Posts Tagged ‘budget’

Daily Fix, April 12

April 12, 2011

Budget, budget and more budget – and an exclusive opportunity to see “Atlas Shrugged” on the big screen.

*As we talk about the budget, free markets and entitlement programs, Ayn Rand’s novel “Atlas Shrugged” is frequently referred to as an example of what happens when the government takes over and the free market dies. The Utah Young Republicans are bringing the movie to the Jordan Commons in Sandy at 7:30 PM, Saturday, April 16. We’ll start seating at 7:10. There is limited seating for the first 225 individuals. RSVP by emailing Dan Burton at utahyoungrepublicans@gmail.com and he will give you the payment information. I’ll be there. You should be too. Utah YRs

*The debt ceiling increase looms.  Timothy Geithner says we much increase by early July or the government “will” begin defaulting on its loans.  Republicans say there is no chance of passing a debt limit increase without significant cuts.  The White House wants a “clean” bill.  So what happens if we don’t increase the debt limit?  One possibility is that we begin raiding pension funds.  Kinda like we did on Social Security… WaPo

*Meanwhile, the American people has helped to create a “suicidal” government, where the majority of citizens want to increase spending, but think their taxes are too high. According to an article by Robert Samuelson, few Americans realize the extent of their dependency. In addition to benefiting from one or more government programs, we now try to be all things to all people. “Once politics was about only a few things; today, it is about nearly everything,” writes the eminent political scientist James Q. Wilson in a recent collection of essays (“American Politics, Then and Now”). The concept of “vital national interest” is stretched. We deploy government casually to satisfy any mass desire, correct any perceived social shortcoming or remedy any market deficiency.Des News

*Wall Street is getting used to high drama in Congress, but the fight over raising the debt limit will test even that seasoned resolve. If the recent funding tussle over less than 1% of the budget was playing with matches, then “the fight over the debt ceiling as playing with plastic explosives,” said Steve Bell, a former staff director with the Senate Budget Committee and now with the Bipartisan Policy Group. “What markets typically dislike the most is uncertainty,” said Douglas Holtz-Eakin, the president of the American Action Forum and former director of the Congressional Budget Office. “The more it drags out, the greater that impact will be, and that’s not a good thing.” The Hill

*GOP leaders got 4 of Obama’s czars axed – except three of the four had already moved on. The language in the short-term budget agreement seeks to put four of President Barack Obama’s policy czars out of jobs — those appointed to assist the president on health care, climate change, autos and manufacturing, and urban affairs. Sigh. Politico

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Daily Fix, April 11

April 11, 2011

The federal government did not shut down on Friday, the BIG budget battle is still ahead and Pignanelli and Webb wonder if the tea party influence is waning in Utah.

*Since all of you were undoubtedly on the edge of your seats late Friday night waiting to see if all non-essential government services would grind to a halt, you already know that a deal was reached. $38.5 billion in cuts in exchange for dropping the policy riders that would have defunded Planned Parenthood and put restrictions on the EPA and Obamacare. Politico

*Much bigger battles loom as the debt ceiling will be reached in May and the Ryan 2012 budget is on the table. During last week’s impasse, Boehner’s political cred went up, but it remains to be seen if GOP unity will remain intact when dealing with the GOP’s budget plan. The Hill

*Obama is now trying to get ahead of the budget battles by hinting at entitlement reforms – and tax increases. Republicans are skeptical, saying that they’ve had to bring the president “kicking and screaming” to the table to cut spending. Politico // WaPo

*Many tea party activists are unhappy at the compromise, wanting the cuts to go much deeper. Congressman Jason Chaffetz joined 69 of his colleagues in voting against the deal, saying it did not go far enough. “We have to be more aggressive in tackling our debt. At least we are talking about cuts, but these are not nearly big enough.” (Remember, the cuts aren’t even 1% of the proposed budget.) SL Trib // CBS

*Speaking of the tea party, Pignanelli and Webb wonder if their influence has peaked. Webb, a long-time Republican says “It is a sign of political naivete to attack someone you agree with 90 percent of the time. Some on the far right would burn down the house because they don’t like the paint in the bathroom.” Pignanelli, a Democrat, says he is both amused and vindicated. DNews

The path to prosperity

April 5, 2011

There are finally some people in Washington willing to take on entitlements like Medicaid and Medicare. We can and we must address those areas if we are to turn this “ship of state” around.

Daily Fix, April 4

April 4, 2011

Friday, the government shuts down if the budget battles don’t lead to some sort of agreement. Some say both sides are trying to hurt each other as much as possible without actually shutting down, while others believe a shut-down is looming.

*Both major political parties seem to have the same strategy when it comes to budget negotiations: Hurt the other side as much as possible without actually negotiations to collapse. “The apparent urge to avoid a shutdown comes amid a political messaging war in which Democrats hope to cast Republicans as beholden to extremists in their ranks, while Republicans are seeking to cast Democratic leaders as unwilling to confront fiscal challenges head-on.” The Hill

*However, negotiations may be collapsing anyway. Today, Speaker Boehner said “It’s become sadly evident to me, and to the American people, that the White House and Senate Democrats are just not serious yet about enacting real spending cuts,” Boehner said. “If the government shuts down, it will be because Senate Democrats failed to do their job.” He called for a party caucus tonight, before meeting with the White House tomorrow morning. Politico

*A new poll by the Pew Research Center shows that 39% of Americans would blame the GOP, 36% would blame the Obama administration and 16% say both. Interestingly, 56% also says they want federal lawmakers to be more willing to compromise on this budget, while 36% say go ahead and shutdown the government. Pew Research

*So just what happens when the government “shuts down”? We’ve had two previous shut-downs, in 1995 and 1996. According to MSNBC, it actually cost the government money in back wages, lost revenue from shut-down national parks and the local economies and businesses surrounding those parks. Not all government workers go on a mandatory vacation, either. Essential staff still stay on duty – FBI and TSA workers, VA hospitals and military bases stay open, as would the US Postal Service, the prez and his employees and all members of Congress. We’ll find out this week if America will kinda, sorta grind to a halt. MSNBC

Poor hurt the most by expiration of Bush tax cuts

October 7, 2010

On Jan 1st, the Bush tax cuts are set to expire. The child tax credit will be cut in half, the standard deductions and income credits decrease and the 10 percent tax bracket – aimed at non-wealthy taxpayers – goes away.

While wealthier taxpayers pay more in taxes and stand to lose more in total dollars, the impact on low-income taxpayers will be far greater since they live on much slimmer margins.

In a new report from the Tax Foundation, author Nick Kasprak points out that in spite of repeated promises that the cuts will be extended, “the current Congress has shown itself to be unusually susceptible to gridlock so the threat of automatic, full expiration of all these cuts is quite real.” In fact, even though we heard last year that the death tax would go away completely, ten months later, Democratic leaders have yet to follow through on that promise.

If predictions for Republican wins in the Senate races in Illinois and West Virginia hold true, those new members will be sworn in immediately. That will give the GOP 43 seats in the upper chamber and the Democrats will have a very difficult time getting the 60 votes they need to pass the legislation to extend the tax cuts for the middle class, but let them expire for the “wealthy.” They will then be faced with the choice to extend the cuts for ALL, or do nothing and let them expire, hurting those at the lower end of the income scale.

“When comparing changes in after-tax income, low-income workers benefited substantially from the Bush-era tax cuts, and so they would pay much higher taxes if political gridlock allows the imminent expirations to occur on schedule,” Kasprak said.

Additionally, low-income taxpayers have benefited from many temporary stimulus measures enacted in 2009 that are also set to expire at the end of this year: a further expansion of the earned income credit for couples, greater refundability of the child tax credit, and bigger credits for college education.

The Making Work Pay credit that appears in paychecks and boosts take-home pay up to $400 for individuals and $800 for couples is also slated to expire next year.

The report shows that inaction on these tax measures will cost a married couple with two dependents earning $40,000 about $2,643. Their after-tax income would drop from $41,513 (if the cuts are extended) to $38,870.

Those cuts could have been extended if the Blue Dog coalition, led by Jim Matheson, had not hidden behind Pelosi’s skirts.

David Walker and financial boondoggles

September 16, 2010

David Walker, former Comptroller General of the United states, was in town recently to talk at Senator Orrin Hatch’s “Economic Summit”.

Walker served as Comptroller General and head of the Government Accountability Office (GAO) from 1998 to 2008. Appointed by President Bill Clinton, his tenure as the federal government’s chief auditor spanned both Democratic and Republican administrations.

Normally a 15-year position, Walker stepped down after ten years when he was personally recruited by Peter G. Peterson, co-founder of the Blackstone Group, and former Secretary of Commerce to lead his new foundation. The foundation distributed the film I.O.U.S.A. that looks at the alarming financial situation we find ourselves in.

Walker has compared the present-day United States with the Roman Empire in its decline, saying the U.S. government is on a “burning platform” of “unsustainable policies and practices with fiscal deficits, expensive overcommitments to government provided health care, swelling Medicare and Social Security costs, the enormous expense of a prospective universal health care system, immigration, and overseas military commitments threatening a crisis if action is not taken soon.”
In 2007, Walker called the Medicare Part D program “probably the most fiscally irresponsible piece of legislation since the 1960s. I would argue that the most serious threat to the United States is not someone hiding in a cave in Afghanistan or Pakistan,” he continued “but our own fiscal irresponsibility.”

“I’m going to show you some numbers…they’re all big and they’re all bad,” he told CBS. “You know the American people, I tell you, they are absolutely starved for two things: the truth, and leadership. What’s going on right now is we’re spending more money than we make…we’re charging it to a credit card…and expecting our grandchildren to pay for it. And that’s absolutely outrageous.” He was clearly able to read the writing on the wall when he continued: “The fact is, is that we don’t face an immediate crisis. And, so people say, ‘What’s the problem?’ The answer is, we suffer from a fiscal cancer. It is growing within us. And if we do not treat it, it could have catastrophic consequences for our country.” The cancer, Walker says, are massive entitlement programs we can no longer afford.

“It’s the number one fiscal challenge for the federal government, it’s the number one fiscal challenge for state governments and it’s the number one competitive challenge for American business.”

In an ironic twist, Senator Hatch voted for Medicare Part D.

Time for Emergency Economic Reform

September 7, 2010

A year ago, I blogged about Indiana’s governor, Mitch Daniels and the coming “reality check” for state budgets. He said then: “State governments will soon have to choose between a major downsizing or consigning themselves to permanent decline. Wishing for an improbably huge boom while chasing your own tail through self-destructive taxes won’t prove much of a strategy.”

Today in the Wall Street Journal, Governor Daniels is even more pointed. He calls for a “time-limited, emergency growth program aimed at triggering new private investment” and says that should be a primary goal of the next Congress.

He clearly outlines where we are nationally and it’s not a pretty picture – anemic growth, the failure of trickle-down government spending, job creation being stalled by big-government policies like Obamacare and government recovery projections that rely on rates of growth we have not seen in 50 years. Those rates, by the way, only pull us back from “catastrophe” to “disaster”, and still allows debt to rise to almost 90% of GDP. It’s not a real “fix” – only a vibrant, extended boom can pull us back from true catastrophe – and banking on that is like depending on the lottery for your retirement plan.

Governor Daniels suggests:
*A payroll tax holiday of the Social Security tax for one year, offset twice over through a combination of the following policies:

*Impoundment power – once again authorizing the president to SPEND LESS than Congress appropriates
*Recall federal funds – rescind unspent TARP funds and hundreds of billions in unspent funds from previous appropriation bills
*Federal hiring and pay freeze – better yet, a 10% cut, then freeze
*A “freedom window” for energy companies that would allow them to proceed immediately with new job creation
*Accelerated or full expensing of business investment, something that is rumored to be under discussion right now.

He shares the following story:

Ronald Reagan enjoyed telling of the elderly Blitz victim rescued from her demolished London flat in World War II. A fireman found a bottle of brandy under the ruins of her staircase and offered her a nip for her pain. “Leave it right there,” the matron ordered. “That’s for emergencies.”

Governor Daniels concludes:

With or without Democratic help, Republicans should step forward with these or superior ideas. A stagnant, impoverished America will not be a greener or safer or fairer place. Grown-ups make trade-offs. Pass the brandy, then let’s get busy.

California’s pension cliff

August 30, 2010

Governor Arnold Schwarzenegger penned an op-ed for the Wall Street Journal last week that lays out the stark reality of California’s budget crisis. Bluntly stated, without significant public pension reform, the state budget is shot all to heck – leading to its inevitable demise.  “Here’s the plain truth,” says Schwarzenegger. “California simply cannot solve its budgetary problems without addressing government-employee compensation and benefits.”

Right now, 80 cents out of every government dollar is being spent on public employee compensation and benefits. The costs over the last decade rose THREE TIMES faster than revenues. There must be trade-offs, so on the chopping block has been higher ed, state parks and even one of California’s sacred cows – environmental protection.

It gets worse. According to the governor, “much bigger increases in employee costs are on the horizon.” He continues:

Thanks to huge unfunded pension and retirement health-care promises granted by past governments, and also to deceptive pension-fund accounting that understated liabilities and overstated future investment returns, California is now saddled with $550 billion of retirement debt.

The cost of servicing that debt has grown at a rate of more than 15% annually over the last decade. This year, retirement benefits—more than $6 billion—will exceed what the state is spending on higher education. Next year, retirement costs will rise another 15%. In fact, they are destined to grow so much faster than state revenues that they threaten to suck up the money for every other program in the state budget.

Over the last TWO years, the private sector has seen the loss of almost 1.2 MILLION jobs in California. The public sector? Virtually none. 401K’s have declined 20% nationally since 2007. Public sector? Up in value, to the point that in California public employees who retire at age 55 can look forward to a million bucks for their retirement.

Before he signs a state budget, Governor Schwarzenegger insists that the Democrat-controlled California assembly:
#1: Reverse the massive and RETROACTIVE increase in pension formulas enacted 11 years ago.
#2: Prohibit “spiking” – the practice of giving someone a big raise in his last year of work so his pension is boosted.
#3: Require public pension funds to make truthful financial disclosures to the public.
#4: Require public pension funds to use REALISTIC projected rates of return.
#5: End the “annuity give-away” they passed in 2003.
#6: Require employees to up their contributions.
#7: End the immoral practice of pension fund board members accepting gifts or even campaign contributions from lobbyists, salesmen, unions and other special interests.
#8: Establish a rainy day fund.

So far, his demands are falling on deaf ears. The Washington Examiner published a piece two days before the Guv’s op-ed titled “California rejects even modest pension reform.” In fact, recent California legislation allows government employees to PAD their pensions during their last year on the job. “We should be taking away the candy, not adding more,” Marcia Fritz of the California Foundation for Fiscal Responsibility complained to the Los Angeles Times.

There is one state, though, that has addressed the pension black hole. Any guesses? Yep – it’s Utah. In March, the state legislature became the first in the nation to pass a major overhaul of the state’s defined benefit pension system after it lost 30 percent of its assets ($4 billion) in the stock market. All current employees are “held harmless” and will continue in the current system. All new workers hired after July 1, 2011 can choose to enroll in either a 401(k) or a hybrid pension system that caps state contributions at 10 percent of employees’ salaries – no matter what the stock market does.

I admit – this one flew under my radar during the last session. I went to a couple of committee meetings where it was discussed and heard blah, blah, blah, actuarial tables, blah, blah. I did understand Representative John Dougall who said something like this on the House floor: “Without these changes, pensions blow a HUGE hole in the state budget and we go bankrupt.” (Dougall didn’t think Utah’s changes went far enough, by the way.)

According to the Washington Examiner,

Utah state Senator Dan Liljenquist, who sponsored the legislation, said it was the only way to honor current pension commitments and also keep unfunded pension liabilities from bankrupting his state.

Other states have tried increasing retirement age, scaling back retiree benefits, freezing cost of living increases and requiring employees to start contributing to their pension plans, but hybrid plans like Utah’s are increasingly viewed as the best way to keep government promises to current employees while scaling them back to sustainable levels for future workers.

We’ve completely eliminated the pension-related bankruptcy risk. This is exactly what California needs to do,” Liljenquist told The Examiner, adding that all the public unions in Utah were initially opposed to the idea. “But they eventually realized that we preserved benefits for current employees, and if we go bankrupt, all pensioners will be out of luck.”

Contrast that with California’s irrational ability to make even minor adjustments to its unsustainable pension system, virtually guaranteeing its own demise.

I still don’t fully understand all the ins and outs of pension systems – but I do recognize a broken, unsustainable system when I see one. I don’t buy for one second the line that “California is too big to fail” (nor do the companies leaving CA and flocking to Utah, apparently). I wish Governor Schwarzenegger luck in pulling his state back from the brink.

State budgets without pension reform

August 27, 2010

Got it? Good.

Barack Obama’s Endgame

August 26, 2010

Our spending is not sustainable. We can NOT afford to keep kicking the can down the road. Generational debt? Already out of control.

I will also predict this – if the Republicans do not make serious changes – real, substantive changes – once they regain control of Congress, the party will not survive.


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