Spending Daily | December 18, 2012
Bankrupting America Releases “‘Twas the Night Before Cliff-mas”
Bankrupting America, a project of Public Notice, today released “’Twas the Night Before Cliff-mas,” a 14-page book that parodies the famous poem “’Twas the Night Before Christmas” with a clever take on the fiscal cliff negotiations and how we came to the precipice of fiscal disaster. “‘Twas the Night before Cliff-mas” comes as a friendly reminder that as the holidays approach, so does the fiscal cliff. Click here to read “‘Twas the Night Before Cliff-mas.”
Major Entitlement Reforms Still Missing From Obama’s Latest Offer
The Associated Press reports, “President Barack Obama has agreed to curtail future cost-of-living increases for recipients of Social Security and softened his demand for higher taxes at upper income levels, narrowing differences with House Speaker John Boehner in ‘fiscal cliff’ talks, people familiar with the talks said Monday. Speaking a few hours after Obama and Boehner met at the White House, these people said the president was nowseeking a higher tax rate beginning at incomes over $400,000, up from the levels of $200,000 for individuals and $250,000 for couples that were cornerstones of his successful campaign for re-election. Obama’s willingness to reduce future cost-of-living increases in Social Security, government retirement and numerous other programs marked another clear concession to Boehner, although it came with an asterisk. The president wants lower-income recipients to receive protection against any loss from scaling back future cost-of-living increases, these officials said. … Democrats have said they would object much more strongly if the president would to accept a plan to raise the Medicare eligibility age from 65 to 67. He was ready to embrace that proposal in the earlier round of talks, but he would face opposition from congressional Democrats and the AARP as well as other groups in the current political climate.”
Boehner Moving to “Plan B”
USA Today reports, “With the ‘fiscal cliff’ looming, House Speaker John Boehner will tell fellow GOP lawmakers Tuesday that he wants to move forward with a bill that will raise tax rates for Americans making more the $1 million Plan B does not mean that Boehner has given up on negotiations with the White House, but the speaker believes that the threat of current tax rates expiring rising for all Americans is too great not to have a backup plan, according to a congressional source who was not authorized to speak on the issue.”
“Boehner offers debt-ceiling increase in cliff compromise”
The Washington Post reports, “House Speaker John A. Boehner has offered to push any fight over the federal debt limit off for a year, a concession that would deprive Republicans of leverage in the budget battle but is breathing new life into stalled talks over the year-end ‘fiscal cliff.’ The offer came Friday, according to people in both parties familiar with the talks, as part of the latest effort by Boehner (R-Ohio) to strike a deal with President Obama to replace more than $500 billion in painful deficit-reduction measures set to take effect in January. With the national debt already bumping up against a $16.4 trillion cap set last year, Congress risks a government default unless it acts to raise the debt ceiling in the next few months.”
“How to cut $100B from the defense budget”
Lawrence Korb, Alex Rothman and Max Hoffman editorialize in Politico, “In order to make a deal to avert the fiscal cliff and put the country on a more sustainable fiscal path, political leaders from both sides of the aisle agree that some cuts to discretionary spending must be part of the package. The defense budget, which accounts for about half of all discretionary spending, should bear a significant percentage of these reductions. … In order to make a deal to avert the fiscal cliff and put the country on a more sustainable fiscal path, political leaders from both sides of the aisle agree that some cuts to discretionary spending must be part of the package. The defense budget, which accounts for about half of all discretionary spending, should bear a significant percentage of these reductions.”
Military Families Worry Over Benefit Cuts
According to U.S. News and World Report, “Emerging from more than a decade at war, military families are confronting a new worry at home: the prospect that a Washington deal over federal spending cuts could chip away at military benefits long considered untouchable. … Military families and retirees worry any cuts could hurt assistance they depend on, including military health insurance, pensions or on-base services such as child care and commissaries. Military spouse Jeremy Hilton of Burke, Va. calls it ‘fear of the unknown.'”
Small-Business Owners in Michigan: “radical measures are needed to reduce the nation’s debt”
Rep. Bill Huizenga, R-Mich., and citizens in the small town of Zeeland, a city within his district, commented on excessive government spending and the prospect of higher taxes in The New York Times: “‘That is the most important caveat in this whole thing: What are we going to do with it?’ Mr. Huizenga said of new revenue. ‘Are we just going to continue to spend it? Or are we going to do something that’s meaningful and changes the way we do business here in Washington, D.C.?’ … ‘I’d be willing to pay a little more tax if government is willing to stop spending excessive amounts of unwarranted money,’ said Wally Ryzenga, 71, who lives in nearby Holland and retired from a steel manufacturing business he ran. ‘The thing that really works is working for more efficiency, and that’s what I would be asking our government to do. The same as I did in my business.'” Among [Zeeland small-business owners], there was no unanimity about paying higher taxes — except that ideally they would prefer not to. And they seemed to agree that radical measures are needed to reduce the nation’s debt.”
Video: Focus on Taxes “insane,” No One Wants to be the “grownup in the room” on Spending
CNBC’s Brian Sullivan makes the case that spending and entitlements are the real cause of our fiscal mess. Click here to watch.
“How Big Deficits Became the Norm”
The Wall Street Journal writes, “Big budget deficits haven’t always been with us. From the end of the Eisenhower years through the Carter presidency, the deficit averaged a modest 1.4% of the nation’s economic output. The budget was nearly balanced in seven of the 20 years from 1960 to 1979. And, as Bill Clinton reminds at every opportunity, the U.S. government was in surplus for four years at the end of his presidency. … When the CBO looked back over the decade in January 2012, it counted deficits that summed to nearly $6.2 trillion. It was off by about $12 trillion over 10 years. What happened? How did the U.S. spend more than $1 trillion above what it collected in revenue in each of the past four years…?”
Medicare Means-Testing for Fiscal Cliff Deal?
The Hill reports, “Democrats wary of accepting any entitlement benefits cuts are asking Republicans to show them their plans if they want to make Medicare means-testing a part of a lame-duck fiscal package. GOP leaders have floated the idea of hiking Medicare costs for wealthier beneficiaries – a proposal President Obama has repeatedly backed – as a condition of any deal to prevent a slew of tax hikes and spending cuts from taking hold Jan. 1. But Speaker John Boehner (R-Ohio), the GOP’s point man in the negotiations, has declined to specify the Republicans’ wish-list for entitlement reform – at least publicly. And it’s unclear whether means-testing would be enough to win GOP support for a deal that would also hike tax rates on households with annual family income above $250,000.”
2014 Budget Already Delayed
Politico reports, “The year-end budget impasse is being felt already in 2014. The White House confirmed to POLITICO Sunday that it has deliberately slowed preparations for President Barack Obama’s fiscal 2014 budget until it has a better fix on the current talks with Republicans in Congress. The customarylate November pass-backs from the Office of Management and Budget—telling federal agencies what resources they can expect to get in the the president’s request—have been put on hold. ‘Yes. OMB has held off on pass-backs to agencies to determine if adjustments will be needed based on the current negotiations,’ an administration official said after POLITICO asked about the delay.”
Credit-Rating Agencies Eye U.S. Debt Burden
The Wall Street Journal reports, “As far as the U.S. credit-rating firms are concerned, Washington can send the country over the ‘fiscal cliff.’ Holding their fire for now, the firms are keeping a much closer eye on whether another looming debate is resolved—the need to raise the U.S. debt limit by February or March. … Wall Street and Capitol Hill are on edge over lawmakers’ ability to reach a budget deal before year’s end. Recent conversations between President Barack Obama and House Speaker John Boehner (R., Ohio) have hinted at a possible breakthrough to avoid the coming spending cuts and tax increases, and both sides are voicing rare optimism about a deal.”
“Foreign holdings of US Debt hit record $5.48T”
The Associated Press reports, “Foreign ownership of U.S. Treasury securities rose to a record level in October, a sign that overseas investors remain confident in U.S. debt despite a potential budget crisis. … Still, the increase of $6 billion was the weakest since total holdings fell in December 2011. China, the largest holder of U.S. government debt, increased its holdings slightly to $1.16 trillion. Japan, the second-largest holder, boosted its holdings by a smaller amount to $1.13 trillion. Brazil, the country with the third-largest holdings, increased its total to $255.2 billion. The new figures show that investors are still seeking the perceived safety of U.S. Treasurys, even as lawmakers and President Barack Obama remain at odds over whether to raise the U.S. borrowing limit as part of a broader budget deal. But economists also said the slowdown in purchases of Treasury securities suggests that investors are more willing to buy other debt, including from European governments.”
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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