Forbes has this piece: Here’s how and why the brilliant Simpson-Bowles  Panel came up with a bold plan to reduce the budget deficit–  only to find their hared work was abandoned to the refuse pile.

Erskine Bowles, a co-chairman of the Obama Deficit Reduction Panel told a group of CEOs at JP Morgan today that the bold plan he and former Sen. Alan Simpson proposed last year was killed because the President’s closest political advisers told him it would damage his bid for re-election.

Bowles charged  the plan to reduce the deficit actually went further than originally planned– but that all economic policy in the White House is subject to the veto of the inner political advisory group,  David Axelrod, Valerie Garrett and David Plouffe.   In other words, all the work done by Bowles, Simpson and their bi-partisan group went for nothing due to political exigencies.

In another  address to the CEOs gathered from around the nation Jamie Dimon, chairman of JP Morgan Chase, revealed that he never understood just how serious a drawback the  Basel III  banking regulation were  for JP Morgan until a recent trip to China where his Chinese   hosts had doped out  in exacting fashion just how detrimental it was going to be for American banks. This comment was meant to underscore just how savvy and focused the Chinese are on every aspect of the financial services industry in America.

]]> http://gestetnerupdates.com/2011/12/05/obama-advisers-killed-the-deficit-reduction-panels-plan/feed/ 2 http://gestetnerupdates.com/2011/03/07/the-223-billion-february-deficit-in-perspective-2/ http://gestetnerupdates.com/2011/03/07/the-223-billion-february-deficit-in-perspective-2/#comments Tue, 08 Mar 2011 00:43:59 +0000 Yossi Gestetner http://yossigestetner.com/?p=1442 The Washington Times reports that the federal deficit for February 2011, was approximately $223 billion. No I didn’t write 2.23 billion dollars. It is $223 billion; a record for one month. Here is some context: Dividing the $223 billion in the …

Read more »

It is a joke when Democrats raise concern of the deficit considering that they gave us in recent years average annual deficits of $1.1 trillion a piece. But for what it is worth, let us go along with the premise that a Tax Cut costs money and see how it will affect the deficit going forward.

 The CBO projects that the loss of revenue due to the Obama Tax Deal will be $756 billion over the next five years. (There is of course more spending in the package too which will add even more to the cost, but let us not focus on it now). Dividing the $756 billion cost into five, amounts to $151.2 billion per year, which is em, er… approximately what the deficit was for all of… November! Yes! This last November, in just one month, the Democrat Congress and President gave us a deficit of $150 billion. So spare me the tears and hysteria my dear Democrats when we have a tax plan which will add a mere $12.6 billion per month to the deficit ($151.2 in 12 = $12.6), all while you gave us now twelve times this amount of a deficit in just one month.

As for low tax rates “costing” money, I noticed that revenue to Wall Mart in 2009 was $419 billion. How stupid is Wall Mart! If only they had higher prices on their products, they would have way more revenue… Right my dear Democrat friends? Same goes with all retailers during the holiday seasons: If only they increased – instead of reduced – prices in the current season, they could have much more revenue. How stupid are these retailers! Right?

Well, no! If higher tax rates translate into more revenue, why don’t Democrats propose that we go back to pre-Reagan era tax rates? Can you imagine how large and how many surpluses we would have in the last thirty years but for Reagan?

Democrats take credit for the reduced deficits and surpluses we had in the late nineties by pointing out that it took place during the Clinton  Administration. Republicans say it was the first time in forty years they had control of both Houses, thus budgets were balanced.

In the ongoing debate how to reduce the deficits or perhaps balance the budgets, we can settle the differences between both sides by revising the budget increases of the past decade to mirror the hike rates of the Clinton years, and start the next budget at the level where the revised numbers take us. This would be the best option how to tackle the budget problem considering that everyone liked how things ran in the late 1990′s.

No, we do not need to adjust tax rates to the Clinton years, nor do we need to cut military spending to fit the growth (growth? cut) rates of the Clinton era. We can also leave Medicare and Social Security as is. We only need to adjust the Bush/Obama budgets in a few spending areas to reflect Clinton increases. By doing so, the FY 2012 deficit can be below $500 billion, and it will continue to decrease in the following years.

For example (See Table 3.1at the GPO Access website), in the Republican Clinton years, 1995 through 2000, the Federal Government spent on average $51 billion a year on Education. In the following six Republican Bush years, 2001 through 2006, the annual average was $85 billion. This is a difference of $210 billion in a short six year stretch. Furthermore, this spending category grew a total of only 6% in the Republican Clinton years, yet more than doubled in the six Republican Bush years.

Had the Republican Bush Congress; later Reid/Pelosi, and more recently President Obama, increased this class of spending at the Republican Clinton rates, we would be looking at an Education Bill in Fiscal Year 2012 less than half the current expected size, and save tens of billions of dollars right there on Education.

(The FY 1995 budget was crafted with a Democrat Congress in the previous year, and the 2001 budget was crafted under Clinton. But in calendar year 1995, Republicans had the Congress and automatically affected the budget. Therefore, I credit the FY 1995 budget to the Republicans, and the 2001 budget to Bush, etc.)

Here is another example. In the six Republican Clinton years, federal expenditures on Health – excluding Medicare – was on average $131 billion annually. During the following six years it was… $222 on average. The dollar difference is North of $500 billion in only six years. Furthermore, the increase in Health outlays grew during the final six Clinton years, by less than six percent annually, versus more than 10% in the six Republican Bush years.

Had we kept since 2001 to the Health growth rate increases of the above Clinton years, we would be looking now on health outlays of approximately $210 billion, instead of an outlay closer to $400 billion area. In fact, despite a recession in his early months, tax cuts, terror attacks and two wars, Bush too could have balanced a few of his Republican budgets if only he followed Clinton on some discretionary spending.

I don’t know what the smart-heads on the Debt Commission were busy fighting recently as to how to reduce the deficits. We can leave our tax, military, and seniors alone, and focus on The GREAT Clinton years that both parties seem to love in terms of balancing the budgets. I gave two examples which on its own can cut the next deficit by hundreds of billions of dollars.  More programs can be found to use in following in the Clinton steps.

Sign up here to receive FREE my posts by E-Mail. Only your e-mail address is needed. It takes 42 seconds. Posts arrive only once a day.

I know, I know: Bush and the Republican Congress gave us deficits. But in early 2008, when BUSH was President, the Congressional Budget Office (p. 20) estimated that during the five budget years 2009 through 2013, the US will add a TOTAL of $408 Billion dollars in deficits. But two years later, and we are looking at a total $6.2 TRILLION added deficits, which is FIFTEEN times worse than what the CBO projected in early 2008.

FURTHERMORE: In September of 2008, when the Dem Congress passed its 2009 budget, the revised five-year budget projection of the CBO came in at a TOTAL of $1.4 trillion dollars in added deficits, NOT the four and half times worse $1.4 trillion that we have now on an ANNUAL basis.

Here are the annual numbers:

2009 $1.4 trillion in the red.

2010 $1.47 trillion in the dumps.

2011 $1.4 projected minus.

2012 and 2013, $1 trillion dollar a piece.

Now, THIS is the difference between the Bush/Republican deficits to the Obama/Dems deficits

NOTE TO THOSE WHO RECEIVE MY POSTS VIA E-MAIL: if you have a comment that you want to send me regarding the issue I address or any posting in general, you can reply as you would in a regular e-mail: Hit the reply key; write what you please; press send, and I’ll be glad to read your thoughts.

NOTE TO THOSE WHO DON’T RECEIVE MY POSTS VIA E-MAIL: sign-up here to receive my writings directly into your inbox. Only your email address is needed

The Pelosi-Reid controlled Capitol Hill who had no worries how to cover an Omnibus Spending Bill earlier this year despite it being $32 billion larger than a year before; the Democrats who didn’t think twice about cost when debating the $787 billion Stimulus Bill, are now very concerned of how to pay for the war in Afghanistan, despite that it is according to them “a war of necessity.”

Well, here is how to cover the war: The Democrats claim that health care reform pays for itself by more people having insurance, thus more have access to preventative medicine. In turn, billions of would-be health expenses that the nation has now due to an uninsured population, would vanish in coming years. Using this thinking, Afghanistan pays for itself. How? By crushing the Taliban and the terrorists, the United States will prevent a lot of instability in the region and terror attacks worldwide, thus sparing the Treasury billions in future war costs, in addition to the fact the in times of peace and stability, world economies can grow strong, thus bringing in more money to the Treasury.

Bingo!

I am sure you came across the report that the United Stets Postal Service (USPS) considers stopping delivering mail on Saturday. Why? Simple, the USPS, which does not work to earn a profit, ran a loss of a few billion dollars in fiscal year 2009, and owns the federal government upwards of $10 billion. Therefore, in order to cut back expenses, they are planning to cut services. This of course comes after years of increasing prices of services, such as regular postage.

Come again? I would think that if you want to cut expenses and balance books, one would make the office more sufficient; cut extra jobs, limit compensation; cut back prices, and enhance services, which will in turn bring more clients and money too. This calculation, however, is too difficult of a math for the USPS people to figure out.

The USPS lays blame of their weak business at the Internet and E-mail, which caused people to reduce their reliance of Postal services. This might hold some truth if not for the fact that FedEx and UPS are doing just fine. If the end-game is to earn a profit and service costumers, by God firms will make it happen, as UPS and FedEx do. Whereas if the business beyond military and espionage is government-run, or government subsidizes, the priority is giving workers all they want, while customer service is some place down the line.

If you disagree, let me know how your recent business in a DMV or USPS office went by.

Ok, ok. I know the “real” news stories today are Health Care Reform (HCR) and Limbaugh’s quest to buy an NFL team, but let us not lose focus of the overwhelming thing which affects everything from your energy bill, to the greater US economy, to international affairs alike… Debt.

You sure know that in fiscal year ’09, which ended late September, the federal government ran up a $1.4 trillion deficit, triple the amount of fiscal year ’08, a deficit that the Democrats last year (already controlling 2/3 of the budget process since wining control of Capital Hill in late ’06), decried as unsustainable, and Candidate Obama, alone a member of the deficit-enlargement Congress, led attacks against it on the campaign trail.

At any rate, as a way to scare the nation and the Congress to control spending, deficit critics warn about the debt that will “be left for our grandchildren.” The problem is that such a warning permits people to say: “our economy is in trouble now, so let’s spend our way out of it, we will worry about the deficit another time.” This of course is nonsense because the debt of now creates messes now (let alone for the future too).

Here is one example: Due to a loss of confidence in the dollar as results of deficits, the dollar falls, oil prices – which of course trade in dollars –go up because oil-producing nations need to compensate the loss of the dollar value. As a result, gas and energy prices on the retail level go up, and therefore less people have money to spend on other stuff, like shopping, paying mortgage bills, etc. This pulls back the economy with all perils that follow, as it happened in late 2007 and got worse the following year largely in result of the unsustainable gas prices.

Here is another example: in order to make their bonds more attractive to a skeptical market, the U.S. government needs to pay a bigger interest. When Uncle Sam pays more on a loan, homebuyers, colleges students, new business owners and everyone who wants to borrow a buck, pays even more interest, and when interest rates go up, spending goes down. When spending goes down in an already weak economy, no real recovery can take place. As a result, more people are out of work; more consumer default on credit payments, etc, etc, etc, and there goes your economy to hell in a hand basket.

In total: all the talk of indebting our children, permits people to believe that the deficit danger is one that can be pushed off for the future, when in fact it kills you and your neighbor every day, let alone your grandchildren too.