Spending Daily February 19, 2013

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Spending Daily | February 19, 2013

“Washington’s Vacation After An Abdication”
Michael Gerson writes in The Washington Post, “Official Washington is so concerned about the coming sequester that it headed off on vacation. For the record, all sides bear responsibility for this self-destructive turn ofevents. What President Obama now calls a ‘really bad idea’ was generated by his own economic policy team. What Speaker John Boehner now refers to as a ‘meat ax’ passed the House at his urging with 174 Republican votes. All involved would protest that across-the-board cuts were intended only as the unthinkable alternative to a rational plan approved by the so-called supercommittee. ‘The sequester is ugly,’ explained Boehner at the time, ‘Why? Because we don’t want anybody to go there. That’s why we have to succeed.’ … So Washington has maneuvered itself into a position where doing nothing makes political sense for everyone, at least for the moment. But when all these politically rational decisions are added up, they still amount to an absurd, discrediting way to run a government. Across-the-board cuts are an ethical abdication.”

As Sequester Nears, Defense Contractors Surprisingly Silent
BuzzFeed reports, “As the automatic federal spending cuts known as the ‘sequester’ near, there has been little sound or fury recently from those government contractors who stand to lose the most. The cuts, which are set to take effect March 1, would trim $1.2 trillion from the federal budget over ten years, roughly half of that from defense spending. Before Congressextended the sequester deadline from Jan. 1 to March 1, defense contractors saw the sequester as a call to arms and placed immense pressure on lawmakers to find a solution. Now, the discourse has assumed a new tone of resignation and wariness. … But the most acute obstacle to averting the sequester is an unspoken understanding in both parties that the political motivation to find an alternative will be greater after the cuts begin to take effect.”

Next Stop, Greece
In a special report on America’s debt crisis, Barron’s writes, “In his State of the Union speech last Tuesday, President Obama concluded that “the State of our Union is stronger.” The big question is: stronger than what? Federal debt is a record $12.2 trillion, or 76% of the nation’s annual output of goods and services. While that’s still well below Greece’s 153%, we’re headed steadily in the wrong direction. … These are not just numbers. If the U.S. national debt continues ballooning, we can be sure of a deep, long-lasting recession — very likely a depression — sometime in the next two to three decades. The unemployment rate could easily surge to 20%. The CBO has been issuing warnings about the looming risk of a debt crisis for nearly three years. So far, those warnings have gone unheeded, probably because the crisis seems so far away. But as the CBO keeps pointing out, the longer this particular can gets kicked down the road, the greater the risk that entitlements promised to tens of millions of the old and poor won’t be delivered. It could also lead to a fiscal crisis on an unprecedented scale.”

SolarWorld Latest Poster-Child for Failed “Green Energy” Subsidies
Tim Carney writes in the Washington Examiner, “Obama has thrust the U.S. into an arms race in green-energy subsidies. To grasp the difficulty – or perhaps futility – of such a contest, look at SolarWorld, the subsidized German manufacturer now drowning in a sea of cheap Chinese panels. … In 2008, the company opened U.S. operations in Oregon, with help from local politicians. Oregon offered SolarWorld up to $100 million in renewable energy tax credits. Boris Klebensberger, the company’s COO, asked for more. … Later in 2010 the Obama administration announced SolarWorld was eligible for an $82.2 million Advanced Energy Manufacturing Tax Credit.Despite all this help, the company has faltered. … In recent weeks SolarWolrd announced it was laying off more than a third of the workers at its flagship Oregon factory. The company is losing hundreds of millions of dollars a year, and its stock is plummeting.”

GOP Under Fresh Pressure From Obama to Avoid Cuts
Reuters reports, “President Barack Obama will make a fresh push on Tuesday to force congressional Republicans to make concessions that will head off budget cuts that appear increasingly likely to kick in starting on March 1. Obama, just back from a three-day golf getaway in Florida, will appear at the White House at 10:45 a.m. EST with emergency responders who would lose their jobs if the cuts go into effect. A White House official said he would urge Congress to approve a $110 billion tax increase and spending cut plan that would postpone more severe spending cuts set to begin March 1. … To give Congress time to act on a long-term solution, Obama will urge congressional Republicans to accept the smaller $110 billion package that Democrats proposed last week. ‘The president will urge congressional Republicans to compromise and accept thissolution so these devastating cuts that will hurt our economy and middle class families won’t hit,’ the official said.”

“Deficit Dealers Are Exiting Congress”
The Wall Street Journal reports, “Sen. Mike Johanns’s decision not to run for re-election in 2014 adds to a small but notable wave of lawmakers who sought a bipartisan agreement to reduce the deficit but have seen their efforts run into one wall after another. Mr. Johanns (R., Neb.) co-authored a March 2011 letter with Sen. Michael Bennet (D., Colo.) that – while vague – called for President Barack Obama to push for a deficit-reduction deal that included spending cuts, entitlement changes and ‘tax reform.’ The letter surprised most of Washington when it secured the signatures of 64 senators. Now, everyone had a different idea of what ‘tax reform’ meant (does it mean higher taxes or just lower tax rates?), but the letter still grabbed a lot of attention. It did little, though, to help avoid a nasty fight over the debt ceiling five months later.”

“The country has a confidence problem and it’s Congress’s fault”
Chris Cillizza writes in The Washington Post, “The country has a confidence problem, and Congress bears much of the responsibility for it. That conclusion, drawn by Republican pollster Bill McInturff, carries ill omens as lawmakers seem all but certain to let more than $1 trillion in automatic spending cuts go into effect at the end of the month and with fights over keeping the government funded and raising the debt ceiling looming. ‘It is clear we have entered a new phase where the dysfunction and paralysis in Washington is having a significant and deleterious impact on how consumers feel about the overall state of the economy and their personal financial situations’ writes McInturff in an analysis entitled ‘The Washington Economy.'”

Scarborough: Paul Krugman is Wrong, and the Debt Crisis is Real
Joe Scarborough writes in POLITICO, “America’s fiscal predicament is serious. The problem has become obvious in the last few years, but it has been building for decades, largely the result of promises of extensive social benefits without a corresponding willingness to pay for them. Investors may be growing skittish about U.S. government debt levels and the disordered state of U.S. fiscal policymaking. … If you believe that I am wrong and Paul Krugman is right, if you disagree that America’s debt crisis is serious today, that it is draining American soft power globally, that it is devaluing the dollar, that it is undermining our influence with international trading partners, that painful adjustments in government outlays will be necessary, and that we cannot afford to wait until 2025 to worry about Medicare and other drivers of U.S. debt, then take it up with the RAND Corporation, whose senior economist wrote everything you have read here other than this concluding paragraph. The debt crisis is real and waiting another decade to fix it is not an option. Anyone who suggests it is operates well outside the mainstream of where serious economists reside.”

“Obama, the puppet master”
Mike Allen and Jim Vandehei write in POLITICO, “President Barack Obama is a master at limiting, shaping and manipulating media coverage of himself and his White House. Not for the reason that conservatives suspect: namely, that a liberal press willingly and eagerly allows itself to get manipulated. Instead, the mastery mostly flows from a White House that has taken old tricks for shaping coverage (staged leaks, friendly interviews) and put them on steroids using new ones (social media, content creation, precision targeting). And it’s an equal opportunity strategy: Media across the ideological spectrum are left scrambling for access.”

California’s Tax Hikes May Unravel Economic Comeback
The Washington Post reports, “If there’s anyplace in the country where rising tax rates should choke off an economic recovery, it’s California. On top of the federal tax hikes that kicked in last month, the state has just raised income taxes on its wealthiest residents to the highest levels in the nation, a move that conservatives warn will drive millionaires and their companies to other states, taking jobs and growth with them. The increases come as California’s economy continues a remarkable turnaround. A year ago, the state was a mess, with double-digit unemployment, a bottoming-out housing market and scary budget deficits. Now, hiring is up faster than the national average, and the housing market is regaining strength. Even the state budget is back in the black. What happens to the economy here over the next year will be a case study for policymakers in Washington, who are paralyzed by similar questions of taxation and growth.”