Spending Daily | December 10, 2012
Bankrupting America Launches Deficit Reduction Plan Resource Center
Can’t remember the details of all those deficit reduction plans being proposed by various organizations and members of Congress? Bankrupting America has the solution. Bankrupting America, a project of Public Notice, today launched the Deficit Reduction Plan Resource Center, a one-stop shop for anyone looking to compare and analyze the competing deficit reduction proposals offered to avert the fiscal cliff.
“Track Wasteful Spending? There’s an App for That”
Breitbart reports, “A new iPhone app released Thursday by fiscal conservative group Public Notice aims to put wasteful spending in the spotlight, just as debate surrounding the fiscal cliff heats up. According to a release, the app ‘geographically targets users’ news feeds to ensure they are informed of the latest national and local news on government spending and budget issues.’ The app also allows users to highlight examples identified by them of outrageous spending and waste by enabling them to ‘upload photos or videos of wasteful spending examples in their communities.'”
NYT: Revenue From Higher Tax Rates Barely Scratches The Surface
The New York Times reports, “Despite hints in recent days that President Obama and House Speaker John A. Boehner might compromise on the tax rate to be paid by top earners, a host of other knotty tax questions could still derail a deal to avert a fiscal crisis in January. The math shows why. Even if Republicans were to agree to Mr. Obama’s core demand — that the top marginal income rates return to the Clinton-era levels of 36 percent and 39.6 percent after Dec. 31, rather than stay at the Bush-era rates of 33 percent and 35 percent — the additional revenue would be only about a quarter of the $1.6 trillion that Mr. Obama wants to collect over 10 years. That would be abouthalf of the $800 billion that Republicans have said they would be willing to raise. Together those changes would raise $407.4 billion over a decade — nearly as much as the president’s proposal on higher rates, which would raise $441.6 billion by 2023, for a total of $849 billion. Another $119 billion would come from higher estate taxes, opposed by Republicans and some Democrats.”
President Obama’s Former Advisers Pressing White House On Entitlement Reform
President Obama’s former chairman of the Council on Economic Advisers, Austan Goolsbee, believes entitlement reform is essential to a long-term solution to our debt crisis, telling the National Review (NRO) that any solution must contain “cuts on discretionary and entitlement spending.” The National Review reports Goolsbee said that without entitlement reform, “there will be groups that say ‘I shouldn’t have to sacrifice because X other group didn’t give up anything.'” NRO also notes, “[f]ormer Office of Management and Budget director Peter Orszag is also speaking out in favor of reforming entitlements, and urging his fellow Democrats to do the same. ‘Democrats should affirmatively want entitlement reform that is progressive and puts the crucial programs on a sounder footing,’ Orszag wrote in Bloomberg earlier this week.”
Leading Democrats Moving Towards Means Testing Medicare
The Hill reports, “Leading Democratic lawmakers have suggested that raising premiums for wealthy Medicare beneficiaries could be a matter of common ground with Republicans in the ongoing deficit-reduction talks. ‘I think that is reasonable and certainly consistent with the Democratic message that those who are better off in our country should be willing to pay a little more,’ Senate Majority Whip Dick Durbin (D-Ill.) said Thursday. … Durbin is not the only Democrat who has suggested he would be open to more means testing as part of a final deal. Last week, Senate Finance Committee Chairman Max Baucus (D-Mont.) called the idea ‘somewhat attractive’ as a bargaining chip for talks on the so-called fiscal cliff. Sen. Claire McCaskill (D-Mo.) remarked that ‘Donald Trump may need medication, but he certainly doesn’t need the government to pay for it.’ And Congressional Black Caucus Chairman Emanuel Cleaver (D-Mo.) called means testing a good way to bolster Medicare’s budget without cutting benefits.”
IMF’s Lagarde: Fiscal Cliff Deal That Fails To Address Spending, Entitlements “Insufficient”
Bloomberg reports, “International Monetary Fund Managing Director Christine Lagarde said a political agreement on the U.S. budget should be comprehensive because a minimal deal would fail to provide certainty for investors Markets would sink without measures to avoid more than $600 billion in spending cuts and tax increases due to come into force next year, Lagarde said, according to a transcript of a taped interview for today’s ‘CNN’s State of the Union’ program. Still, an agreement that would only extend tax cuts for the middle class without addressing spending or entitlements would be insufficient to reassure the rest of the world, she said. … Lagarde, who at the IMF helm has been consumed by the European debt crisis, said the turmoil there is less of a risk for the U.S. economy than the fiscal cliff.”
Shrinking Workforce Driving The Decline In Jobless Rate
The Washington Examiner editorializes, on Friday’s jobs report, writing, “People are simply giving up on this economy. Superficially, the numbers seemed good: The official rate fell from 7.9 percent to 7.7 percent, according to the Labor Department. The more expansive U-6 number, which unlike the official rate includes the underemployed jobless and discouraged, fell to 14.4 percent from 14.6 percent. … What is driving the decline in the jobless rate, though, is not the expansion of the economy, it is the shrinkage of the workforce. The number of Americans reporting they had jobs actually fell by 122,000 last month. The only reason the unemployment rate fell is that more than 350,000 Americans left the labor force entirely.”
Replacing Sequester Emerging As A “Sharp Point Of Conflict”
Roll Call reports, “The question of how to replace the sequester — the $109 billion in automatic, across-the-board spending reductions set to start cutting into the budget at the start of the year — is emerging as a sharp point of conflict standing in the way of a fiscal cliff deal. Conservative Republicans in both chambers are intent on replacing the cuts with alternative spending reductions, not tax increases. But many Democrats view revenue as a better replacement. Senate Republicans charge the proposal advanced by President Barack Obama last week would shut off the sequester without finding alternative cuts, which they say they will not accept. … The White House has consistently avoided specifics on how the sequester would affect agencies, and even now agencies are not saying how the cuts would be implemented, leaving massive uncertainty for both federal workers and contractors.”
Poll: Most Americans Say Deficit Talks Will Fail
The Hill reports, “A clear majority of voters expect President Obama and Congress will fail to reach a deal to prevent spending cuts and tax hikes on millions of households next year, according to a new poll for The Hill. The survey found 58 percent of people have little or no confidence political leaders can negotiate a compromise before Jan. 1, reflecting deep pessimismamong voters about Washington’s ability to solve major problems facing the country. Only 39 percent believe the two sides will reach an agreement thatstops the looming combination of $500 billion in tax increases and $109 billion in automatic spending cuts, which economists say would trigger a recession. Voters are eager to see the two sides come together on a long-term debt pact. Fifty percent want Obama and congressional Republicans to strike a comprehensive deal before the end of the year, according to the poll, conducted for The Hill by Pulse Opinion Research. Only 36 percent believe it would be better to reach a short-term agreement that buys time for negotiators to reach a so-called ‘grand bargain’ to slash the deficit. “
Distrusts Among Congress Fuels Doubts About Compromise
Reuters reports, “President Barack Obama and his Republican opponents in Congress enter a crucial week in the ‘fiscal cliff’ impasse with more than just differences over taxes to bridge: Also in the way is pervasive mistrust among members of Congress that discourages big concessions for fear the other side won’t reciprocate. That distrust is fueling doubts among Republicans and Democrats about relying on the other side to live up to any bargains struck now on deficit reduction in the future, Capitol Hill aides say. Because resolution of the immediate cliff issues depends in part on commitments by both sides to a framework for overhauling the tax code and entitlement programs over the next year, an atmosphere of disbelief could impede any agreement on thecliff. … But widespread credibility issues could cause problems for Democrat Obama and Republican House Speaker John Boehner if and when they have to sell any agreement they forge to their parties in Congress.”
‘Dramatic Drop’ In Consumer Spending
The Wall Street Journal reports, “U.S. consumer spending, a rare pillar of economic strength in recent months, is showing signs of weakening. American consumers helped carry the economy through a spring slowdown and appeared to power a summer resurgence in growth. But in recent weeks government data have shown spending was slower over thesummer than previously believed, and it has started off the final three months of the year on an even weaker footing. Now a range of factors, from high unemployment to the prospect of increased taxes due to the approaching ‘fiscal cliff,’ are threatening to sap consumers’ spending power at a time when other sectors of the economy likely are too weak to pick up the slack. … ‘It was a dramatic drop,’ said Jacob Oubina, senior U.S. economist for RBC Capital Markets. ‘The consumer’s not all of a sudden going to pick up the baton.’”
White House Has Power To Stop Middle Class Tax Hike Should Talks Fail
The Hill reports, “The White House has the power to temporarily protect taxpayers from middle-class tax hikes even as upper income rates rise if Congress does nothing and all of the Bush-era tax rates expire in January. Experts and lawmakers alike agree that Treasury Secretary Timothy Geithner has the power to adjust how much is withheld from paychecks for tax purposes — for all taxpayers or just for some. By doing so, Geithner could ensure paychecks reflect the White House position that wealthier taxpayers with annual income higher than $250,000 see their taxes rise. Geithner at the same time could leave withholding tables where they are for the middle class, ensuring those workers don’t see a higher cut from their paychecks. … Lawmakers on both sides of the aisle acknowledge Geithner has this power, even if they hope to be productive enough to make it irrelevant.”
“Democrats Want Jobless Benefits in ‘Cliff’ Deal”
The Associated Press reports, “Hovering in the background of the ‘fiscal cliff’ debate is the prospect of 2 million people losing their unemployment benefits four days after Christmas. ‘This is the real cliff,’ said Sen. Jack Reed, D-R.I. He’s been leading the effort to include another extension of benefits for the long-term unemployed in any deal to avert looming tax increases and massive spending cuts in January.… Emergency jobless benefits for about 2.1 million people out of work more than six months will cease Dec. 29, and 1 million more will lose them over the next three months if Congress doesn’t extend the assistance again. Since the collapse of the economy in 2008, the government has poured $520 billion – an amount equal to about half its annual deficit in recent years – into unemployment benefit extensions. … Long-term unemployment remains a persistent problem. About 5 million people have been out of work for six months or more, according to the Bureau of labor Statistics. That’s about 40 percent of all unemployed workers.”
Monday Morning Nugget: Politico Poll Shows Spending and Deficit Top Concern
A recent Politico Battleground poll shows “government spending and the budget deficit” as a top concern (23%), followed by the economy (22%) among “likely” voters.
Wealth is not Created at the Top: It is Only Devoured There
The UK has left the EU and we can argue about the minutiae of Wealth until we’re blue in the face. But the overriding factors are apparent and in one of the richest countries in the world it is shocking that so many people can’t even be sure if they are going to be able to eat enough today or provide for their loved ones.
These days, politicians from the left to the right assume that most wealth is created at the top. By the visionaries, by the job creators, and by the people who have “made it”. By the go-getters oozing talent and entrepreneurial-ism that are helping to advance the whole world – Opinion by Rutger Bregman
… across the spectrum virtually all agree that wealth is created primarily at the top and so entrenched is this assumption that it’s even embedded in our language. When economists talk about “productivity”, what they really mean is the size of your paycheck. And when we use terms like “welfare state”, “redistribution” and “solidarity”, we’re implicitly subscribing to the view that there are two strata: the makers and the takers, the producers and the couch potatoes, the hardworking citizens – and everybody else.
Bankers, pharmaceutical giants, Google, Facebook … a new breed of rentiers are at the very top of the pyramid and they’re sucking the rest of us dry
In reality, it is precisely the other way around. In reality, it is the waste collectors, the nurses, and the cleaners whose shoulders are supporting the apex of the pyramid. They are the true mechanism of social solidarity. Meanwhile, a growing share of those we hail as “successful” and “innovative” are earning their wealth at the expense of others. The people getting the biggest handouts are not down around the bottom, but at the very top. Yet their perilous dependence on others goes unseen. Almost no one talks about it. Even for politicians on the left, it’s a non-issue.
To understand why, we need to recognise that there are two ways of making money. The first is what most of us do: work. That means tapping into our knowledge and know-how (our “human capital” in economic terms) to create something new, whether that’s a takeout app, a wedding cake, a stylish updo, or a perfectly poured pint. To work is to create. Ergo, to work is to create new wealth.
But there is also a second way to make money. That’s the rentier way: by leveraging control over something that already exists, such as land, knowledge, or money, to increase your wealth. You produce nothing, yet profit nonetheless. By definition, the rentier makes his living at others’ expense, using his power to claim economic benefit.
But here comes the rub. Most rentiers are not as easily identified as the greedy banker or manager. Many are disguised. On the face of it, they look like industrious folks, because for part of the time they really are doing something worthwhile. Precisely that makes us overlook their massive rent-seeking…
The problems we face are that the politicians are firmly in the hands (pockets) of the uber wealthy. We live in a corporate plutocracy and those holding all the wealth and therefore power have no intention of changing the status quo, even if it isn’t sustainable. They remind me of bacteria (or cancer) devouring the host body more and more even though eventually it will kill them too.
Donald Trump Forgets Important Lesson From Grandad:
Harper’s Magazine reprints an interesting letter from US President Donald J. Trump’s own grandfather that may get you thinking. Here is it then:
The Emigrants – By Friedrich Trump – From a letter written in 1905 by Friedrich Trump, Donald Trump’s grandfather, to Luitpold, prince regent of Bavaria. Trump had been ordered to leave Bavaria for failing to complete mandatory military service and to register his initial emigration to the United States twenty years earlier.
Prince Luitpold rejected Trump’s request for repatriation; the family later settled in New York. Translated from the German by Austen Hinkley.
Most Serene, Most Powerful Prince Regent! Most Gracious Regent and Lord!
I was born in Kallstadt on March 14, 1869. My parents were honest, plain, pious vineyard workers. They strictly held me to everything good — to diligence and piety, to regular attendance in school and church, to absolute obedience toward the high authority.
After my confirmation, in 1882, I apprenticed to become a barber. I emigrated in 1885, in my sixteenth year. In America I carried on my business with diligence, discretion, and prudence. God’s blessing was with me, and I became rich. I obtained American citizenship in 1892. In 1902 I met my current wife. Sadly, she could not tolerate the climate in New York, and I went with my dear family back to Kallstadt.
The town was glad to have received a capable and productive citizen. My old mother was happy to see her son, her dear daughter-in-law, and her granddaughter around her; she knows now that I will take care of her in her old age.
But we were confronted all at once, as if by a lightning strike from fair skies, with the news that the High Royal State Ministry had decided that we must leave our residence in the Kingdom of Bavaria. We were paralyzed with fright; our happy family life was tarnished. My wife has been overcome by anxiety, and my lovely child has become sick.
Why should we be deported? This is very, very hard for a family. What will our fellow citizens think if honest subjects are faced with such a decree — not to mention the great material losses it would incur. I would like to become a Bavarian citizen again.
In this urgent situation I have no other recourse than to turn to our adored, noble, wise, and just sovereign lord, our exalted ruler His Royal Highness, highest of all, who has already dried so many tears, who has ruled so beneficially and justly and wisely and softly and is warmly and deeply loved, with the most humble request that the highest of all will himself in mercy deign to allow the applicant to stay in the most gracious Kingdom of Bavaria.
Your most humble and obedient,
… Well then. Long ago, yes.. Still applies? You tell me.
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