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from Breakingviews:

U.S. deficit dynamic duo remain uncontested champs

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By Daniel Indiviglio
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Alan Simpson and Erskine Bowles remain the uncontested champions in crafting compromise in Washington. The original bipartisan plan to rein in America’s fiscal deficit which the dynamic duo spearheaded in 2010 became part of the vernacular - though was rejected by policymakers. Now they have come up with a revised $2.4 trillion compromise. Like the original, it contains plenty of items not to love. Yet balanced alternatives to restrain the national debt remain elusive.

Their latest attempt to save the economy would raise $600 billion over the next 10 years through tax reform. Reducing the costs associated with Medicare, the federal healthcare program for the elderly, would account for a similar amount in savings. And the final $1.2 trillion would consist of more spending reductions and fee revenue. That’s more comprehensive than anything the two political parties have put forward.

The Simpson-Bowles target is lower than the original $4 trillion sought. That’s because this latest iteration takes into account some of the other budget measures that Washington has put in place. But unlike their previous proposal which would merely have stabilized the debt-to-GDP ratio, this one would bring it from 73 percent to below 70 percent by 2023.

from The Great Debate:

Obama must surprise in State of the Union

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President Barack Obama stirred with an unexpectedly powerful inaugural address – a second effort that far surpassed his first. He summoned great themes of American history to argue cogently for his second-term agenda. Now he has a chance to deliver a State of the Union address that improves on those of his first term, too.

The key to success? Presidents still have the power of surprise. Franklin D. Roosevelt once said, “I am like a cat. I make a quick stroke, and then I relax.” As in his inaugural, Obama should surprise us – this time with new policies and sharp specificity. On the budget, democracy reform and immigration, the president stands well positioned.

from The Great Debate UK:

Fiscal cliff deal is depressingly European

--Laurence Copeland is a professor of finance at Cardiff University Business School. The opinions expressed are his own.--

The deal to break the deadlock in the US looks awful, far worse than going over the cliff, which I suspect would have been a lot less damaging than is usually assumed.

from The Great Debate:

The fight for a grand bargain

The Gang of Eight: (Top Row, L to R) Senator Mark Warner (D-Va.), Senator Saxby Chambliss (R-Ga.), Senator Tom Coburn (R-Okla.) Senator Kent Conrad (D-N.D.) (Second Row, L to R)) Senator Mike Johanns (R-Neb.), Senator Mike Crapo (R-Idaho), Senator Dick Durbin (D-Ill.), Senator Michael Bennet (D-Colo.)  REUTERS/File

There is growing momentum in Washington and around the country in the fight to restore fiscal sanity. So get ready for the counter-attack by the special interests and ideologues.

from MuniLand:

Is the U.S. growing, or just issuing debt?

The collective output of the U.S. has increased modestly in the most recent quarter, as Reuters reports:

Gross domestic product expanded at a 2 percent annual rate, the Commerce Department said on Friday in its first estimate of the third quarter, a pick up from the second quarter's 1.3 percent pace.

from Breakingviews:

Uncle Sam still living well beyond his means

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By Martin Hutchinson
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Uncle Sam just can’t seem to stop living beyond his means. While U.S. consumer credit failed to match its June 2008 peak, outstanding debt of domestic U.S. non-financial sectors still stands at nearly 250 percent of GDP, against 232 percent just before the financial crisis hit. While the consumer has deleveraged a bit, business debt is flat and government borrowing has soared. At some point, this just has to end. 

Economists Carmen Reinhart and Kenneth Rogoff demonstrated that recessions preceded by a financial crash can be exceptionally deep and long, because of the reduction of debt that needs to occur before normal growth returns. Since 2008, with unprecedented levels of fiscal and monetary stimulus, no net U.S. deleveraging has occurred; rather the liabilities of non-financial sectors have grown faster than GDP. While households have cut back (partly through defaulting on mortgages and credit cards) from 97 percent of GDP to 83 percent, business debt kept pace with GDP and the government’s balance sheet has soared from 57 percent of GDP to 89 percent. 

from Tales from the Trail:

U.S. religious leaders urge moral solution to debt talks

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Don’t balance the U.S. budget on the backs of the poor and sick, religious leaders said, suggesting that their churches’ charity work is already overstretched and social havoc could result if the government’s social safety net is abandoned.

Representatives from Protestant, Jewish, Muslim and interfaith groups and churches expressed their collective disappointment with the tone of blame in the debt debate between President Obama and congressional negotiators.

from Tales from the Trail:

Is Rand Paul a U.S. Senate action hero?

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RTR9KH6_Comp-150x150It didn't take Rand Paul long to become Captain America of the U.S. Senate. He's tough-minded, strong-willed and he's ready to battle the most dangerous titans on the political landscape, like Social Security and Medicare.

In fact, the Republican Tea Party favorite from Kentucky tells MSNBC's "Morning Joe" that a courageous and comprehensive plan for fixing America's public finances will soon be on the march. And if all goes as planned, much may be accomplished before the start of this year's Major League Baseball season.

from Tales from the Trail:

Peterson Foundation launches OweNo campaign on U.S. debt

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While the ads are humorous, the subject is serious.

Fictional presidential candidate Hugh Jidette (pronounced huge debt) will soon be making a pitch for more U.S. debt held by foreign countries in television ads that willCALIFORNIA-PROTESTS/ be appearing across the country.

The tongue-in-cheek spots are actually trying to drive home to the American public the consequences of failing to tackle huge debt increases facing the United States if lawmakers fail to balance the annual budget and continue to run deficits.

from The Great Debate UK:

What to do about the City’s “Lazy Funds”

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BRITAIN/By Andrew Kakabadse

--Andrew Kakabadse (www.kakabadse.com) is Professor of  International Management Development at Cranfield School of Management. The opinions expressed are his own.--

Over the last 18 months I have interviewed a number of high-level city executives, including chairmen and CEOs, for a research paper to be published in the Journal of Strategic Review early next year. What was surprising was the general consensus that there is £450 billion in ‘Lazy Funds’ waiting to be invested in the City. That is more than twice the upper estimates of national debt. This enormous figure is not being invested because managers cannot see clear opportunities for realising gains.

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