters set fire to their bank branch in downtown Athens.
 
The Greek government, meanwhile, missed its financial targets. Rescue loans were delayed. And the recession got worse. Facing the very real possibility of defaulting on its enormous national debt, Greece last month negotiated another bailout package involving cash and a 50 per cent “haircut” off all its privately held debt, if Greece would agree to further cuts to public spending and increased taxes.
 


Greek Prime Minister George Papandreou then shocked the rest of the continent when he announced he would take the proposed package to the Greek people in a national referendum. But French President Nicolas Sarkozy and Merkel—leaders of the two largest economies in the eurozone—summoned Papandreou to a meeting of the G20 in Cannes, France, and told him all bailout money would be suspended until after a referendum vote was held. What’s more, they said, a referendum on the bailout deal would, in effect, be a vote on whether Greece wished to remain in the eurozone. Papandreou backed off and dropped the referendum.
 
For Vaso Gildizi, a Greek freelance writer, events in Cannes were “a national humiliation for the country.” The Greek prime minister was scolded like a schoolboy and sent home. The incident didn’t sit well with many Greeks who were already sour on the bailout deal and the euro itself.
 
“We’re bankrupt,” says 44-year-old Vasilia Paneli, owner of Bliss, a trendy café a short walk from Syntagma Square and the parliament in Athens. “We know it. The EU knows it. And yet we continue this Greek tragedy. A referendum would at least give us a voice, a chance to speak up for our future.” Paneli was unmoved by French and German threats that a referendum on the bailout deal would have meant a vote on whether to remain in the eurozone. She’d rather Greece leave it. “It’s self-serving,” she says. “I say let’s go back to the drachma.”
 
This option of leaving the eurozone and reverting back to Greece’s previous currency has some traction in Greece. “Under the euro we’ve become a nation of bailout slaves,” says Stavro Tsoykalas, an unemployed truck driver who claims people were never as poor during the drachma days as they are now. He too would like to drop the euro.
 
William Antholis, a senior fellow at the Brookings Institution think tank, likens flirting with a return to the drachma to “threatening suicide to avoid a lynching.” Greece is in for a painful few years whatever happens, he said in an interview with Maclean’s. The austerity measures are going to bite. But leaving the euro, he says, would be disastrous. The costs could include a run on Greek banks, as people sought to withdraw euros before they were changed to drachmas. Some banks would probably collapse. Greece would likely default on its debts, and would be unable to pay pensions and salaries. Some sectors of the economy built on export might benefit from a new, devalued currency, but at the expense of much heavier blows elsewhere.
 
“Greece would be basically shot back into developing country status,” says Henning Meyer, a senior visiting fellow at the London School of Economics. “The economy would almost certainly collapse. It would be a very severe economic shock to the country.” But Meyer is also critical of the bailout package. Forced spending cuts will shrink Greece’s GDP, he predicts, crippling its ability to pay down its debts. What’s needed, he says, is a “European growth strategy” of targeted cuts but also investment. This isn’t on the table. Greece will accept the bailout package, he says, “because they’ve basically got a gun to their head. There are no good options left.”
 
Indeed, this week the Greek socialist government and opposition conservatives agreed to form a coalition government until a new election is held next year, possibly in February. Papandreou will remain as prime minister until his interim replacement is chosen. In the meantime, the coalition government will approve the bailout package, triggering the release of the now frozen rescue funds.
 
This won’t solve all of Greece’s problems, though. The economy will take years to recover, if it does at all. This will make Greece difficult to govern in the years ahead, as future governments will have to convince voters that austerity measures are still necessary, even as their standard of living stagnates or declines.
 
“If one of us were indebted to that degree and told you have to give up all the comforts that you’ve been accustomed to, and on top of that pay more out of your pocket, and maybe in 15 years you’ll see some incremental growth, there isn’t much incentive for people to work toward that goal,” says Phil Triadafilopoulos, an assistant professor of political science at the University of Toronto. “There isn’t much hope in that message. And that’s basically the message of austerity at its best.”
 
It’s not certain Greeks will buy in to such a deal, and solve some of the problems that have bedevilled the Greek economy and made reform so difficult: widespread tax evasion and a pervasive black market. Kostas Agas, a banker in Piraeus, a port city on the outskirts of Athens, says that even though Greeks understand the severity of the problems facing their country, many “continue to perpetuate the black money economy and the no-receipt mentality, but now it’s done in defiance of the austerity measures.”
 
Beyond Greece’s economic future are dilemmas about its political one—and indeed about the political future of Europe as a whole. “This is a much bigger than a question of currency. It’s a question of identity and who we are moving forward,” says Triadafilopoulos.
 
A generation or two ago, Greeks talked about “going to Europe,” as if the place were somewhere else. This has changed, as Greeks, especially young Greeks, embrace being part of a larger European community. But cynicism is growing among some, such as Gjini, the construction worker who believes his country is owned by Germans and run by Angela Merkel.
 
“The nature of the European Union is that you give up a piece of your sovereignty in return for prosperity and democracy,” says Jeffrey Kopstein, a political science professor at the University of Toronto. “That’s the bargain. If the prosperity is not there, the bargain appears to be less juicy.”
 
But Spyros Economides, a senior lecturer in international relations at the London School of Economics, dismisses the notion that Greece is selling its sovereignty to foreign countries in exchange for bailout funds. “This is a false dichotomy. We are a European Union partner. We are eurozone partners. We’ve also benefited from being part of this joint enterprise. And when we were on the receiving end of money and benefits, and structural funds and cohesion funds and regional funds, I didn’t hear much of an outcry then in terms of what this meant for sovereign rights and whether we were being dictated to from abroad.”
 
What’s most worrying about Greece’s financial crisis is that it is not an isolated one. Other countries in the eurozone are faltering, and the repercussions in economies bigger than Greece will be stronger. “Greece is a minor, minor spoke on a much bigger wheel,” says Economides.
 
Portugal and Ireland have both needed bailouts because of their debt problems. Now there are fears for Italy’s economy—the third largest in the eurozone—because of the country’s large debt and soaring borrowing costs for the government. This week, its prime minister, Silvio Berlusconi, finally heeded calls from political allies and opponents and agreed to step down. Along with Papandreou of Greece, he’s the second European leader to fall victim to the financial crisis in a week.
 
“The European project has a big question hanging over it,” says Economides. “I don’t think the European Union is in danger of collapsing right now. But you can see if the eurozone starts dismantling and falling into subgroups, and two tiers, then of course it has direct implications as to what this project actually is, and who it’s for, and what it’s going to achieve in the future.”
 
Already, some voters in the richer EU countries question why they should continue to bail out poorer member states. In Britain, 81 Conservative MPs defied Prime Minister David Cameron’s orders to vote against a call for a referendum on Britain’s continued membership in the European Union. And according to an October ICM poll, more Britons would vote to leave the European Union than would choose to stay in it.
 
“A whole dream has come into question,” says Triadafilopoulos. “Something that people were really proud of and saw as part of their identity, this European project, has been challenged at its very core. The belief in Europe as a basically positive thing and a way of moving forward into the future has been put into question at its basest level.
 
“Europe was established initially as a way of making sure that France and Germany didn’t tear each other to pieces a third time. The logic changed somewhat to be more economically driven. But at its core, it’s an idea that Europe is a community of European states that are united, despite their differences, according to a common allegiance to certain core principles—key of which is a commitment to liberal democratic principles and human rights. “If that project fails, then what we understand of Europe today is thrown into question. And Europe’s pre-unification history is not one that makes me optimistic. It was the centrepiece of two world wars, and prior to that innumerable conflicts, vicious conflicts that pitted European against European.”
 
Triadafilopoulos doesn’t expect a return to war in Europe. But he says a shared sense of what it means to be European will be lost. Until now, the trend in an integrating Europe has been toward liberal democracy. “If that trend is thrown into reverse, I don’t know what the consequences are, but I’m pretty sure they’re not good.”
 
But Triadafilopoulos says the crisis might have collateral benefits if it provokes debate among Europeans about what they want their future to be. Europe’s politicians, he says, will have to make a renewed case for the union. “Those who believe in Europe, they’re going to have to marshal arguments that resonate with everyday people in their respective countries, that give them a sense of the consequences if Europe is allowed to wither, because they are significant,” he says. “This may be a way of connecting Europe to Europeans.”
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G M
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« Reply #523 on: November 13, 2011, 10:30:35 AM »

http://www.thedailybeast.com/articles/2011/11/12/europe-s-financial-crisis-is-headed-to-america.html


Europe’s Disaster Is Headed Our Way
Nov 13, 2011 12:00 AM EST


Can America withstand the death spiral of debt?


As an author who has just published a book on the crisis of Western civilization, I couldn’t really have asked for more: simultaneous crises in Athens and Rome, the cradles of the West’s law, languages, politics, and philosophy.
 

Yet most Americans are baffled by the ongoing economic pandemonium in the European Union. For them, places like Greece and Italy are primarily tourist destinations they’ll visit at most once. The finer points of Mediterranean politics leave them cold, except insofar as they’re funny. After all, who could resist the opera-buffa character of Silvio “Bunga-Bunga” Berlusconi?
 

But only a few weirdos really feel their pulses quicken when they hear news like: the new Greek prime minister is a former central banker called Papademos! Ever tried to explain to a New Yorker the finer points of Slovakian coalition politics? I have. He almost needed an adrenaline shot to come out of the coma.
 

So why should Americans care about any of this? The first reason is that, with American consumers still in the doldrums of deleveraging, the United States badly needs buoyant exports if its economy is to grow at anything other than a miserably low rate. And despite all the hype about trade with the Chinese, U.S. exports to the European Union are nearly three times larger than to China.
 

Until March, it seemed as if exports to Europe were on an upward trajectory. But the eurozone crisis has stopped that. Governments that ran up excessive debts have seen their borrowing costs explode. Unable to devalue their currencies, they’ve been forced to adopt austerity measures—cutting spending or hiking taxes—in a vain effort to reduce their deficits. The result has been Depression economics: shrinking economies and unemployment rates approaching 20 percent.
 

As a result, according to the new president of the European Central Bank, Mario Draghi, a “double dip” recession in Europe is now all but inevitable. And that’s lousy news for U.S. exporters targeting the EU market.
 

But there’s more. Europe’s problem is not just that governments are overborrowed. There are an unknown number of European banks that are effectively insolvent if their holdings of government bonds are “marked to market”—in other words, valued at their current rock-bottom market prices. In our interconnected financial world, it would be very odd indeed if no U.S. institutions were affected by this. Just as European institutions once loaded up on assets backed with subprime U.S. mortgages, so most big U.S. banks have at least some exposure to eurozone bonds or banks. One institution—MF Global, run by former Goldman Sachs CEO Jon Corzine—just blew up because of its highly levered euro bets. Others are biting their fingernails because it is suddenly far from clear that the credit default swaps they have bought as insurance against, say, a Greek default are worth the paper they are written on.
 

But the third reason Americans should care about Europe is more important even than the risk of a renewed financial crisis. It is the danger that what is happening in Europe today could ultimately happen here. Just a few months ago, almost nobody was worried about Italy’s vast debt, which amounts to 121 percent of GDP. Then suddenly panic set in, and Italy’s borrowing costs exploded from 3.5 percent to 7.5 percent.
 

Today the U.S. gross federal debt stands at around 100 percent of GDP. Four years ago it was 62 percent. By 2016 the International Monetary Fund forecasts it will be 115 percent. Economists who should know better insist that this is not a problem because, unlike Italy, the United States can print its own money at will. All that means is that the U.S. reserves the right to inflate or depreciate away its debt. If I were a foreign investor—and half the debt in public hands is held by foreigners—I would not find that terribly reassuring. At some point I might demand some compensation for that risk in the form of ... higher rates.
 

Athens, Rome, Washington ... The shortest route from imperial capital to tourist destination is precisely this death spiral of debt.
 

Like The Daily Beast on Facebook and follow us on Twitter for updates all day long.


Niall Ferguson is a professor of history at Harvard University and a professor of business administration at Harvard Business School. He is also a senior research fellow at Jesus College, Oxford University, and a senior fellow at the Hoover Institution, Stanford University. His Latest book, Civilization: The West and the Rest, will be published in November.

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JDN
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« Reply #524 on: November 13, 2011, 10:42:35 AM »

Your point (emphasized) about debt is valid.  We need to get our house in order.

An important subpoint however is that Europe DOES matter.
"So why should Americans care about any of this? The first reason is that, with American consumers still in the doldrums of deleveraging, the United States badly needs buoyant exports if its economy is to grow at anything other than a miserably low rate. And despite all the hype about trade with the Chinese, U.S. exports to the European Union are nearly three times larger than to China."

The implication is that we should not sit by and merely watch Europe fail.   Whether you care about Europe or not, it's failure will a disaster for us.
 

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G M
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« Reply #525 on: November 13, 2011, 11:50:16 AM »

You assume there is something we can do to save europe. Europe has to fix Europe. We have to unfcuk ourselves.
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JDN
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« Reply #526 on: November 14, 2011, 09:05:03 AM »

I'm not sure why "working for the State is different"......

http://www.latimes.com/news/local/la-me-discipline-reversed-20111114,0,7958658.story
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G M
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« Reply #527 on: November 14, 2011, 09:11:49 AM »

I'm not sure why "working for the State is different"......

http://www.latimes.com/news/local/la-me-discipline-reversed-20111114,0,7958658.story

Well, it's a matter of due process regarding civil service employees. Pretty repulsive examples cited, and I don't think civil service would protect some of those in other states.
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Crafty_Dog
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« Reply #528 on: November 16, 2011, 10:10:03 AM »

Seems to me that the larger point about it being insanely difficult to fire state employees for cause has considerable merit.
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G M
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« Reply #529 on: November 16, 2011, 11:52:33 AM »

I can tell you that it's not the case elsewhere.
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DougMacG
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« Reply #530 on: November 22, 2011, 12:18:35 PM »

I understand the BBA voted on that received a majority but failed to get the 2/3rd threshold did not include the cap on spending, did not include the super majority requirement to raise taxes and among the opponenets was Rep. Paul Ryan.

Ryan said:  “I’m concerned that this version will lead to a much bigger government fueled by more taxes,” Ryan said in a statement following the vote. “Spending is the problem, yet this version of the BBA makes it more likely taxes will be raised, government will grow, and economic freedom will be diminished. Without a limit on government spending, I cannot support this Amendment.”

I agree with Paul Ryan.  What a strange 'solution' that we can spend all we want if it is combined with a tax increase on someone else. 
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Crafty_Dog
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« Reply #531 on: November 22, 2011, 04:52:00 PM »

Agreed.
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DougMacG
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« Reply #532 on: November 26, 2011, 10:01:34 AM »

First I must admit I am fascinated with things like off the grid power systems and with electric vehicles.  I have 2 electric vehicles right now (an electric bike and a trolling motor powered kayak) but still rely heavily on the combustion engine to get real work done, a load carried or a real distance traveled.  A natural gas and electric hybrid I predict will be in my future, but who knows.  I just don't see how any of it depends on a government program.  That doesn't it make it more cost effective, it just hides the costs.

The real intention of these government programs, subsidies and mandates, is to rush the product to market before it is ready.  Isn't government's role in every other product, FDA etc. life saving drugs and procedures, to slow the product to market so that proper testing and public safety is assured?

http://www.signonsandiego.com/news/2011/nov/25/2nd-electric-car-battery-fire-involving-chevy-volt/?ap

2nd electric car battery fire involving Chevy Volt

WASHINGTON (AP) — Federal officials say they are investigating the safety of lithium-ion battery in General Motors Co.'s Chevrolet Volt after a second battery fire following crash-testing of the electric car.
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DougMacG
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« Reply #533 on: November 28, 2011, 10:05:57 AM »

In the last round, were the real cuts $1 billion or $7 billion?

Mark Steyn:  "The correct answer is: Who cares? The government of the United States currently spends $188 million it doesn’t have every hour of every day. So, if it’s $1 billion in “real, enforceable cuts,” in the time it takes to roast a 20 lb. stuffed turkey for your Thanksgiving dinner, the government’s already borrowed back all those painstakingly negotiated savings. If it’s $7 billion in “real, enforceable cuts,” in the time it takes you to defrost the bird, the cuts have all been borrowed back."

By the time the relevant bill passed the Senate earlier this month, the 2012 austerity budget with its brutal, savage cuts to government services actually increased spending by $10 billion.

http://www.nationalreview.com/articles/284111/more-more-more-mark-steyn
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DougMacG
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« Reply #534 on: December 02, 2011, 01:08:33 PM »

Posted elsewhere that leftists think govt spending is too low.  huh

Voters sent a message to Washington a year ago.  We had fights over "CUTS" that would cripple public services last summer.  Still spending is up anther 5%.  Why?  Because of, as Crafty has argued, the services baseline budget calculations still in place, so a cut isn't a cut, it is any number lower than what some elitists in the bowels of DC determine is enough to keep excesses constant.

A larger look at what they are stealing from the economy below.  A smarter parasite would not seek to kill off the host.
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Body-by-Guinness
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« Reply #535 on: December 07, 2011, 10:51:28 AM »

Going Off the Rails Against the REINS Act
Jonathan H. Adler • December 7, 2011 8:52 am

Today the House of Representatives is expected to vote on the REINS Act, a bill to enhance political accountability over regulatory decisions. The bill has two essential features. First, it bars new “major” regulations (those anticipated to cost more than $100 million annually) from taking effect unless approved by both houses of Congress. Second, it creates an expedited review process that forces each house to vote on each major rule. So while requiring Congressional approval, REINS prevents members of Congress from ducking their responsibility to vote yay or nay.

REINS is a controversial bill, in part because it effectively limits the delegation of broad regulatory authority to federal agencies, but to read some critics, REINS would usher in an anti-regulatory armageddon. While I support the legislation, for reasons detailed in these posts (and summarized in this NRO piece), I recognize that there are reasonable arguments to be made on the other side. What’s so interesting watching this debate, however, is how many opponents refuse to make them, relying instead on inaccurate and fanciful characterizations of the bill. It’s telling when opponents of legislation are unable or unwilling to describe it accurately when making their case.

To take one example, US PIRG’s Ed Mierzwinski argues that the REINS Act would lead to unsafe toys on the market and emasculate the CPSC.

One bill, the REINS Act, would not only allow but require congressional meddling in the implementation of all public health and safety rules. A single member of Congress, at the behest of some powerful special interest or campaign contributor, could block the public database, block science-based lead standards for children’s products, block crib safety rules or any number of protections that provide a safer consumer marketplace.

The idea that REINS would allow a single member of Congress to block new regulations is a common claim. The Center for American Progress makes it here. It’s also false. The bill expressly limits debate, waives procedural objections, and requires a vote on the merits. Under REINS, if some members of Congress wish to block needed safety rules at the behest of a special interest, they will have to do it out in the open, and will only succeed if they can win a majority vote. How could this undermine legislative accountability? It’s true REINS requires that legislative approval occur within a set period of time, but it also ensures the vote occurs before the deadline expires.

The NYT worries REINS will “undermine the executive branch.” Really. Why? Because it will be too easy for a majority in either House to prevent a President from rewriting regulatory requirements. The NYT also argues REINS is “deeply undemocratic.” Got that? Requiring legislative votes on major regulations — that two or three of the most consequential regulatory decisions made by federal agencies — is “undemocratic,” whereas allowing agencies to rely upon decades-old statutes to remake industries and reconfigure whole sectors of the economy is not.

The REINS Act would dramatically alter how major rules are made, but it would do so by making sure the people’s representatives have a greater say on — and greater accountability for — the major regulatory actions our federal government takes. If the public wants greater regulation of environmental or other problems, REINS won’t stand in the way. Only if the public is skeptical of such regulations, or unconcerned by legislative vetoes of proposed rules, will REINS slow down the adoption of new rules. And perhaps that’s what the REINS Act’s opponents are truly afraid of: A regulatory process that more accurately reflects what the public wants.

UPDATE: For unhinged commentary on the REINS Act, it’s hard to do better than this piece which, among other things, claims the Act would “essentially return environmental regulation to 1890s standards – when corporations polluted with impunity.” That’s an astounding charge given that REINS a) does not have any effect whatsoever to regulations already on the books and b) would apply equally to deregulatory initiatives, such as any effort by a future President to repeal existing regulations.

http://volokh.com/2011/12/07/going-off-the-rails-against-the-reins-act/
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« Reply #536 on: December 22, 2011, 08:47:05 AM »

Just a quick yip to note the utter tactical incoherence of the Boener in the current go round with Baraq.  The intellectual co-author of the "super committee" fiasco has now managed to enable Baraq positioning himself as the tax cutter!  Unfgbelievable.   angry
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« Reply #537 on: December 22, 2011, 10:38:42 AM »

Just a quick yip to note the utter tactical incoherence of the Boener in the current go round with Baraq.  The intellectual co-author of the "super committee" fiasco has now managed to enable Baraq positioning himself as the tax cutter!  Unfgbelievable.   angry

Yes, the roles got flipped here, but it was Boehner who got the pipeline into the bill and the senate approved that.  Doesn't even the two month extension get the pipeline going?  Unless I am missing something, they should have taken the deal.

OTOH, it is odd that Dems are so eager to defund social security making it less sacred.

Removal of the separate payroll tax should have been combined with comprehensive reform.  Real reform is not possible with the current divisions of power.  The positioning and posturing coming into the election is crucial and there is a leadership vacuum on both sides.
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« Reply #538 on: December 22, 2011, 10:48:21 AM »

According to GM CEO Dan Akerson, the average Volt owner makes $170,000 per year.

Chevy Volt Costing Taxpayers Up to $250K Per Vehicle

http://www.michigancapitolconfidential.com/16192

Each Chevy Volt sold thus far may have as much as $250,000 in state and federal dollars in incentives behind it – a total of $3 billion altogether, according to an analysis by James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy.

Hohman looked at total state and federal assistance offered for the development and production of the Chevy Volt, General Motors’ plug-in hybrid electric vehicle. His analysis included 18 government deals that included loans, rebates, grants and tax credits. The amount of government assistance does not include the fact that General Motors is currently 26 percent owned by the federal government.

The Volt subsidies flow through multiple companies involved in production. The analysis includes adding up the amount of government subsidies via tax credits and direct funding for not only General Motors, but other companies supplying parts for the vehicle. For example, the Department of Energy awarded a $105.9 million grant to the GM Brownstown plant that assembles the batteries. The company was also awarded approximately $106 million for its Hamtramck assembly plant in state credits to retain jobs. The company that supplies the Volt’s batteries, Compact Power, was awarded up to $100 million in refundable battery credits (combination tax breaks and cash subsidies). These are among many of the subsidies and tax credits for the vehicle.

It’s unlikely that all the companies involved in Volt production will ever receive all the $3 billion in incentives, Hohman said, because many of them are linked to meeting various employment and other milestones. But the analysis looks at the total value that has been offered to the Volt in different aspects of production – from the assembly line to the dealerships to the battery manufacturers. Some tax credits and subsidies are offered for periods up to 20 years, though most have a much shorter time frame.

GM has estimated they’ve sold 6,000 Volts so far. That would mean each of the 6,000 Volts sold would be subsidized between $50,000 and $250,000, depending on how many government subsidy milestones are realized.

If those manufacturers awarded incentives to produce batteries the Volt may use are included in the analysis, the potential government subsidy per Volt increases to $256,824. For example, A123 Systems has received extensive state and federal support, and bid to be a supplier to the Volt, but the deal instead went to Compact Power. The $256,824 figure includes adding up the subsidies to both companies.

The $3 billion total subsidy figure includes $690.4 million offered by the state of Michigan and $2.3 billion in federal money. That’s enough to purchase 75,222 Volts with a sticker price of $39,828.

Additional state and local support provided to Volt suppliers was not included in the analysis, Hohman said, and could increase the level of government aid. For instance, the Volt is being assembled at the Poletown plant in Detroit/Hamtramck, which was built on land acquired by General Motors through eminent domain.

“It just goes to show  there are certain folks that will spend anything to get their vision of what people should do,” said State Representative Tom McMillin, R-Rochester Hills. “It’s a glaring example of the failure of central planning trying to force citizens to purchase something they may not want. … They should let the free market make those decisions.”

“This might be the most government-supported car since the Trabant,” said Hohman, referring to the car produced by the former Communist state of East Germany.

According to GM CEO Dan Akerson, the average Volt owner makes $170,000 per year.
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« Reply #539 on: December 22, 2011, 11:33:05 AM »

Question:

The super committee failed to come to terms, so presumably the "automatic cuts" are , , , automatically happening?  If so, WHEN are they happening?

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« Reply #540 on: December 31, 2011, 09:23:43 AM »


Amid this month's payroll tax fracas, few noticed that Congress passed a 1,200-page, $1 trillion omnibus spending bill for fiscal 2012. Maybe no one in Washington boasted because it's a victory for spending as usual. Republicans—in the House and Senate—need a better strategy.

The news is that after accounting for last-minute unemployment insurance extensions, "emergency" spending and higher Medicare physician payments, total federal outlays are estimated to be $3.65 trillion in fiscal 2012, up slightly from $3.6 trillion in 2011. The last year has seen no major reforms in any of the big entitlement programs—Medicare, Medicaid or Social Security. Spending on food stamps alone is scheduled to reach $80 billion in 2012, more than double the amount as recently as 2007.

Republicans had promised to roll back discretionary spending to 2008 levels, to save $100 billion. But the August debt deal lowered the savings to $7 billion—or a 2012 target for appropriations of $1.043 trillion. Even that target was missed because appropriators tacked on roughly $10 billion in disaster relief—hurricanes this summer—and so the new total is $1.054 trillion. That's $4 billion more than the 2011 baseline of $1.050 trillion, although savings from troop withdrawals in Iraq may reduce that.

What about killing programs? Well, only 28 programs out of the thousands of line-items contained in the omnibus budget were terminated. The list includes mostly minor programs such as $12.5 million spent on something called "adolescent family life," $1.2 million for civic education, and $1.4 million for economics education (not for members of Congress).

The one major domestic program of more than $100 million that got the axe was the Energy Department loan guarantee program for the likes of Solyndra. The total domestic savings from program terminations come to less than $0.5 billion.

Enlarge Image

Close...Meanwhile, scores of programs that have long been GOP targets survived: Amtrak, the Legal Services Corp., National Public Radio, the United Nations population program, mass transit grants, and even funding for the U.N. Climate Panel. Spending increased for many programs, such as the National Institutes of Health, the Consumer Product Safety Commission, Indian Health Service and Bureau of Land Management.

Many readers will look at all this and blame House Republicans, and there's no doubt they failed to meet expectations. Yet believe it or not, a flat overall budget is a vast improvement over the years 2007 to 2011, when overall spending increased 32%, or $868 billion. (See the nearby table.) Voters elected a GOP House to pull the Democratic credit card, and Republicans at least stopped the blowout of the Pelosi-Obama years.

The real failure of GOP leaders is that Senate Democrats and the White House foiled Republican attempts to cut spending further. The GOP fiscal high point was the passage of Paul Ryan's budget in the spring, with $4.5 trillion of savings over a decade, numerous program cancellations, the most ambitious entitlement reform since the GOP budget of 1995 (vetoed by Bill Clinton), and an outline for pro-growth tax reform.

From that moment on, Democrats went into a prevent defense. Senate Majority Leader Harry Reid refused to pass a comparable budget outline, a Democratic abdication that has now reached more than 900 days. Democrats offered no spending cuts or budget reforms in public. None. Instead, they attacked Mr. Ryan for daring to reform the structure of Medicare to introduce more competition, which takes some nerve after Democrats cut Medicare by $500 billion over a decade to fund ObamaCare.

As for the White House, Mr. Obama joined the assault on Mr. Ryan, but he also claimed to favor some fiscal discipline and he invited GOP leaders to work out a compromise behind closed doors. This let him posture as a spending cutter without having to make a decision on any specific budget cuts or reforms. He gulled Speaker John Boehner in particular with promises of sincerity, only to demand $1 trillion in tax increases that House Republicans could never pass without violating their own campaign promises.

This was the big GOP mistake. Mr. Boehner and Majority Leader Mitch McConnell both fell for Mr. Obama's backroom political trap. Mr. Boehner privately insisted that Mr. Obama really wanted a deal, while Mr. McConnell, who never liked the House budget, was looking for political cover on Medicare. But whatever their motives, their strategy failed by letting Mr. Obama set the terms of debate. They failed to make Senate Democrats and the White House declare themselves in public where voters would notice.

***
There has to be a better way. Tea party expectations of major reforms were always unrealistic with Democrats controlling the Senate and White House. But that's no reason that Republicans in Congress can't use their power to fight for their priorities.

They need to draw contrasts with Democrats on taxes, spending, regulation and reform that at least educate the public about what's at stake. Pick some programs and make them budget-cutting showcases. Use the savings to finance tax cuts that promote growth. Or simply vote for tax reform whether or not it is "revenue neutral" under Congress's silly budget rules. Follow votes in the House by bringing pro-growth bills to the Senate and forcing Democrats to vote up or down, as they did with the Keystone XL pipeline.

GOP Congressional leaders will be tempted to play it safe and wait for their Presidential nominee. And inevitably the Presidential race will dominate public debate as 2012 unfolds. But before it does, Republicans need to do far more to show their own supporters and independent voters that they are the party of reform and change in Washington. If voters want spending as usual, they'll elect Democrats.

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« Reply #541 on: January 04, 2012, 10:55:03 AM »

"Public debt has increased by 67 percent over the past three years, and too many Americans refuse even to see it as a problem. For most of us, '$16.4 trillion' has no real meaning, any more than '$17.9 trillion' or '$28.3 trillion' or '$147.8 bazillion.' It doesn't even have much meaning for the guys spending the dough: Look into the eyes of Barack Obama or Harry Reid or Barney Frank, and you realize that, even as they're borrowing all this money, they have no serious intention of paying any of it back. That's to say, there is no politically plausible scenario under which the 16.4 trillion is reduced to 13.7 trillion, and then 7.9 trillion and, eventually, 173 dollars and 48 cents. At the deepest levels within our governing structures, we are committed to living beyond our means on a scale no civilization has ever done." --columnist Mark Steyn
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DougMacG
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« Reply #542 on: January 05, 2012, 12:01:59 AM »

In a country of 307,000,000, roughly 1500 people bought the US taxpayer subsidized Chevy Volt flammable electric golf cart.  You do the math.  A good number of those subsidized rich people already own at least one subsidized Prius.

The average Volt buyer makes $170,000 per year, roughly the same as a US Senator or a judge on the US Court of Appeals.

So much for the war on poverty.
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« Reply #543 on: January 06, 2012, 08:58:38 AM »

I'm thinking Romney or Santorum would have a hard time answering this in debate-- how about each of us?
==================
WSJ
By AUSTAN GOOLSBEE
The Iowa caucuses presented the full range of views of the Republican hopefuls. When it came to fiscal strategy, however, there was almost no daylight among them. Each candidate decried the rise of government spending and wants to cut taxes.

Again and again they noted that spending under President Obama rose to 25% of the economy in 2009, the highest in decades and well over the 20%-21% norm of the last 30 years.

To hear the GOP candidates tell it, this fact explains the deficit, explains America's long-run fiscal problem, and explains why new taxes cannot be tolerated. Congressional Republicans have the same outlook. The deficit is up thanks to government spending, so we must cut spending right now in every form.

Yet the long-run fiscal problem facing the country—which is real—has almost nothing to do with the reasons that the deficit is currently large or that spending is abnormally high. They are high for the same reason taxes are abnormally low: because of the economic downturn. We should debate the real issues, not try to pretend the recession never happened.

The Congressional Budget Office forecast a $1.2 trillion deficit before the Obama administration even came into office. The stimulus added only around $250 billion a year, and more than one-third of that came from tax cuts, especially the tax credit in the stimulus bill's "Making Work Pay" provision.

Most of the increase in the deficit during a downturn doesn't come from new policies in Washington. The deficit rises because both spending and taxes automatically adjust when the economy struggles. Unemployment insurance payments rise and more people qualify for Medicaid and food stamps. Incomes fall so people pay less taxes.

It's completely normal that spending rises during big downturns. The government's share of the economy jumped significantly during the big recessions in the 1970s and '80s. As the economy grows back to health, the government share of the economy will fall (and many analysts forecast just that for the coming year).

The same dynamic applies to tax revenues. You would think that—using the same logic they apply to the rise of government spending—the GOP candidates would be trumpeting the last three years as one of the greatest tax cutting periods of the century.

The nonpartisan Tax Policy Center's data predict that in 2011 taxes will have fallen more as a share of national income than during almost any other comparable period in U.S. history (including under Ronald Reagan) and may hit their lowest level since World War II: 14.4% of GDP, compared with the more than 18% average of the last 30 years. Individual income taxes may hit their lowest level as a share of income since 1950 and corporate income taxes the lowest since 1936.

The deficit shot up in basically equal measure from taxes falling and spending rising. Spending rose to 25% of GDP from 20.5% in the recession and soon it will fall back down. Taxes fell to 14.5% of GDP from 18.5% and will also return to more normal levels.

The true fiscal challenge is 10, 20 and 30 years down the road. An aging population and rising health-care costs mean that spending will rise again and imply a larger size of government than we have ever had but with all the growth coming from entitlements—while projected federal revenues as a percentage of GDP after the rate cuts of the 2000s will likely remain below even historic levels of 18%.

To hear the Republican candidates, you would think our problems were about discretionary spending running wild. Yet, if you take out the aging of the population and health-care cost increases, government spending is going to shrink over the next decade. A cap on government spending at past levels and a balanced-budget constitutional amendment would force huge cuts to Social Security and Medicare.

So let's talk about the trade-off between new revenues versus cuts to entitlements. We have known about that issue for decades. We also know it would be much easier to address if the economy were growing again.

The election should lay out each candidate's fiscal grand bargain and growth strategy. Let us compare them. They matter. This could make up the heart of a historically important presidential contest. Instead, Iowa showed us a series of candidates trying to outdo one another with condemnation for the short-term rise in spending while simultaneously proposing tax policies that would add trillions to the long-term deficit.

Mr. Goolsbee, a professor of economics at the University of Chicago's Booth School of Business, was chairman of President Obama's Council of Economic Advisers from 2010 to 2011.


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« Reply #544 on: January 07, 2012, 01:10:03 PM »

Crafty wrote:  Alright gents, answer this...  I'm thinking Romney or Santorum would have a hard time answering this in debate-- how about each of us?

Hey, that was some 40 posts back, where are those answers?!  Put it another way, either know and be able to articulate a rebuttal to Obamanomics or settle for you, your children and your grandchildren living their lifetimes in the transformed country that Pres. Obama and his Czars and central planners are building for you.  I will go through this drivel point by point, but would rather see the deceptions answered in a coherent and persuasive 60-90 second debate narrative, as Crafty indicated.  The piece contains the central thesis of the reelection, at least the best they can manufacture.
==================
WSJ
By AUSTAN GOOLSBEE

   - FWIW, this is the editorial page publishing an opposing view and these are the slanted underpinnings for a partisan stump speech written by an insider and co-conspirator.  He is highly credentialed but this is not a serious academic economic analysis.

"The Iowa caucuses presented the full range of views of the Republican hopefuls. When it came to fiscal strategy, however, there was almost no daylight among them."

   - FALSE. A view that they are all the same can only come from an opposing partisan setting up a series of straw arguments.  Reminds me of a white guy saying all blacks or Asians look alike.  If the author isn't interested or can't see the differences, then why comment.

"Each candidate decried the rise of government spending and wants to cut taxes."

    - FALSE and its a theme here.  It's the tax RATES that they want to cut, not cut revenues.  A professor of economics at the Univ. of Chicago knows the difference.  Shame on him.

"Again and again they noted that spending under President Obama rose to 25% of the economy in 2009, the highest in decades and well over the 20%-21% norm of the last 30 years." ( - TRUE!)

"To hear the GOP candidates tell it, this fact explains the deficit, explains America's long-run fiscal problem, and explains why new taxes cannot be tolerated. Congressional Republicans have the same outlook. The deficit is up thanks to government spending, so we must cut spending right now in every form."

    - FALSE,  Everyone of them knows that the under-performance of the private economy is the central problem.  Resources taken from the private economy for the public sector are just one of the causes of that under-performance.  Taxes and especially overly burdensome regulations comprise most of the rest.

"Yet the long-run fiscal problem facing the country—which is real—has almost nothing to do with the reasons that the deficit is currently large or that spending is abnormally high. They are high for the same reason taxes are abnormally low: because of the economic downturn. We should debate the real issues, not try to pretend the recession never happened."

    - FALSE!  What Republican is pretending the recession never happened?  Prof. Goolsbee, OTOH, pretends that the economic stagnation is like weather; this recession is like a rain certain to be followed by sunshine just by waiting or doing more of the same.  This recession/stagnation was and is a GOVERNMENT CAUSED DOWNTURN and as a top adviser, former chief economic adviser, he was right there at the table where they failed to identify either the correct cause or solution to the mess.

"The Congressional Budget Office forecast a $1.2 trillion deficit before the Obama administration even came into office."

    - DECEPTIVE to say the least.  Yes the pundits and voters will look at the calendar days of the Obama Occupy the White House movement but everyone who was alive and paying attention knows that domestic power in Washington DC changed hands in the Nov 2006 election.  The CBO forecast he sites is from the Pelosi-Reid-Obama-Hillary-Biden 'non-partisan' CBO scoring the budget passed by the Pelosi-Reid-Obama-Hillary-Biden congress signed by Bush 'before the Obama administration even came into office'.   The downturn was under THEIR watch as well, including SEN. Obama always supporting or voting with the majority, and the emergency measures coming into the 2008 election and during the transition period were made in 100% consultation and agreement with the incoming Obama administration.  Spin that some other way if you would like, but the investors and employers in the economy were wide awake heading into the tax rate increases and the host of new programs and regulations impending beyond their worst nightmare of imagination when the asset selloff began and when the collapse of housing and employment ensued.

"The stimulus added only around $250 billion a year, and more than one-third of that came from tax cuts, especially the tax credit in the stimulus bill's "Making Work Pay" provision."

    - This is 4 years later! "ONLY" a quarter trillion/yr. is a TRILLION in 4 years and it wasn't a stimulus if it didn't stimulate and it doesn't count the QEx, nationalization of autos and host of other excesses.  If you didn't know that then, surely you know that now as the chief outgoing economic adviser.  And not all tax cuts are created equal.  Some stimulate economic activity and others give up revenues without improving incentives whatsoever.  Some are targeted to constituent voting groups and some apply to all, especially those inclined to hire and produce.  Guess which types the Obama administration working the first 2 years with a 100% Dem congress chose??

"Most of the increase in the deficit during a downturn doesn't come from new policies in Washington. The deficit rises because both spending and taxes automatically adjust when the economy struggles. Unemployment insurance payments rise and more people qualify for Medicaid and food stamps. Incomes fall so people pay less taxes."

    - A theoretically truth, but FALSE in this case.  Spending sold as "emergency" and "temporary" in fact became the new benchmark used by same author and the administration and its allies to assail any reduction from emergency levels an act of war against the 99% and the weakest among us in particular.  Proof: After all the budget hysterics and pretend "cuts" of the past year under bitterly divided government, spending was up another 5% for the year.  What part of that spending was emergency?  None of it.  It was the why-waste-a-crisis crowd intentionally transforming American dependency on government.  BTW, we aren't in a recession (and the downturn did come from new government policies).  We are in the new American economy operating exactly as it should be under the disincentives scheme designed by Prof. Goolsbee et al and legislated and signed by the side he is defending.

"It's completely normal that spending rises during big downturns. The government's share of the economy jumped significantly during the big recessions in the 1970s and '80s. As the economy grows back to health, the government share of the economy will fall (and many analysts forecast just that for the coming year)."

    - WHY should the economy grow back to health.  Doing more and more of the same and expecting a different result is WHAT?? (definition of insanity?)

"The same dynamic applies to tax revenues. You would think that—using the same logic they apply to the rise of government spending—the GOP candidates would be trumpeting the last three years as one of the greatest tax cutting periods of the century."

    - BLATANTLY FALSE!!  If anyone would believe this drivel then I would put it with falsely shouting fire in a crowded theater - perhaps not protected speech.  Do they need that level of LIE to run on their record?  Once again, a fully educated economist intentionally confuses tax rates with tax revenues for political deception purposes.  The frontrunners are NOT trying to lower government revenues.  Maybe Ron Paul would lower revenues AND balance the budget, but that blows the Professor's first premise that he (blindly) can't see any daylight between any of them.

"The nonpartisan Tax Policy Center's data predict that in 2011 taxes will have fallen more as a share of national income than during almost any other comparable period in U.S. history (including under Ronald Reagan) and may hit their lowest level since World War II: 14.4% of GDP, compared with the more than 18% average of the last 30 years. Individual income taxes may hit their lowest level as a share of income since 1950 and corporate income taxes the lowest since 1936.

The deficit shot up in basically equal measure from taxes falling and spending rising. Spending rose to 25% of GDP from 20.5% in the recession and soon it will fall back down. Taxes fell to 14.5% of GDP from 18.5% and will also return to more normal levels."

    - Again, he implies a bad economy was happenstance rather than admit it was a government policies caused event.  We avoided large downturns for almost a quarter century by keeping mostly in place the Reagan pro-growth agenda, even with reform in the late 80s, smaller increases under HW Bush and the early Clinton years.  But this economy IS the new normal.  What changed?  He doesn't say here but if pressed I'm sure he would say Bush's fault.

"The true fiscal challenge is 10, 20 and 30 years down the road. An aging population and rising health-care costs mean that spending will rise again and imply a larger size of government than we have ever had but with all the growth coming from entitlements—while projected federal revenues as a percentage of GDP after the rate cuts of the 2000s will likely remain below even historic levels of 18%."

    - FALSE.  The true challenge is get off the slow growth or no-growth trajectory of the current policies and to minimize the amount of debt we accumulate during this wasted 4-8 years of 'transformation' BEFORE the worsening demographics fully set in.

"To hear the Republican candidates, you would think our problems were about discretionary spending running wild."

    - FALSE.  Does anyone remember the sensation of 9-9-9? That was all about unleashing economic growth running wild.  Or Pawlenty's plan highly acclaimed by Prof Taylor of Stanford, or Rick Perry's plan endorsed by Steve Forbes, or Gingrich's plan - all about regenerating economic growth and innovation, or Huntsman's or even Romney's Plan.  The centerpiece of NONE of them is slashing spending or starving seniors, our single most prosperous demographic group.

... Iowa showed us a series of candidates trying to outdo one another with condemnation for the short-term rise in spending while simultaneously proposing tax policies that would add trillions to the long-term deficit.

    - FALSE and when will we truly be rid of the proven false doctrine of static scoring?!?!  Growth at this point in the Reagan recovery was close to 8% and revenues in the 1980s DOUBLED! Good riddance to you and your team.

Mr. Goolsbee, a professor of economics at the University of Chicago's Booth School of Business, was chairman of President Obama's Council of Economic Advisers from 2010 to 2011.

    - Can you imagine investing your family's life savings in sending your kid to one of the top schools in the country and finding out this is the level of analysis being taught?  Did the professor writing about FISCAL challenges really not know that REGULATIONS are a tax on the economy or simply run out of space?  Did he not know or just wish to not say that under his watch 77,000 pages of new regulations were issued?  Did he not know that Obamacare impending is a tax on our economic growth and perhaps the final nail in the coffin of new hiring?  Did he forget to notice the differences between these candidates and his policies prohibited energy development and blocked pipelines that are taxes on our growth?  Did he not know that the perpetual cloud of expiring Bush-Obama tax rate cuts is a huge tax on our economy that yields all the destruction and no new revenues and same for the Harry Reid surcharge proposal on millionaires, the 24 new taxes in  Obamacare: http://www.atr.org/comprehensive-list-tax-hikes-obamacare-a5758.  Republican are proposing plenty of remedies starting with canceling his new programs and reversing most of their new regulations, the question is whether anyone is listening and whether people would really prefer just more of the same policies, but expecting a different result.

My two cents.
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« Reply #545 on: January 08, 2012, 06:44:07 AM »

WSJ
By AUSTAN GOOLSBEE

   - FWIW, this is the editorial page publishing an opposing view and these are the slanted underpinnings for a partisan stump speech written by an insider and co-conspirator.  He is highly credentialed but this is not a serious academic economic analysis.

MARC:  Exactly so.



"Each candidate decried the rise of government spending and wants to cut taxes."

    - FALSE and its a theme here.  It's the tax RATES that they want to cut, not cut revenues.  A professor of economics at the Univ. of Chicago knows the difference.  Shame on him.

MARC:  I agree with the point, but this meme runs deep.   As the rather good Wesbury piece I posted yesterday points out, the payroll tax holiday will not produce much economic effect because it is MARGINAL tax rates that matter.  Under Boener’s leadership in the House, the Reps have already folded on this subject so if we are keeping score, the Reps are poorly positioned at the moment to make Doug’s point.



"Again and again they noted that spending under President Obama rose to 25% of the economy in 2009, the highest in decades and well over the 20%-21% norm of the last 30 years." ( - TRUE!)

"To hear the GOP candidates tell it, this fact explains the deficit, explains America's long-run fiscal problem, and explains why new taxes cannot be tolerated. Congressional Republicans have the same outlook. The deficit is up thanks to government spending, so we must cut spending right now in every form."

    - FALSE,  Everyone of them knows that the under-performance of the private economy is the central problem.  Resources taken from the private economy for the public sector are just one of the causes of that under-performance.  Taxes and especially overly burdensome regulations comprise most of the rest.

"Yet the long-run fiscal problem facing the country—which is real—has almost nothing to do with the reasons that the deficit is currently large or that spending is abnormally high. They are high for the same reason taxes are abnormally low: because of the economic downturn. We should debate the real issues, not try to pretend the recession never happened."

    - FALSE!  What Republican is pretending the recession never happened?  Prof. Goolsbee, OTOH, pretends that the economic stagnation is like weather; this recession is like a rain certain to be followed by sunshine just by waiting or doing more of the same.  This recession/stagnation was and is a GOVERNMENT CAUSED DOWNTURN and as a top adviser, former chief economic adviser, he was right there at the table where they failed to identify either the correct cause or solution to the mess.

MARC:  I suspect that if the Dems were to point out that tax revenues as a % of GDP are several percentage points below usual, even for during a recession, and that much of the deficit is due to this factor and but for this the deficit numbers would be well within normal ranges, the Reps would be sore pressed to give a snappy coherent answer.  With the exception of Ron Paul the Reps have conceded Keynesian logic that some deficit spending is necessary during a recession.

"The Congressional Budget Office forecast a $1.2 trillion deficit before the Obama administration even came into office."

    - DECEPTIVE to say the least.  Yes the pundits and voters will look at the calendar days of the Obama Occupy the White House movement but everyone who was alive and paying attention knows that domestic power in Washington DC changed hands in the Nov 2006 election.  The CBO forecast he sites is from the Pelosi-Reid-Obama-Hillary-Biden 'non-partisan' CBO scoring the budget passed by the Pelosi-Reid-Obama-Hillary-Biden congress signed by Bush 'before the Obama administration even came into office'.   The downturn was under THEIR watch as well, including SEN. Obama always supporting or voting with the majority, and the emergency measures coming into the 2008 election and during the transition period were made in 100% consultation and agreement with the incoming Obama administration. 

MARC:  I’m not sure that this answers the point as perceived by most voters— many/most of them tend to say “Obama inherited a really bad situation.”

“Spin that some other way if you would like, but the investors and employers in the economy were wide awake heading into the tax rate increases and the host of new programs and regulations impending beyond their worst nightmare of imagination when the asset selloff began and when the collapse of housing and employment ensued.

MARC:   THIS is a VITAL point and it is a HUGE failing of the Reps that it is not part of the narrative. 

"The stimulus added only around $250 billion a year, and more than one-third of that came from tax cuts, especially the tax credit in the stimulus bill's "Making Work Pay" provision."

    - This is 4 years later! "ONLY" a quarter trillion/yr. is a TRILLION in 4 years and it wasn't a stimulus if it didn't stimulate and it doesn't count the QEx, nationalization of autos and host of other excesses.  If you didn't know that then, surely you know that now as the chief outgoing economic adviser.  And not all tax cuts are created equal.  Some stimulate economic activity and others give up revenues without improving incentives whatsoever.  Some are targeted to constituent voting groups and some apply to all, especially those inclined to hire and produce.  Guess which types the Obama administration working the first 2 years with a 100% Dem congress chose??

MARC:  Again we see the weakness of participating in non-marginal rate tax cuts and the weakness of Bush and the Reps failing to make his cuts permanent in the name of “fiscal responsibility” thereby conceding the Dem meme that rate cuts equal revenue cuts.   Also, have the Reps effectively put out their number of what Baraq has spent?  NO!!!  Quickly now, can anyone here (and we are all well above average—“No brag, just fact”) give me the total of Baraq’s stimulus spending?

"Most of the increase in the deficit during a downturn doesn't come from new policies in Washington. The deficit rises because both spending and taxes automatically adjust when the economy struggles. Unemployment insurance payments rise and more people qualify for Medicaid and food stamps. Incomes fall so people pay less taxes."

    - A theoretically truth, but FALSE in this case.  Spending sold as "emergency" and "temporary" in fact became the new benchmark used by same author and the administration and its allies to assail any reduction from emergency levels an act of war against the 99% and the weakest among us in particular.  Proof: After all the budget hysterics and pretend "cuts" of the past year under bitterly divided government, spending was up another 5% for the year.  What part of that spending was emergency?  None of it.  It was the why-waste-a-crisis crowd intentionally transforming American dependency on government.  BTW, we aren't in a recession (and the downturn did come from new government policies).  We are in the new American economy operating exactly as it should be under the disincentives scheme designed by Prof. Goolsbee et al and legislated and signed by the side he is defending.

MARC:  Again we see the evil Orwellian effects of baseline budgeting in clouding clear thinking!!!  Until the Reps (and  the Tea Party too!!!) find a way to get this point across, I fear we are doomed.  That said, the challenge of crisply answering Goolsbee’s Keynesian logic here remains.

"It's completely normal that spending rises during big downturns. The government's share of the economy jumped significantly during the big recessions in the 1970s and '80s. As the economy grows back to health, the government share of the economy will fall (and many analysts forecast just that for the coming year)."

    - WHY should the economy grow back to health.  Doing more and more of the same and expecting a different result is WHAT?? (definition of insanity?)

MARC:  The argument Baraq will make is that things were really bad so they’re taking longer than usual to turn around but now we are, as Doug notes, out of recession and things are headed in the right direction, albeit slower than we would like.   How do we crisply answer this in a fifty words or less sound bite?

"The same dynamic applies to tax revenues. You would think that—using the same logic they apply to the rise of government spending—the GOP candidates would be trumpeting the last three years as one of the greatest tax cutting periods of the century."

    - BLATANTLY FALSE!!  If anyone would believe this drivel then I would put it with falsely shouting fire in a crowded theater - perhaps not protected speech.  Do they need that level of LIE to run on their record?  Once again, a fully educated economist intentionally confuses tax rates with tax revenues for political deception purposes.  The frontrunners are NOT trying to lower government revenues.  Maybe Ron Paul would lower revenues AND balance the budget, but that blows the Professor's first premise that he (blindly) can't see any daylight between any of them.

"The nonpartisan Tax Policy Center's data predict that in 2011 taxes will have fallen more as a share of national income than during almost any other comparable period in U.S. history (including under Ronald Reagan) and may hit their lowest level since World War II: 14.4% of GDP, compared with the more than 18% average of the last 30 years. Individual income taxes may hit their lowest level as a share of income since 1950 and corporate income taxes the lowest since 1936.

The deficit shot up in basically equal measure from taxes falling and spending rising. Spending rose to 25% of GDP from 20.5% in the recession and soon it will fall back down. Taxes fell to 14.5% of GDP from 18.5% and will also return to more normal levels."

    - Again, he implies a bad economy was happenstance rather than admit it was a government policies caused event.  We avoided large downturns for almost a quarter century by keeping mostly in place the Reagan pro-growth agenda, even with reform in the late 80s, smaller increases under HW Bush and the early Clinton years.  But this economy IS the new normal.  What changed?  He doesn't say here but if pressed I'm sure he would say Bush's fault.

MARC:  Here Goolsbee makes the assertion that concerns me the most.  Revenues as a % of GDP in fact ARE down a lot, far more than usual in a recession if I am not mistaken.  Superficially it will sound plausible for Obama to say in a debate?  What is our sound bit answer to this???

"The true fiscal challenge is 10, 20 and 30 years down the road. An aging population and rising health-care costs mean that spending will rise again and imply a larger size of government than we have ever had but with all the growth coming from entitlements—while projected federal revenues as a percentage of GDP after the rate cuts of the 2000s will likely remain below even historic levels of 18%."

    - FALSE.  The true challenge is get off the slow growth or no-growth trajectory of the current policies and to minimize the amount of debt we accumulate during this wasted 4-8 years of 'transformation' BEFORE the worsening demographics fully set in.

MARC:  With the exception of the final clause this is quite TRUE.  Entitlements and Rising Health Care costs ARE the true challenge-- and the fact of it is that the Reps have avoided talking about how to bring down entitlement spending.  Quick, someone name me Rep proposals other than that by Paul Ryan or the joint plan by Ryan and Dem ____ (about which I have posted here).   Why are none of the candidates, including my man Newt, using the Ryan plan as a talking point?

"To hear the Republican candidates, you would think our problems were about discretionary spending running wild."

    - FALSE.  Does anyone remember the sensation of 9-9-9? That was all about unleashing economic growth running wild.  Or Pawlenty's plan highly acclaimed by Prof Taylor of Stanford, or Rick Perry's plan endorsed by Steve Forbes, or Gingrich's plan - all about regenerating economic growth and innovation, or Huntsman's or even Romney's Plan.  The centerpiece of NONE of them is slashing spending or starving seniors, our single most prosperous demographic group.

... Iowa showed us a series of candidates trying to outdo one another with condemnation for the short-term rise in spending while simultaneously proposing tax policies that would add trillions to the long-term deficit.

    - FALSE and when will we truly be rid of the proven false doctrine of static scoring?!?!  Growth at this point in the Reagan recovery was close to 8% and revenues in the 1980s DOUBLED! Good riddance to you and your team.

MARC:  The key word in Goolsbee’s assertion here is “discretionary” and he is right, the Reps are, as I asserted a moment ago, talking as if discretionary spending is the issue—with Ron Paul being the exception.  Only he is talking about eliminating entire departments.  Perry can’t even remember his three, and Romney and Newt want to keep the Dept. of Education and others of that ilk.

Mr. Goolsbee, a professor of economics at the University of Chicago's Booth School of Business, was chairman of President Obama's Council of Economic Advisers from 2010 to 2011.

    - Can you imagine investing your family's life savings in sending your kid to one of the top schools in the country and finding out this is the level of analysis being taught?  Did the professor writing about FISCAL challenges really not know that REGULATIONS are a tax on the economy or simply run out of space?  Did he not know or just wish to not say that under his watch 77,000 pages of new regulations were issued?  Did he not know that Obamacare impending is a tax on our economic growth and perhaps the final nail in the coffin of new hiring?  Did he forget to notice the differences between these candidates and his policies prohibited energy development and blocked pipelines that are taxes on our growth?  Did he not know that the perpetual cloud of expiring Bush-Obama tax rate cuts is a huge tax on our economy that yields all the destruction and no new revenues and same for the Harry Reid surcharge proposal on millionaires, the 24 new taxes in  Obamacare: http://www.atr.org/comprehensive-list-tax-hikes-obamacare-a5758.  Republican are proposing plenty of remedies starting with canceling his new programs and reversing most of their new regulations, the question is whether anyone is listening and whether people would really prefer just more of the same policies, but expecting a different result.

MARC:  Are we happy with how the Rep candidates are communicating this message?
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DougMacG
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« Reply #546 on: January 08, 2012, 12:39:57 PM »

Crafty thanks for great additions to that.  Going back a step, if Republicans let Obama and the Goolsbee types frame the debate, Republicans lose.   We need real answers to their straw arguments but this will be decided by something much simpler: the right direction/wrong direction question.  Is the progress expected by Nov 2012 (unemployment 7.9%?) good enough to reelect on?  And what do swing voters think of the Republican alternative?

Starting at the end, "Are we happy with how the Rep candidates are communicating this message?"

   - Obviously not.  But this is unfortunately a time of candidates bickering amongst themselves.  This part could be over very quickly, hopefully followed by many months of a more singular and coherent argument against the direction of the current administration.

Taking one key passage leading to where Crafty wrote "THIS is a VITAL point and it is a HUGE failing of the Reps that it is not part of the narrative":

[I contended this mess goes back to Nov 2006 and Pelosi-Reid-Obama taking over congress]

MARC:  I’m not sure that this answers the point as perceived by most voters— many/most of them tend to say “Obama inherited a really bad situation.”

(Doug)“...investors and employers in the economy were wide awake heading into the tax rate increases and the host of new programs and regulations impending beyond their worst nightmare of imagination when the asset selloff began and when the collapse of housing and employment ensued.

MARC:   THIS is a VITAL point and it is a HUGE failing of the Reps that it is not part of the narrative. 
----

Yes.  Republicans need to attack on what caused our current mess, even where that means taking responsibility, because it is tied to what solves it.

I have called it '6 years since 2006'.  Not just the Presidency but those Senate seats are up.  Obama entered the majority Jan. 2007, was a rock star by that time, and voted yes on everything he showed up for in the agenda tied to the collapse.  If he gets a free pass for his role in the 2 years preceding the Oval Office, then no one has learned anything about what went wrong so why would we expect to win their vote now.  One person who should know about the change of power in Nov. 2006 is former Sen. Rick Santorum who lost very badly that year in a key swing state.  He should take responsibility for his part in what led to the Republican defeat and power shift, then he should be all over what happened to this country aftger his opponents won and took power.  Not that all that is wrong started then, but what they didn't reform before the collapse they still haven't reformed now - this many years later - and won't fix in the next 4 years either.  Out they go!

None of the Obama/Goolsbee wild goose chase straw distractions justify the Democrats obsession with raising taxes on job creators (from 36% to 39.6% plus the Buffet-Reid surcharge, plus a 15.3% payroll tax removing the ceiling, the estate tax against wealth, and the 24 new taxes in Obamacare) when we are only collecting 14.4% taxes on income in the current setup.  The marginal rate of disincentive to produce, hire and grow doesn't need to surpass 50% when the goal is only to get back to collecting 18% of GDP in federal revenues.  We ought to be able to do that with a top rate in the mid-20s and end the counter productive class envy and class warfare mindset.  It's been 6 years of attacking ourselves and it didn't work.

Instead:

1) Open up the energy production by widely approving projects that use state of the art, clean processes only - not dirtier air and dirtier water.

2) Close down the excesses in regulations especially in hiring and employment regulations.  This does not mean return to the dark ages or slave labor. 

3) Phase out federal spending on failed programs and things the federal government has no business doing in the first place.  Get entitlements in line with our ability to pay.

4) Get tax RATES on individuals, business owners and corporations down to what is efficient and competitive in a 21st century global marketplace.  Cut out the crap.  Lower the rates.  Even Goolsbee admits it, revenues only come back with economic growth and the deficit will never close with spending cuts alone.

It isn't rocket science.
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Crafty_Dog
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« Reply #547 on: January 10, 2012, 09:49:18 AM »

These columns have defended the independence of the Federal Reserve from attacks on the right and left, but after last week the central bank is on its own. It's impossible to defend the Fed's rank electioneering as it lobbies for more political and taxpayer intervention in the housing market—just in time for the election campaign.

This extraordinary political intrusion came in the form of a 26-page paper that the Fed sent to Capitol Hill last Wednesday, without invitation, graciously offering what Chairman Ben Bernanke called a "framework" for "thinking about certain issues and tradeoffs." He was underselling his document. The paper is a clear attempt to provide intellectual cover for politicians to spend more taxpayer money to support housing prices.

In case there was any doubt on this point, New York Fed President William Dudley put them to rest Friday when he called specifically for bridge loans for jobless borrowers, more government-assisted refinancings, a new program for principal reductions for underwater borrowers, and floated the possibility of getting Fannie Mae and Freddie Mac into the rental housing business. Your average HUD secretary wouldn't dare go this far.

As America's central bank, the Fed is responsible for monetary policy and bank regulation. During and since the financial panic, and in the name of preventing a meltdown, the Fed has bought mortgage-backed securities to provide liquidity for housing and keep down mortgage rates. This is a form of credit allocation and should be winding down, though it is at least arguably within the emergency purview of monetary policy.

It is a far different matter to tell Congress and the executive branch that they ought to rescue homeowners who borrowed more than they can afford to repay, or strong-arm banks to loosen credit standards for borrowers, or further entrench government-sponsored enterprises (Fan and Fred) that have already cost taxpayers $142 billion in losses. These are core political questions that belong to elected officials.

Enlarge Image

CloseAssociated Press
 
Federal Reserve Chairman Ben Bernanke and New York Fed President William Dudley.
.The intrusion is especially ill-timed because it looks like an attempt to further isolate Edward DeMarco, Fannie and Freddie's politically beleaguered regulator. House Republicans have closed off another housing bailout from Congress, so Administration officials and Capitol Hill Democrats are desperate to unleash Fannie and Freddie to spend even more to rescue underwater homeowners.

Their main obstacle is Mr. DeMarco, who has bent a little to accommodate the Treasury's expanded refinancing program but rightly says he has a legal mandate to protect taxpayers. The Fed white paper acknowledges that committing more taxpayer money to its housing brainstorms could stick Fan and Fred with more losses, but it suggests this is worth promoting a faster housing recovery. How about we put that gamble to a taxpayer vote? In any event, it's disgraceful for the Fed to contribute to the mau-mauing of a fellow regulator.

The advice to let Fan and Fred rent out foreclosed properties they own until prices rise also goes against the lesson of previous housing recoveries. Prices recover faster—recall the Resolution Trust Corp. after the savings and loan bust—when the government sells property as quickly as possible, so prices can find a bottom. The last thing housing markets need is an extended Fannie and Freddie inventory overhang.

The Fed also suggests having Fan and Fred weaken their standards for loan modifications and expand an existing refinancing program to include private-insurance-backed mortgages participate. But weak lending standards is part of what created the subprime mortgage mess. No wonder the mortgage bankers, the homebuilders and the rest of the housing lobby greeted the Fed's white paper with enthusiasm. They'd love to see Fannie and Freddie more politically and economically entrenched so reformers can't slowly reduce their market dominance.

The Fed will no doubt justify all of this by claiming that the larger economy can't recover until housing does. Yet this confuses cause and effect. Housing recoveries don't lead economic recoveries; they occur as part of the larger recovery as incomes begin to rise and consumer confidence grows. It's precisely this "housing must save the day" mentality that caused the Fed to keep interest rates too low for too long after the dot-com bust and 9/11. This promoted the housing bubble and led to the mania and crash. By force-feeding a housing recovery, the Fed is misallocating resources that will make the expansion less durable.

The Fed's economic timing is especially curious given Friday's encouraging jobs report for December. Manufacturing is expanding and the economy is showing signs that the modest expansion may be self-sustaining. Aside from a European meltdown and a 2013 tax increase, the main threat to this growth is if Washington maintains its habit of willy-nilly intervention in housing, health care, energy and everything else.

We recently attempted to add up the number of housing-support programs that the federal government has implemented since prices began to fall five years ago. We counted 16. Maybe Washington should do nothing for a change, let foreclosures take their natural course, allow the surplus supply of houses to clear, and see if that works. It can't do any worse.

Beyond the policy errors, the larger issue is the political independence of the Fed itself. Its Board of Governors is now dominated by Obama appointees who share the interventionist designs of their colleagues in the White House. Mr. Dudley is a White House and Treasury man. Mr. Bernanke may feel surrounded, but we'd have thought he'd have more respect for the integrity of his institution.
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ccp
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« Reply #548 on: January 12, 2012, 06:01:42 PM »

I notice we the tax payers paid for this abuse of power by the obama administration through the outdated and past its time equal employment opportunity commission.

So I just happen to look up the website and I see this mafia like government organization basically extorting money out of Pepsi - why because they do background checks on job applicants and a disproportionate number of Blacks come up with positive criminal records.  So they are fined 13 million.   Where is the outrage from the MSM?   So now an employer cannot do background criminal checks and act upon their findings at their discretion?  I guess so if your the bama/holder mob:

http://www.eeoc.gov/eeoc/newsroom/release/1-11-12a.cfm
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Crafty_Dog
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« Reply #549 on: January 12, 2012, 09:48:10 PM »

The Orwellian fascism of it all boggles the mind  cry cry angry
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