Budget Cutting

Brought to you by the Indiana division of the Tea-Party.

State police scramble to cover meth cleanup costs - Post-Tribune

When you hire budget-cutters this is what you get. Of course, everyone thinks their federally-funded project is important.

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Europe: Also Doomed | ThinkProgress

Europe: Also Doomed | ThinkProgress

Also a little late but....

How can our debt be downgraded if its still the best around? At some point maybe the US and Europe should just tell the bankers to get fucked. We'll pay China, our Individuals and other countries back but rich hedge fund bastards can go to hell. What are they going to do?

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Credit Ratings

Simon Johnson: Which Is in Worse Shape, U.S. or Europe? - NYTimes.com

I guess it doesn't matter now but I don't understand how a credit downgrade would have had much effect. If we're still the best bet around where else is the money going to go?

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Who Borrowed? Who Loaned?

Econbrowser: Graphic of the Day: Who Borrowed? Who Loaned?

The Deficit

How the Deficit Got This Big - By TERESA TRITCH

A few lessons can be drawn from the numbers. First, the Bush tax cuts have had a huge damaging effect. If all of them expired as scheduled at the end of 2012, future deficits would be cut by about half, to sustainable levels. Second, a healthy budget requires a healthy economy; recessions wreak havoc by reducing tax revenue. Government has to spur demand and create jobs in a deep downturn, even though doing so worsens the deficit in the short run. Third, spending cuts alone will not close the gap. The chronic revenue shortfalls from serial tax cuts are simply too deep to fill with spending cuts alone. Taxes have to go up.

End the Bush Tax Cuts, the stupid wars on the Muslims, bump up the top tax bracket for the >250k (or >500k) per year crowd, increase the Social Security Taxable income cap and most of our deficit problems go away.

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Long Term Budget Forecasts

The Baseline Scenario: Long-Term Budget Forecasts for Beginners

The CBO predicts that if our leaders do nothing, leave current laws in place and let expiring laws expire, the debt will level out at about 75-80% of GDP but if our leaders continue to act the way they have the last ten/fifteen years and extend these expiring laws (tax cuts, AMT, DocFix) the debt will balloon to over 180% of GDP.

It's like a bucket of shit. The more you stir it, the more it stinks.

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Cutting the Deficit

Dean Baker ponders how cutting the deficit will lead to increased growth and job creation.

Dean Baker: The faith-based economics of deficit reduction


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The Debt

The Baseline Scenario sums it up.

When people hold certain ideological beliefs strongly enough, no amount of facts will get in their way. If you believe that the current deficit is the result of excessive government spending (passed by Democrats, even though they only controlled Congress and the White House for four out of the past thirty years*), no pile of charts will be big enough to convince you otherwise — just like if you believe that tax cuts increase tax revenues, that the deficit has produced high interest rates, or that Barack Obama was born on Mars, no amount of evidence will convince you otherwise.

This is just fine if you are my daughter, who is four years old — although, actually, she admits it when she makes a mess (and helps clean it up). But if you are a legislator in the most powerful country in the world –and the one whose debt is the definitionally risk-free asset against which the yield of every other financial asset in the entire world is measured — it’s not good enough.

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Brad Delong Speaks

A couple of good points from a [Brad Delong talk about the Financial Crisis]

First on the Financial crisis

As the foundations of this crisis were laid, there were always arguments against massive regulatory intervention to deal with it. Those arguments always sounded convincing. The stayed convincing even as the situation transformed itself from a justified boom in long duration assets driven by advances in diversification and by capital inflows pushing down interest rates, to froth, to irrational exuberance, to a full-fledged bubble.

The first argument was: "well it is their money." Countrywide probably knows what it is doing. There are major benefits from diversification and better access to credit. Even if it does not know what it is doing, it isn't the government's job to rescue the investors in Countrywide from the fact their risk controls are not what they ought to be.

Second, Alan Greenspan really is a Randite, really is a follower of Ayn Rand. He really does believe that it is a bad thing to infringe your freedom and protect you from yourself. He really is the kind of person who thinks that it is bad for you if the government keeps you from making stupid investments that cost you all your money. You can ask him--"do you think there should guardrails on the ledge of the Grand Canyon?"--and he might well say no--that there should be warnings, but if grown-ups wish to venture too close to the crumbling edge... they are grown ups, and should not be treated like children.

The third argument was: "who is going to get hurt?" Investors in Countrywide, but they are rich and risk-loving and if they want to build the rest of us houses we should probably say "thank you." And somebody buying a house east of Riverside California with a zero-down, a teaser rate, a pick-what-you-pay mortgage--what they are really doing from an asset-price perspective is renting a house at a below-market rent for three years and being given a free call option on the house. They will be sad if the house price doesn't go up and the call option is not worth exercising. But that is regret. That is not harm: they did still get to live in the house at a low rent for three years. So why should the government step in and keep people from getting these deals if Countrywide wants to provide them?

Fourth, and most important, it is a big political looser for regulators to go before Congress. The Democratic members would whack them: why aren’t
you letting my constituents buy the houses they want to buy? The Republican members would whack them: why aren’t you letting my contributors make the loans they want to make?" That’s a very unpleasant position for a regulator to be in--when both Republicans and Democrats agree that you are an ass.

Fifth, there was the fact that the old framework for lending locked lots of people out of the real estate asset class, and a belief that we should be experimenting with new ways to get money to people who want it to make investments--that we should be trying to broaden the access of the poorer half of Americans to high-return investment vehicles.

Most important, however, was the overall belief on the part of the regulators that they could handle it. Subprime was a small asset class in the global economy. The Federal Reserve was powerful. Whatever stupid things financial markets did, the Federal Reserve could clean up the mess afterwards and build firewalls between finance and the real economy so that we would not suffer from high unemployment and a deep recession. The Federal Reserve had handled it in 1987 with the stock market's Black Monday, had handled it in 1991 with the Savings and Loan crisis, had handled it 1995 with the Mexican crisis, in 1997 with Malaysian crisis, in 1998 with the triple crisis--the Korean crisis, the state bankruptcy of Russia as it became clear that just because you were a nuclear armed ex
superpower that did not mean the IMF thought you were too big to fail. the bankruptcy of the largest hedge fund in the world, LTCM. We had the 2001 collapse of the dot-com bubble. And in every single case we managed to handle it: contain systemic risk, stabilize the financial system, and avoid a deep recession.

And on the long run deficit problem

It is a fact that if congress simply goes home--doesn’t do anything for the next 10 years except keep the federal government on autopilot, or if it does do things if it pays for whatever increases in spending it enacts by raising taxes and pays for whatever tax cuts it enacts by cutting spending--that we do not have a long run deficit problem. If congress goes home for ten years our program spending is matched to our tax
revenues, which means a declining debt burden because the growth rate of the economy is larger than the interest rate on our debt.

Our belief that we have a long-run deficit problem is based upon the belief that congress will pass laws that increase spending and that cut taxes--that it will repeal the Independent Payment Authorization Board's authority to try to make Medicare more efficient, that it will repeal the Affordable Care Act's tax on high-cost health plans. Given that the fear is based on a belief that some future congress will bust the budget, it is hard to see how we can address this fear through any possible piece of legislation today--for no congress can bind its successors.

This is a problem.

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The Deficit

Here are the arguments behind the chart below. Causing the deficit

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Increasing Taxes on the Wealthy

Economist's View: Increasing Taxes on the Wealthy is Unfair???

On the first point, it's debt, not spending, that is at issue. You can have high spending with little debt if you are wiling to collect the taxes to support it. In addition, the problem is mainly rising health costs, not spending in general -- so that's what we ought to be talking about. We shouldn't let deception over where the true problem is lead us to solutions that meet the ideological goal of Brooks and others of smaller government, but do little to help solve the main problem.

Some good links and comments below the post.

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Root of the budget deficit: Health Care

Brooks Bemoans the Lack of a Free Lunch for Representative Ryan | Beat the Press

The third belief is contradicted by the experience of the dozens of countries who have comparable quality health care systems to the United States and pay less than half as much per person. Most, if not all, of them rely less on co-payments and other patient contributions than the United States. It is also worth noting that if the United States had the same per person health care costs as any other wealthy country, it would be looking at huge budget surpluses rather than deficits.

If we fix health care, the budget will take care of itself.

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Congress: Spending-Deficits

We're pretty serious about cutting spending: [Spending Cuts]

Unless we're talking about this spending:

[Barak: U.S. aid significantly bolsters Israel's missile-defense capabilities - Haaretz Daily Newspaper | Israel News]

Defense Minister Ehud Barak welcomed Friday a decision by the U.S. House of Representatives to approve a budget which includes $205 million intended for continuing development of the Iron Dome anti-missile system

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Ryan Budget

Jonathan Zasloff's take, on David Brooks' take, on the Ryan Budget. [Moment of Deceit « The Reality-Based Community]

Here's my favorite.

Brooks... The Ryan budget will put all future arguments in the proper context: The current welfare state is simply unsustainable and anybody who is serious, on left or right, has to have a new vision of the social contract.

Zasloff.... No, that is not the proper context. The proper context is 1) that if we ended the Bush tax cuts, bringing us back to the socialistic 1990′s; and 2) stopped fighting wars in Iraq and Afghanistan, we could get a great deal of the budget under control. Moreover, every other advanced democracy is able to cover its entire population and control costs better than we do. That is the proper context.

Point Zasloff.

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Ryan Budget

Digby on Ryan's Budget

There's no chance this budget goes anywhere. It's just out there to make the other less radical plans look better.

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Guns and butter.

On Libya.

[Gin And Tacos: Bang for the Buck]

[Economists View: Guns or Jobs]

I just don't understand how anyone can think that bombing people on the other side of the world is better for the US than improving our health care, education, infrastructure, creating jobs, etc. I just don't get it.

Many years ago, I had a left-wing, radical friend who said he liked to read the Economist to see what "The Other Side" thought about issues. Well,......

Economist: Guns and Butter

They tell us we can't afford to pay teachers, then they spend money on Bombs? Hell, even those at the Economist don't get it?

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Congress in Action

Political Irony › Congress in Action

"Five minutes after voting to cut off federal funding for NPR, the House of Representatives voted to continue funding the War in Afghanistan.

How much will defunding NPR help reduce the deficit? Lemme see, according to the CBO, it will save, hmmm, absolutely nothing. How long did Congress spend debating a measly $5 million in funding for NPR? (A one minute ad during the Super Bowl costs more than that. And the government spends more than that on NASCAR.) How much time did Republican politicians spend working on this? I wouldn’t be surprised if it cost far more than $5 million just in Congressional salaries.

Not to mention that this was entirely political theater, since Obama will undoubtably veto the bill if it gets to his desk.

How much does the Afghanistan war cost us? Ten Billion Dollars. Per Month. That’s 24,000 times as much money as the federal government spends on NPR. If we could have reduced spending in Afghanistan by 0.005% we would have saved more money.

After these votes, your elected Representatives flew home for yet another vacation. If you see one of them, let them know what you think."

And,.. those tomahawk missles we're firing at Libya cost between $500,000 and $750,000 each. Trade you ten of those for some NPR funding.

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Cutting Eduction Spending

Off the Charts Blog | Center on Budget and Policy Priorities | Blog Archive | Five Things You Might Not Know About Public Employees

1. Education is by far the largest category of state and local government employment. Nearly 7 million teachers, aides, and support staff work in the nation’s public elementary and secondary schools, more than twice as many as in the next largest job category (protective services, which includes police officers, fire fighters, and correctional officers).

I don't understand. The same people that want to attack big government deficit-spending because it "steals from our future" also want to attack spending on education. However, educating our children gives them the tools they'll need to compete in the future global economy. It is really giving to our future. So, they want to "not give" to our future so we don't "steal from" our future?

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The 58 Billion in budget cuts

from GinAndTacos: ginandtacos.com » Blog Archive » LOW HANGING. AND DIMINUTIVE.

Spending Cuts

How much money could we save if we ended this stupid war?

Top Ten Myths about Afghanistan, 2010 | Informed Comment