Tales from the Trail

Bejeebers! A scary fiscal outlook and Tea Party politics

Tackling huge budget deficits and growing debt is essential for the United States to avoid a financial market crisis that would push interest rates higher and severely damage the U.S. economy, many economists have warned.

Compromise and statesmanship will be needed to cut spending and raise revenues to narrow the budget gap, and that might not be possible inUSA-ELECTIONS/TEAPARTY the current political environment, says at least one experienced budget expert.

“We’re certainly going to have a more fiscally conservative Congress next year,” Rudolph Penner, a former Congressional Budget Office director told a U.S. Chamber of Commerce forum.  “The Tea Party, if nothing else, has certainly moved both the Republicans and Democratic Party to the right.”

However, that may not translate into a deficit-reducing budget deal that can pass the House of Representatives and the Senate and then get signed by President Barack Obama, he said.

“A real problem here is that the Tea Party is going to scare the bejeebers out of any Republican that is talking about compromise for fear of what will happen in the next primary,” Penner said. “There is no way we’re going to get out of this problem without a compromise between the two parties.”

A Social Security reality check for deficit hawks

President Barack Obama’s fiscal commission is expected to recommend changes to Social Security to help reduce the deficit when it issues its report in early December.FRANCE-PENSIONS/ But protests in France over pension reforms there could serve as a reality check to U. S. deficit hawks who want to raise the U.S. retirement age  and make other benefit changes to the popular  retirement plan.

While they may not go on strike or take to the streets in protest — like is happening in France over a plan to raise the retirement age from 60 to 62  –  older Americans are more likely to show up at the voting booth in November than other groups.

A new survey by the influential AARP, which advocates for older Americans and has 35 million readers for its magazine, shows that lawmakers who embrace deficit reduction  proposals that include cuts for Social Security may do so at their own peril.

Simpson gets delivery from NOW

High drama at President Barack Obama’s deficit commission meeting.

Members of the bipartisan panel were about to settle in at the Senate Budget CommitUSA/tee hearing room to discuss the weighty issues of performance objectives and the merit of one-year vs. two-year budgeting, when the unscheduled happened.

National Organization of Women President Terry O’Neill swooped in with a delivery and proceeded to lecture commission Republican co-chairman Alan Simpson.

“Stop using the deficit as an excuse to cut Social Security,” she said. “The real message we have is don’t throw people out of the middle class by undermining Social Security.”

Republican YouCut seeks to shear Mohair from budget

It’s worth about $1 million a year.

For most people that’s a lot of money. But in the context of a $3.7 trillion federal budget and a $1.5 trillion deficit, it’s small potatoes. Except in this case it’s a federal subsidy for mohair and it has more lives than an Angora cat.

Federal subsidies for mohair, which is produced from the hair of Angora goats, began in 1947 because the military was worried that there was not enough domestic wool production to supply its need for uniforms.

The development of synthetic fabrics has long made that concern irrelevant, yet apparently the government still writes checks to mohair producers despite repeated attempts by some lawmakers over the last two decades to get rid of it.

Obama reminds Americans he inherited the high deficit from Republicans

OBAMA

Lest there be any doubt, President Barack Obama, a Democrat, blames Republicans for leaving him a huge deficit when he took office.

Heard that before? Many times, probably. The president, who is under pressure for spending associated with the $787 billion stimulus package, bank bailouts and car company rescues, introduced his budget on Monday with another reminder of what he faced when he came into office.

“The fact is, 10 years ago, we had a budget surplus of more than $200 billion, with projected surpluses stretching out toward the horizon,” Obama said.

Republican sees Democrats passing healthcare overhaul

Sarah Palin says on her Facebook page that the healthcare overhaul passed by the U.S. House of Representatives last week should be “Dead on Arrival” in the U.S. Senate. 

The House-passed bill, which includes a new government health insurance plan, may not be what the mooseSenate passes. But the far-reaching healthcare reform backed by President Barack Obama is far from dead. At least one influential Republican senator believes Congress will enact sweeping legislation.

“I think a bill is going to pass,” said New Hampshire Republican Senator Judd Gregg. In an interview with C-Span’s “Newsmakers” that will air on Sunday, Gregg said Obama has invested too much political capital in his top domestic priority to allow it to fail. Gregg once considered joining the Obama administration, but now has become a major critic of Obama’s proposed healthcare reform and its impact on the country’s mounting debt.

Obama lets the budget ax fall — but gently

President Barack Obama has been threatening to crack down on government spending and on Thursday he let the budget ax fall — but gently.
 
He unveiled $17 billion in cuts as part of his administration’s budget for the 2010 fiscal year.
 
OBAMA/BUDGET“We can no longer afford to spend as if deficits don’t matter and waste is not our problem. We can no longer afford to leave the hard choices for the next budget, the next administration — or the next generation,” Obama said.
 
$17 billion.
 
That would be about one half of one percent of his $3.55 trillion budget.
 
Nearly 1.5 percent of the projected 2010 deficit.
 
And about $1 billion less than what President George W. Bush proposed to cut from the previous year’s budget.
 
By comparison, the American family with a median income of about $51,000 a year looking at a 0.5 percent budget cut would need to trim $255.

Asked to explain the discrepancy between the president’s tough words and his meager cuts, White House spokesman Robert Gibbs said the administration was only just beginning to go through the budget line by line to eliminate waste.
 
“Our budget will bring non-defense discretionary spending to the lowest level as a share of our GDP since we began keeping records in 1962,” he said. “We’ll cut the budget deficit in half in four years and put ourselves — put this country — back on a path toward fiscal sustainability.”
 
The White House then sent round a release from Senator Tom Coburn praising the cuts. Coburn is a notorious Republican budget hawk — and Obama friend — who has repeatedly bottled up legislation in the Senate complaining about its cost.
 OBAMA/BUDGET
Other Republicans were less charitable.
 
Senate Republican Leader Mitch McConnell called them “modest spending reductions totaling a fraction of a percent of the trillions his budget would add to the debt.”
 
So what are the president’s budget-cutters planning to chop?
 
The educational attache to UNESCO in Paris. Gone. (Let ‘em use teleconferencing, Obama says.)
 
Fixing up the nuclear accelerator building at Los Alamos. Forget about it — the research they do is important for Obama’s energy independence plans, but they can live in the building as it is.
 
The super-duper helicopter that would replace the president’s current fleet — chopped back by about 90 percent.
 
And more.

So what do you think — are the cuts just token? Or has Obama made a real start toward getting a handle on federal spending?
 
For more Reuters political news, click here.

Think the U.S. deficit is bad? Check out the interest payments

US TREASURY PAULSONFor those who are worried about the $1.75 trillion deficit that President Barack Obama projected the government would run in fiscal 2009, wait until you see what the interest on the growing U.S. debt will be.

The U.S. debt is roughly $10.6 trillion and the government spent $253 billion servicing it last year. With the mounting yearly deficits, that cost is skyrocketing.

During the debate over the $787 billion economic stimulus plan aimed at pulling the U.S. economy out of its downward spiral, Republicans argued that the cost was really over $1.1 trillion because of the cost to service the additional debt.

Presidential advisers debate candidate tax proposals

barry.jpgjohnm.jpg NEW YORK  – As presidential contenders John McCain and Barack Obama sparred over competing tax proposals on Tuesday, their top economic advisers debated similar issues of  what changes in fiscal policy will help boost the U. S. economy.

Taxes took center stage as Doug Holtz-Eakin, senior policy adviser to McCain, and Dan Tarullo, economic adviser to Obama, compared their candidates’ platforms at a Deals & DealMakers executive conference sponsored by The Wall Street Journal.

Their remarks came as their respective Republican and Democrat presidential candidates staked out starkly opposing stances on taxes, with McCain promising corporate tax breaks and Obama pledging tax increases for many.