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BA Spending Daily December 11, 2012

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Spending Daily | December 11, 2012

“Federal Agencies Brace for Possible Cuts”
The New York Times reports, “While the Obama administration and Congressional leaders are trying to negotiate a deal to head off billions of dollars in tax increases and automatic spending cuts on Jan. 1, federal agencies are quietly preparing for tighter budgets. … Some 1,200 programs, including airport security, food inspections and drug approvals, could be affected by the automatic cuts. They must be squeezed into the last nine months of the 2013 fiscal year, which ends Sept. 30. The administration has repeatedly said it wants a deal to avoid indiscriminate cuts. But last week, as a precaution, it ordered agencies to lock in a plan for sharply reduced spending in case a deal does not come to pass.”

Defense Advocates See Sequestration Becoming More Inevitable
Politico reports, “They’ve tried everything they could think of and so far, none of it has worked. The Pentagon hasn’t been able to get Congress to undo sequestration. Hawks in Congress haven’t gotten their colleagues to agree to undo sequestration. The defense industry tried its hardest to energize voters — and Congress hasn’t undone sequestration. For all the apocalyptic rhetoric, the hours upon hours of hearings, the threats and counterthreats and the dread that built with each tick of the countdown, the defense establishment has little progress to show as it enters the final days before it faces a decade of $500 billion in automatic, across-the-board budget restrictions. … Defense advocates in Congress now lament openly that they see little way to avoid sequestration taking effect. Industry executives who once threatened to embarrass the government into acting now attempt to reassure investors that sequestration wouldn’t be a ‘guillotine,’ but only a ‘speed bump.’ Troops and their families nervously watch and wait.”

House Dems, GOP Urge Defense Spending Cuts for Budget Deal
The Associated Press reports, “Substantial reductions in military spending should be part of any budget deal that President Barack Obama negotiates with Congress to avert the so-called ‘fiscal cliff’ of automatic tax hikes and spending cuts, a group of House Republicans and Democrats said Monday. With just three weeks to the double economic hit, 22 lawmakers endorsed further cuts in projected military spending to address the nation’s debt, arguing that long-term, strategic reductions were possible with the end of the war in Iraq and the drawdown in Afghanistan. … It was the clearest signal yet that defense dollars would no longer be spared from budget cuts in a time of astronomical deficits.”

“Preparing for ‘fiscal cliff,’ investors move assets to avoid higher taxes”
The Washington Post reports, “As lawmakers struggle to agree on a plan to avert the series of tax increases looming next year, many investors are taking preemptive action to get out of harm’s way. Americans are moving to sell investment homes, off-load stocks, expand charitable donations and establish tax-sheltering gifts before the end of the year. Financial advisers and accountants say people are trying to avoid the higher taxes that will take effect in 2013 if Washington does not avert the ‘fiscal cliff.’ For the most part, the people moving their assets are the wealthy, who have the most to lose even if a deal is struck. Ordinary Americans also are in line for higher income and payroll taxes and fewer deductions and tax credits if the nation goes over the fiscal cliff. But since most of their earnings come through wages, there is little they can do to minimize the impact.”

Washington Post Co. Taking Steps To Shield Investors From Tax Hikes
The Start Tribune reports, “The Washington Post Co. will pay its 2013 dividends before the end of this year to try to spare investors from anticipated tax increases. The media and education company said Friday that its dividend of $9.80 per share is payable Dec. 27 to shareholders of record as of Dec. 17. The payout is instead of regular quarterly dividends next year. Washington Post is the latest company to move up its quarterly payout or issue a special end-of-year payment to protect investors from potentially having to pay higher taxes on dividend income starting in January.”

Fear and Frustration Spreads Among Voters Over Fiscal Cliff
The Associated Press reports, “Fear and frustration course through the lunch crowd at Robie’s Country Store and Deli, a popular outpost 500 miles from where Washington is again locked in tense negotiations over taxes and spending as a critical deadline looms. ‘I’m worried,’ Lorraine Cadren of nearby Manchester says between bites of her chicken sandwich. Her doubt in the nation’s elected leaders is palpable: ‘I’m not sure what’s going to come out of Washington next.’ Not that she has the time to pay much attention; the 64-year-old is unemployed and preoccupied with finding a new job as Christmas approaches. … Most voters interviewed in recent days are calling for an immediate compromise and seem willing to raise taxes on the wealthy so long as the middle class is protected.”

“Graham to Obama: How about ‘manning up’ on entitlement reform?”
The Hill reports, “Sen. Lindsey Graham (R-S.C.) suggested President Obama should consider ‘manning up’ to address the deficit and entitlement reform during an interview Monday. ‘You just got reelected. How about doing something big that is not liberal?’ Graham said in an interview with Fox News. ‘How about doing something big that really is bipartisan? Every big idea he has is a liberal idea that drowns us in debt. How about manning up here, Mr. President, and use your mandate to bring this country together to stop us from becoming Greece?’ … Graham also suggested that the president’s call to raise income tax rates on the wealthiest earners was ‘sort of a partisan political trophy’ that Obama was trying to win. And he warned that there was ‘a hardening on the Republican side’ not to agree to raise the debt ceiling without the promise of major entitlement reform.”

U.S. Credit Rating Hangs In the Balance As Each Side’s Plan Grows Debt
The Hill reports, “Deficit-reduction proposals from Speaker John Boehner (R-Ohio) and President Obama fall short of clearly stabilizing the debt, according to budget experts, putting the U.S. credit rating at risk of a downgrade. Under both proposals, U.S. debt would continue to grow as a percentage of gross domestic product, unless the economy grows at a rapid pace, according to experts who have studied the proposals. While some suggest new talks between Obama and Boehner suggest a deal is in reach, they have doubts it will be big enough to meaningfully reduce deficits — or satisfy credit rating agencies. …’If those negotiations lead to specific policies that produce a stabilization and then downward trend in the ratio of federal debt to GDP over the medium term, the rating will likely be affirmed and the outlook returned to stable,’ Moody’s said of the U.S. AAA rating in September. ‘If those negotiations fail to produce a plan that includes such policies, we would expect to lower the rating, probably to Aa1.’”

Exports Plummet: U.S. Trade Deficit Increases Nearly 5% In October
MarketWatch reports, “The U.S. trade deficit increased 4.9% in October to $42.2 billion, as imports of crude oil rose and American exports of manufactured goods fell to the lowest level in nearly a year. Imports of foreign goods into the U.S. declined by 2.1% to $222.8 billion in October, but exports fell by 3.6% to $180.5 billion to account for the wider trade gap, the Commerce Department reported Tuesday. U.S. manufacturers are not selling as many goods overseas because of tougher economic conditions in key markets such as Europe. American companies exported fewer industrial supplies, capital goods and food in October. Falling imports, meanwhile, reflect a softer U.S. economy.”

Government Dysfunction Dragging Down California
Bloomberg highlights government mismanagement in California that’s dragging an entire state toward bankruptcy. Bloomberg reports, “Today, the state’s highest-paid employees make far more than comparable workers elsewhere in almost all job and wage categories, from public safety to health care, base pay to overtime. Payroll data compiled by Bloomberg on 1.4 million public employees in the 12 most-populous states show that California has set a pattern of lax management, inefficient operations and out-of-control costs. From coast to coast, states are cutting funding for schools, public safety and the poor as they struggle with fallout left by politicians who made pay-and-pension promises that taxpayers couldn’t afford.”  Click here to see how California is leading the way off a cliff of its own.

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Wealth is not Created at the Top: It is Only Devoured There

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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 

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… 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

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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.

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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…

CONTINUE READING HERE:

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.

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Donald Trump Forgets Important Lesson From Grandad:

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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.

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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,

Friedrich Trump

… Well then. Long ago, yes.. Still applies? You tell me.

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