Reuters blog archive
from The Great Debate:
When it comes to addressing our growing national debt, there is no shortage of disagreement between the political parties in Washington. But there is one thing they should both agree on: to tell the truth about our nation’s growing fiscal imbalance.
That’s hardly the case today. Fiscal reporting by the federal government -- whether through the Congressional Budget Office or the Office of Management and Budget -- vastly underestimates the size of the problem we face and the inter-generational consequences of remaining on our current path.
For example, trillions of dollars in unfunded promises to current and future retirees through programs like Social Security and Medicare are not captured in either the reporting of this year’s deficit or our total national debt. In addition, cost projections on pending legislation only look 10 years into the future -- hardly far enough to gauge their long-term budgetary impact.
As a result, the real financial burdens being placed on young people and future generations are not adequately disclosed and action to fix this problem is being delayed.
from The Great Debate:
Sequestration grew out of a political impasse: Republicans refused to raise the government’s borrowing limit in 2011 without starting to bring spending under control, but Democrats refused to make choices about where to cut spending.
So the president devised sequestration, on the theory that cutting spending in such a painful and dumb way would force Republicans to raise taxes. Spending on entitlement programs like Social Security and Medicare was mostly spared, but other programs, particularly defense, got across-the-board cuts.
from The Great Debate:
Though the president’s budget falls short in several important ways, it demonstrates his willingness to compromise — something most Democratic and Republican legislators have resisted. Now comes the critical stage in any real effort to achieve a “grand bargain,” when the president can show true leadership by bridging the divide between the parties and using the bully pulpit to address the American people in a constructive fashion that can lead to a deal.
Everyone in Washington is fighting over tax cuts, spending limits and the debt ceiling. But the real problem is the fat in all levels of government spending that must be slimmed down. A quick media survey uncovers poorly monitored and misspent government funds at every level of the system.
One of the most commonly reported spending issues is welfare fraud. When Massachusetts was sued to reach more citizens on welfare to get them registered to vote, 19,000 of the welfare recipients were not living at their listed addresses. The state, like most states, distributes welfare benefits electronically so that the benefits can be retrieved anywhere. If all these welfare recipients were illegally receiving support, that would be at least $138 million annually that Massachusetts has overspent. The Boston Herald had the story:
Regardless of the outcome of the negotiations between President Obama and Congress, the government’s budget is seriously out of balance. Here is a fiscal picture for the federal government from February in a simple form:
* U.S. Tax revenue: $2,170,000,000,000
* Fed budget: $3,820,000,000,000
* New debt: $1,650,000,000,000
* National debt: $14,271,000,000,000
* Recent budget cuts: $38,500,000,000
Let's remove eight zeros from these figures and pretend it's a household budget:
The term ‘fiscal cliff’ has now safely transitioned from economic jargon to popular cliché. But how worried should Americans be about the growth-stunting mélange of expiring tax cuts and spending reductions set to begin kicking in at the start of next year?
Economists widely believe that if Congress fails to come to some sort of agreement on the budget, the U.S. economy would plunge into a deep recession. RBS economist Michelle Girard, however, thinks a recent pick up in U.S. economic activity could offset some of the cliff-related weakness.
The battle over the amount and nature of government spending is the focus of the current U.S.presidential campaign and is unlikely to go away even after the November election is well in the rear view mirror.
In such a setting, a paper presented by economist Albert M. Wojnilower at the October 1983 Bald Peak Conference sponsored by the Federal Reserve Bank of Boston, sounds as timely today as it did then. Wojnilower, then chief economist at First Boston, prepared his "Don't Blame the Deficit" talk as a commentary on "Implications of the Government Deficit for U.S. Capital Formation," a paper by Benjamin M. Friedman, a professor of political economy at Harvard.
from The Great Debate:
By Keith Hennessey
The opinions expressed are his own.
I cover three topics in this post: what important players won in this deal, the core concepts and tradeoffs within the deal, and what the different strategies might be this Fall under this bill when it becomes law. The President’s priorities
The President knows he will get debt limit increases through early 2013 no matter what House conservatives/Tea Party members do. Those Members can no longer “hold a debt limit increase hostage” before the 2012 election.
from Financial Regulatory Forum:
By Brett Wolf
ST. LOUIS, March 11 (Complinet) - A looming cut to the federal financial crime agency's budget could cripple state and local investigations that depend on transactions monitored via the anti-money laundering Bank Secrecy Act, worried authorities said.
In a surprise move, the Treasury Department's Financial Crimes Enforcement Network (FinCEN) has decided to save nearly $1.4 million by doing away with positions that facilitate state and local law enforcers' access to the coveted data, often used in fighting drug trafficking, fraud and terrorism finance.
from The Great Debate UK:
The news that China is engaged in talks over the building of a rival to the Panama Canal ought to set alarm bells ringing in Washington – and not just because of its obvious geopolitical implications. It is yet another sign that the Chinese have finally woken up to the fact that relending their hoard of dollars straight back to the USA is not a very smart policy, at least not as long as the Federal Government carries on spraying out greenbacks like a tipsy GI on furlough, and without Chinese support, the outlook for the Treasury bond market looks threatening.
Those who argue that it is a bad time for imposing austerity should be ignored – in the good times there was no sense of urgency, and in any case deficit reduction has to be a multiyear project. The Federal deficit is running at over 10 percent of GDP and the projections for the coming decade on unchanged policies are too frightening to contemplate.