Some key excerpts:
"Members of the conservative Republican Study Committee said the GOP must keep its campaign pledge to immediately slice at least $100 billion from non-defense programs, "
The Tea Party people have put out a $100B number. But then we have:
"House Budget Committee Chairman Paul Ryan (R-Wis.), who is empowered by new House rules to unilaterally set a limit on spending, has said he plans to direct appropriators to slice only about $60 billion from this year's budget. The House Appropriations Committee is identifying cuts at that level."
So the mainstream GOP House leadership is only looking at $60B immediately. But overall the GOP House leadership is committed to further cuts:
"Our immediate goal is to cut spending to pre-bailout, pre-stimulus levels. That's what we pledged, and that's what we'll fight for," said Boehner spokesman Michael Steel. "But that will be the beginning, not the end, of our efforts to cut spending and create jobs (Ed: Huh?) - and we appreciate every member's input."
Top level, it looks like the GOP House would like to roll back the 2008 "stimulus" levels of Federal expenditures, which are probably running off anyway without reauthorization. The $100B cuts that the Tea Party people desire (worst case scenario), would represent about one months worth of Federal deficit levels the US economy has been enjoying over the last two years, the pace of these cuts will probably be more important than the magnitude.
Looking at this FY, through 1Q FY 2011, net spending (gross Treasury account withdrawals minus Treasury Security redemptions) was $1.012T, a projected annual rate of over $4T in net Federal spending. The Tea Party $100B cuts would represent about 2.5% of this projected 2011 Federal spending on an annual basis, and less than 1% of current US GDP. Consensus GDP growth forecasts seem to be running just above 2% for this year. It is not clear to me whether those consensus forecast models take into account these types of fiscal issues.
16 comments:
Japan's Money Multiplier :
http://www.ft.com/cms/s/3/4610815c-271d-11e0-80d7-00144feab49a.html#axzz1BoNrVD00
Cut spending to create jobs is like firing your workers to expand your business - non-sense.
These insignificant cuts are only symbolic - the real unfunded liabilities are the wars which are untouched.
Another smoke screen from voodoo tea moron macaroons.
Googleheim,
Japan has been employing Keynesian remedies for over 15 years. Result: depression.
The wars AND the welfare state are both problems. This sophistry that Social Security is solvent because they have government bonds in their possession is laughable. One agency of govt. says it owes another agnecy of govt. money. It's like me writing a check to myself and claiming a credit. Hey, I'm good for it I tell the bank!The credits and debits cancel each other out. There is no fund to draw on and Social Security is the greatest swindle of all time. Bernie Madoff is in jail for doing what the govt. is doing with our mandatory retiremnt program.
The proposed cuts are insignificant even if any of them get through. However, if spending is the starting point for wealth creation and jobs as you mistakenly believe then why would this country be in such horrible shape given the incredible spending spree on the part of state, local, and fed. govt in combination with the profligacy and debt of the average American citizen?
Is there hope to sidestep the banksters credit smack down on the public. Check out the article below from the Huffington Post from:
Ellen Brown.Civil litigation attorney; author of "Web of Debt"
Posted: January 24, 2011 02:20 PM .
Washington State Joins Movement for Public Banking
Bills were introduced on January 18 in both the House and Senate of the Washington State Legislature that add Washington to the growing number of states now actively moving to create public banking facilities.
The bills, House Bill 1320 and Senate Bill 5238, propose creation of a Washington Investment Trust (WIT) to "promote agriculture, education, community development, economic development, housing, and industry" by using "the resources of the people of Washington State within the state."
Currently, all the state's funds are deposited with Bank of America. HB 1320 proposes that in the future, "all state funds be deposited in the Washington Investment Trust and be guaranteed by the state and used to promote the common good and public benefit of all the people and their businesses within [the] state."
The legislation is similar to that now being studied or proposed in states including Illinois, Virginia, Hawaii, Massachusetts, Maryland, Florida, Michigan, Oregon, California and others.
The "once unthinkable" includes not only draconian cuts in services, increases in taxes, and sale of public assets, but now filing for bankruptcy. States are not currently allowed to go bankrupt, but a move is afoot in Congress to change all that. Bankruptcy proceedings would allow states to escape pension and other contractual obligations, following the dubious lead of such megacorporations as General Motors and Continental Airlines.
Meanwhile, fears of state bankruptcy have caused state and municipal bond values to plummet and borrowing costs to soar. As with Greece and Ireland, rumors of bankruptcy become a self-fulfilling prophecy, bringing out the hedge funds and short sellers that turn prophecy into reality.
Addressing the Problem at Its Source: The North Dakota Model
While drastic spending cuts are being proposed and implemented, the states' woes are not the result of over-spending. Rather, they were caused by loss of revenues and increased borrowing costs resulting from the Wall Street banking crisis. Jammed with toxic assets, derivatives, and the subprime mortgage debacle, the Wall Street credit machine ground to a halt in the fall of 2008 and has still not recovered.
And it is here, in generating credit for the state, that the Bank of North Dakota has been spectacularly successful. By providing affordable, low interest credit for business expansion, new businesses and students, the BND has helped North Dakota sidestep the credit crisis altogether.
The BND partners with private banks, providing a secondary market for mortgages; offers "wholesale" banking services such as check clearing and liquidity support to private banks; and invests in North Dakota municipal bonds to support economic development. In the last ten years, the BND has returned more than a third of a billion dollars to the state's general fund. North Dakota is one of the few states to consistently post a budget surplus.
Unlike private banks, public banks don't speculate or gamble on high risk "financial products." They don't pay outrageous salaries and bonuses to their management, who are salaried civil servants. The profits of the bank are all returned to the only shareholder - the people.
Bob,
I don't know how political control of banking is better than the bureaucratic control of central planners at the Fed.
Also, the Bank of North Dakota can't "create credit" anymore than a private bank or the Fed. Real credit must derive from real savings. A bank should only lend timed accounts with money (represntting saved resources) tht it actaully has. Pyramiding debt on a narrow reserve base is fraudulent.
I think the govt.'s role in banking should be to enforce contract and fraud laws. It is the collusion of banking and state that is the problem.
Bob,
Almost forgot. You don't think public banks will speculate? Hehe. Our Federal Reserve (a publc-private entity after all) was the primary force behind the housing credit bubble. Public-private entities Freddie and Fannie fanned it further. Speculation didn't cause the housing bubble. Excessive credit creation, government subsidies, and collectivized risk (in that order) caused the housing bubble. People only responded to the perverse environment created by government palnners by speculating. You are confusing cause and effect.
Did you see the housing crash coming years in advance? Thought so--maybe that's because you didn't understand it then anymore than you understand it now.
This trust in govt. despite all evidence to the contrary never ceases to baffle me.
WWS,
Do you see "loans" granted as political favors, or at least granted to businesses friendly to pwerful state politicians?
WSWS :
Trade deficit is down
Social security is not insolvent nor an unfunded liability.
The point of the Japanese article is about the multiplier effect not working, just as Norman points out.
Once again, you jump to conclusions and not read what is stated.
Norman has repeatedly pointed out how the U$D is rigged even though is should spike against the quid and the euro.
The multiplier effect is not working Japan.
That is the subject here, none of the garbage anti-spending drool you espouse.
Also Mr WSWS
All your ranting talks about regulating government when the Fed is not supposed to be government
and that real economy corporations should not be regulated
however, the mess that is here is due to the deregulation of the past 20 to 30 years with lauffer, greenspan, voodoo bull market scamming economics.
the cdo swaps and mbs crap all tried to inflate the market by "printing" in the real economy - it was all fictious.
WE KNOW THAT WE the fed and treasury credit that we can take it out and you can call it printing but it is not.
but the cdo swaps mortgage crap all should have been regulated but these instruments overleveraged america and when the inflation of these things disappeared so did a lot of equity.
only the government can inject that back into the real economy but should do so only when the rabid capitalists are all put to shame and regulated so that the normal capitalists can conduct real business.
even the so called liar loaners are not an issue since they represent between $200 to $400 billion only which could have been fixed easily by standard monetary policy.
Googleheim,
I identify the Fed as a hydrid public-private entity that is a private banking government within the federal govt. The Federal Reserve cartelizes the banking sector. It is in fact a banking cartel. The problem is that it has been given monopoly power to create money and to manipulate interest rates (the most imporant price in an economy.)
CDO's would be perfectly fine so long as they aren't based on bubble prices. The mathematical formulas used to structure these debt instruments would be sound so long as credit bubbles courtesy of our cartelized banking industry weren't present.
Matt,
Of course public banks would give loans for political reasons. That is how the game works. Anything run by govt. is by nature political despite pretences to the contrary. The supposedly independent Fed is often times political.
Matt,
In the report Net Change in Operating Cash Balance: $32,894 for the fiscal year 2010-2011? Has the government started to take in more than it is spending?
Thanks,
BFG
BFG,
I believe that could be from selling more Treasuries (net), so the Treasury account at the Fed ("Cash Balance") could go up through "excess" Treasury sales so to speak. Or they are selling some of the stuff they bought under TARP, etc... I dont think it necessarily means tax receipts are starting to increase.
Mike has a better handle on that # than I do. I look at the level of Treasury spending (net of Treasury issuance) to sort of get an idea for what is going on fiscally intermediate term. Mike looks at this NCOCB # to get an idea about short term "liquidity" type issues.
BFG how is it going over there? UK reported a pretty lousy GDP 4Q today....also, what is your take on the Ireland elections in March? If you have a few minutes...
Matt,
A useful indicator could be the trend of government spending to total taxes.
Over here it is a tale of two different economies, the domestic economy is getting decimated. The export sector have never had it so good, but they will provide no increase in employment. But that could all be about to change with the UK starting to double dip, our largest trading partner.
Emigration is exceeding the levels at its peak in the 80s. They are turning this place into a country of old people. It's funny when they set up the European market and talked of labour mobility, Irish people emigrate to the same old reliable countries the UK/Canada/Australia and the US and hardly any to Europe.
Regarding the election, all the main parties are falling over themselves to pass the finance bill, that it has just emerged that not one elected individual took part in the negotations with the ECB/IMF. This is some democracy!
Fianna Fáil are going to get decimated, they are only worrying about themselves at the moment. They are like rats leaving a sinking ship. If you know anything about our politics over here, it never developed along class lines but along civil war politics. FF/FG/PDs are all centre right. The working class people always vote FF. The Labour Party gets its membership from the middle-upper income brackets and are only strong in the urban areas and are non-existent outside Dublin.
They all fear the rise of Sinn Féin, the only established party that have come out against the bailouts. The papers portray them as a far left nationalist party. But they are a pragmatic party, and one of the wealthiest parties in Europe.
Looking at the way Europe is developing, I'm starting to understand the mistrust the US states have to the federal government. You can never get anything done, there is just too many voices.
I can see it won't be a pretty picture in the US if Obama goes along with this mercantile policy of export oriented growth.
welfare state,
Totally agree with you on corruption in public banking system, Freddie Mac and Fannie Mae
are poster childs, look at Reines golden parachute after bankrupting FNE and FNM, I like the idea of taking some of the power and monopoly away from the central bank and primary dealers, at least only one or two states will go bust instead of the whole country. Also maybe cut out the outrageous bonuses for the banksters. Maybe get rid of the earmarks and lobbyists at the federal level too.
Bob,
It's not the lobbyists. It is the government. If a government is given power to hand out subsidies, mandates, special tax laws, favorable regulations, and public-private partnerships then of course people will organize into interest factions in order to petition the govt. The government needs to be stripped of the power to do these things.
Just creating more regulations will only increase the number of lobbyists.
Those bonuses for bailed out bank employees would not have happened if the Federal Reserve and federal govt. hadn't bailed them out to begin with. Taking those bonuses after the fact is a violation of the law. Two wrongs don't make a right.
Japan has been employing Keynesian remedies for over 15 years. Result: depression.
Are you cooking meth? If Japan is in a depression, then sign me up. Their unemployment rate is nearly half of ours (4.9% in Dec).
http://www.tradingeconomics.com/Economics/Unemployment-Rate.aspx?Symbol=JPY
Bear in mind, Japan is very smart to poormouth their economy because they don't want to encourage the US to consider tightening up on Japanese imports. Eammon Fingleton is the man to read...
Why would any nation emphasize its negatives? In Japan's case, I think the research makes it clear. Because Japan is perceived as having economic difficulties, it is getting a free ride on trade.
http://www.japaninc.com/article.php?articleID=519
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