Counterparties: A surplus of cuts
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President Obamaâ€™s 2014 budget was released yesterday; Wonkblog has a concise rundown of its winners and losers. The plan aims to cut $1.8 trillion in spending while raising $580 billion in revenue over ten years. To the considerable dismay of liberals, it includes cuts to Medicare and a reduction in Social Security cost-of-living increases.
Despite these cuts, Annie Lowrey writes that the Presidentâ€™s budget zeroes in on the twin problems of inequality and wage stagnation by increasing the federal minimum wage, instituting free preschool, and making the five-year extension of the earned income tax credit permanent. Sam Stein and Ryan Grim, however, see a budget full of old stimulus ideas that likely wonâ€™t pass.
The deficit is already shrinking rapidly. Bill McBride points to a Goldman Sachs research report estimating that in the first three months of 2013, the federal deficit was 4.5% of GDP — less than half its 2009 level. Dan Gross thinks that even though current policy is â€śnobodyâ€™s idea of optimalâ€ť, we are experiencing a â€śgolden age of deficit reductionâ€ť.
The budget also includes several major changes to the tax code, including the often discussed â€śBuffett Taxâ€ť, which would impose a 30% minimum tax on household income over $1 million. Private equity managers wonâ€™t be pleased either: the budget would kill the â€ścarried interestâ€ť tax break. John Carney says this is futile; Dan Primack has a good rebuttal.
Simon Johnson isnâ€™t pleased. He sees a president who â€śhas allowed the debate to become dominated by excessive paranoia about deficits and by extremist demands to shrink governmentâ€ť. As Derek Thompson writes, the President is proposing between $200 billion and $380 billion more in Social Security and Medicare cuts than Republicans are asking for. Jonathan Chait thinks the reason Obama is proposing these cuts has everything to do with politics: the president wants to beat Republicans to the punch on spending cuts and deficit reduction. â€“ Ben Walsh
On to todayâ€™s links:
The latest hot trade on Wall Street: swaps that lower banks’ capital requirements â€“ Susanne Craig
Regulators are starting to fight back against “needless corporate complexity” in the banking sector â€“ WSJ
And, of course, there are many more links at Counterparties.