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BA Spending Daily December 13, 2012



Spending Daily | December 13, 2012

Without Change, “U.S. eventually will be overwhelmed by its debt” 
The Associated Press takes a look at why the fiscal cliff negotiations are at a standstill and the even bigger problem we’ll be facing if we don’t get our fiscal house in order:  “Congress and Obama could call the whole thing off, by extending the tax cuts and overturning the automatic spending reductions. But that would leave the United States heading toward an even bigger precipice: a national debt crisis. Obama and congressional leaders – especially the Republicans – say it’s time to get serious about fixing budget deficits that have been hitting more than $1 trillion per year. If nothing is done, the U.S. eventually will be overwhelmed by its debt. Indeed, the automatic spending cuts set for January were created as a last-ditch effort to force Congress to deal with the deficit problem. Even if lawmakers agreed to whistle past the problem this time, another showdown would loom early in the year.”

Editorial: “Why tax hikes fall short for cliff talks”
Ed Conran editorializes in Politico, “Lawmakers have increased government spending 30 percent since 2007 — from 20 percent of gross domestic product historically to 24 percent — on flat tax revenues. That has opened up an unprecedented $1.1 trillion-a-year deficit. The resulting unsustainable rise in debt coupled with near-zero interest rates have shielded spending advocates from voters realizing that draconian across-the-board tax increases are needed to support the proposed level of spending. Instead, many voters mistakenly believe that raising taxes on upper-income taxpayers provides enough revenue to bring taxes and spending into balance. … In truth, the president can’t pay for his proposed spending without draconian across-the-board tax increases. Even the fiscal cliff — which would raise middle-class taxes hundreds of millions of dollars a year by letting the Bush tax cuts expire for all taxpayers, expose them to the alternative minimum tax and end the payroll tax holiday — would close only two-thirds of the fiscal gap.”

Fiscal Cliff Debate Overshadows Human Toll of Unemployment
Bloomberg reports, “President Barack Obama and House Speaker John Boehner are engaged in negotiations over shrinking the budget deficit even as high unemployment is taking a greater human and financial toll on the nation’s economic health. By depressing tax revenue and inflating mandatory social spending, unemployment is costing the government more than twice the $220 billion taxpayers will spend this year paying interest on the debt, according to data compiled by Bloomberg. Chronic joblessness is also leaving scars onsociety, crippling the earning power of millions and hamstringing future growth. … The 7.7 percent jobless rate is down from its 10 percent peak in October 2009. Still, the 40-week average joblessness spell is almost three times the post-1948 average, according to the Bureau of Labor Statistics.”

Obama ‘Bludgeoning’ GOP on Taxes, But Can He Strike a Deal On Spending?
In a column for Roll Call, Mort Kondracke writes, “President Barack Obama is on his way to bludgeoning Republicans into agreeing to raise taxes. The big question is: Can he reach a deal on entitlement spending? … All those programs are going broke and will bankrupt the country unless overhauled by some combination of means-testing benefits and premiums, gradually raising the retirement age and changing the indexing formula for inflation. Corker’s plan would not include any budget cap on Medicare, which Democrats say would impoverish seniors, but the Congressional Budget Office says that letting private insurance plans compete with fee-for-service Medicare would still save $641 billion over 10 years. Obama clearly has leverage over Republicans on taxes — and he’s going to win. But Republicans have leverage on spending. Congress has to fund the government after the current continuing resolution runs out in March. The limit on the national debt will need renewing in January or February.”

Boehner Open to More Revenue, White House Still Resistant on Entitlement Cuts
Politico reports, “House Speaker John Boehner privately told President Barack Obama that he’s prepared to consider more than the $800 billion the GOP has already proposed in new tax revenues — but only if the White House will back much deeper cuts to entitlement programs, according to several sources familiar with the talks. … But for the time being, Boehner’s private concession might not be the breakthrough the fiscal talks need. The White House has been resistant to additional entitlement savings — their proposal has been stuck at $600 billion, and their revenue target is pegged at $1.4 trillion. Republicans insist a revenue increase that large could never pass the House or Senate.”

“What will Democrats swallow on spending cuts?”
The Wall Street Journal reports, “One big question in Washington’s budget talks is whether Republicans will make more concessions on taxes. This week, the counterpoint has started to come into play: What will Democrats swallow on spending cuts? The prospect of cuts to Medicare and other entitlement programs is making many Democrats anxious. Of particular concern is Republicans’ call for increasing the eligibility age for Medicare from 65 to 67, an idea that could split Democrats. As budget talks with the GOP drag on, President Barack Obama has been quietly sounding out Democratic leaders about spending-cut options, while his top aides work rank-and-file party members. Mr. Obama has said he’s willing to make decisions Democrats will find difficult if Republicans will bend on tax rates, but so far he has insisted Republicans first agree to raise rates for the top income-tax brackets.”

Bernanke: Failure to Reach Fiscal Cliff Deal Hurting Economy Already
The Hill reports,”Federal Reserve Chairman Ben Bernanke chastised Washington on Wednesday, saying the failure of President Obama and Congress to agree on a deal to avoid the ‘fiscal cliff’ is already inflicting damage on the economy. In his last scheduled public remarks before tax hikes and spending cuts kick in automatically on Jan. 1, Bernanke linked the political standoff to falling consumer confidence and said a failure to reach a deal would wreak havoc on a faltering recovery. … The central bank said it would begin buying $45 billion in Treasury bonds per month in addition to the $40 billion in mortgage debt per month that it is already purchasing to drive down interest rates and spur economic activity. It said the move was necessitated by lackluster economic growth and a stubbornly high unemployment rate.”

Obama Reduces Demand for Tax Increase to $1.4 Trillion
Bloomberg reports, “President Barack Obama reduced his demand for tax increases to $1.4 trillion from $1.6 trillion as he and House Speaker John Boehner traded another round of offers and inched toward a budget agreement. Boehner told fellow House Republicans during a private meeting today that Obama hasn’t been reasonable, according to a House Republican aide who asked for anonymity and wasn’t authorized to speak publicly about the discussions.”

New Rules: Obama Administration Reopens Regulations Pipeline
The Associated Press reports, “For months, federal agencies and the White House have sidetracked dozens of major regulations that cover everything from power plant pollution to workplace safety to a crackdown on Wall Street. The rules had been largely put on hold during the presidential campaign as the White House sought to quiet Republican charges that President Barack Obama was an overzealous regulator who is killing U.S. jobs. But since the election, the Obama administration has quietly reopened the regulations pipeline. In recent weeks, the Environmental Protection Agency has proposed rules to update water quality guidelines for beaches and other recreational waters and deal with runoff from logging roads. … The administration also has initiated several rules to implement its health care overhaul, including a new fee to cushion the cost of covering people with pre-existing conditions.”

Shut Out Of Cliff Talks, Senators Frustrated 
The Hill reports, “Senators from both parties are frustrated that the upper chamber has no representative in the talks to strike a deal on reducing thedeficit. The negotiations between President Obama and House Speaker John Boehner (R-Ohio) have left out a legislative body filled with big egos and type-A personalities. The standing joke about the Senate is that each of its 100 members sees a potential president when he or she looks in the mirror. It’s a chamber full of ambitious leaders who crave a chance to have an impact on the nation’s future. Senators on both sides of the aisle fear Obama and Boehner will reach a deal shortly before the end of the month and stick them with a take-it-or-leave-it vote to avoid the fiscal cliff, which economistswarn could send the nation back into recession if Congress fails to act.”

Dimon: Budget Deal Would Bring Economic ‘Boom’
Reuters reports, “JPMorgan Chase & Co (JPM.N) CEO Jamie Dimon said the United States could have a ‘booming economy’ in a couple of months if lawmakers in Washington reach agreement to deal with the looming spending cuts and tax increases known as the ‘fiscal cliff.’ A budget deal could mean 4 percent economic growth and a drop in unemployment, Dimon said Wednesday at a New York Times conference in New York. A deal would need to link any tax increases with spending cuts, he said.”

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