Tuesday, December 27, 2011

What Our Government Gave Us For Christmas This Year

President Barack Obama pauses after signing H.R. 3765 – “Temporary Payroll Tax Cut Continuation Act of 2011,” in the Oval Office, Dec. 23, 2011. (Official White House Photo by Pete Souza)

Christmas was a couple days ago, but have you stopped to ask yourself, "What did my elected politician do for me this year?" or "What gift did I get from my Senator or Congressman this holiday season?"

Maybe those are silly questions, but I need an excuse to finally update this blog, and given that its the end of the year it's always good to look back and reflect. But I digress...

Back to the question at hand. What did our Congress and President accomplish this year. Well here's a few things that really stick out to me:

1) Another $1.3 trillion, with a "T", of debt that future generations have to pay off. As a percentage of GDP our national debt increased from 93% at the end of 2010 to about 100% today. This massive jump in our national debt pushes the United States ahead of Ireland, Belgium, and Singapore in terms of total indebtedness. Currently the only significant (non-third world) nations with higher indebtedness are: Japan (220% of GDP), Greece (143%), and Italy (119%). Not great company if you ask me.

2) An even more divided Congress. At the end of 2010, with the rise of the Tea Party and the significant victories of their Republican supporters in the midterms, it seemed that the nation could not be any more divided. Then we hit the debt ceiling in August. Oh boy, what a circus! The result of the debt ceiling debacle has been well documented (here and elsewhere) and has not been good. President Obama has essentially become as ineffective at George W. Bush was in his last year, and the Republicans are viewed as too extreme and very stubborn. Its now generally accepted that nothing significant can be accomplished until after the 2012 elections. In other words, its going to be another year of a "do-nothing" Congress and a spineless President Obama.

3) Payroll tax cut results in even lower tax rates. While I understand that we're trying to stimulate the economy, we also have a massive deficit problem. Its very hard to tackle both problems at the same time. Without coming up with any cuts to government expenditures in 2011, Congress thought it would be fine to add another $175 billion to the budget deficit by cutting the Payroll Tax. Whats worse, Congress just extended this tax cut into 2012. With all the promise that the new Tea Party Congressmen brought last year that they would finally be the ones to shrink the deficit, they in fact allowed the budget deficit to get even larger than the year before.

4) The Bush tax cuts keep on keeping on. As I'm sure you've heard, President Obama and most Democrats want to let the Bush tax cut expire at the end of 2012. They talk about how it benefits the rich and we could raise $700 billion over the next 10 years by letting the tax cuts expire on those making more than $250,000 per year. Did you know that the Bush tax cuts also helped the poor and middle class? Its true, Bush cut taxes at every level. In fact, if we let all the Bush tax cuts expire it would generate almost $4 trillion in additional revenue over the next 10 years - that's almost 6 times more revenue. Let's stop all the talk about how the rich aren't taxed enough. We already have the most progressive tax system. If you don't believe me check out this link. Of the 24 largest economies in the world our wealthy pay the highest shares of taxes relative to their share of income (look at the ratio in the third column). The point is this: we have to raise taxes to help close the budget deficit, but if its going to be fair then we have to raise taxes on everyone.

Merry Christmas, Happy Hanukkah, and Happy New Year!

Thursday, September 8, 2011

Can We Really Pass a Jobs Bill That is Deficit Neutral?

Obama speaking at a joint session of congress.
Picture from whitehouse.gov

The short answer has to be no, but Obama still stood in front of Congress and the American people tonight and proposed all sorts of new spending and said that it would not add to the national debt. The reason for this is that Obama is now asking the Super Committee to come up with additional cuts to compensate for this new bill. Which means higher deficits now in exchange for non-binding spending cuts in the future.

I have not seen all the details of Obama’s jobs bill yet, but from his speech there seemed to be three large buckets of money spent (or lost). The total cost is expected to be $447 billion and it is broken down as such:

1) $140 billion. The first is a new infrastructure program that focuses on building and repairing bridges, airports, highways, trains, etc. Where and how the money will be allocated will be a focus of the debate, but this is unlikely to see a great deal of resistance in Congress because it will actually create jobs. Additionally, most politicians believe that building and maintaining infrastructure is a basic responsibility of government.

2) $245 billion. The second is a reduction in the employer payroll taxes by half, up to $5 million (he lowered employee pay roll taxes last year). This could be interesting because it would make hiring new employees less costly for small businesses. Obama also proposed a full payroll tax holiday for increases in payrolls up to $50 million.  One might argue that this will do little to incentives employers because it will be temporary. While it will likely give some employers the incentive to higher more workers, I can't help but ask myself if this will pay for itself in the long-run or if its just money lost.

3) $62 billion. The final proposal is the extension of unemployment benefits for another year. As of right now you can collect unemployment benefits for 99 weeks, and Obama wants to take that to over 150 weeks, or about 3 years. That's right, in an effort to get people back to work, Obama want to provide an incentive for you to continue living out of their parents basement on the government's (taxpayers) dime. Call me insensitive, but if you have been unemployed for 99 weeks, then you are looking for the wrong job. I have a very hard time believe that anyone who has been unemployed for that long is seriously looking for a job. I have an idea, let's pull the plug on all those people a gradually pull back that maximum benefit from 99 weeks to 25 weeks and I guarantee we will start to see a significant drop in the unemployment rate.

There is no question that the economy needs something to get it going again, but I'm afraid that we're about spend another half a trillion dollars and get no results. 

Monday, August 8, 2011

Best Roundtable Discussion from the Sunday News Shows on the National Debt

I always enjoy watching the roundtable discussions on the various Sunday morning news shows. I feel like they can give you the best perspective on where Republicans and Democrats stand on each issue in one news segment.

Meet The Press had an all star line up yesterday with a person for each political view in Washington today. Rachel Maddow was there for the liberals, Alex Castellanos for the conservatives, Austan Goolsbee for the Obama administration, and Alan Greenspan was the grandfather who brought sanity to the discussion. I guess you could go a step further and say that David Gregory was the American people, but that may be taking it too far.

Watch the whole thing, but the highlight of the discussion starts around 11:00 when Greenspan tells us that the deficit is worse than the projections that we're using because GDP is not growing as the rate that is assumed. He also said that there is no way to Cut spending without paying for it, but cutting spending is less damaging than raising taxes.

Please watch the video after the break.

Friday, August 5, 2011

S&P Downgrades United States Debt Rating

Get ready for another bad week in the markets. Standard and Poor's announced this evening that it is downgrading the United States' sovereign debt rating to AA+ from AAA. This is the first time in history that US debt was not rated AAA, the highest possible rating. To make matters worse, S&P left the outlook at Negative and stated that there is a possibility that another ratings downgrade could be coming within the next two years if progress is not made in Washington to reduce the national debt.

The full report can be found here. Text from the press release can be found after the break.

Wednesday, August 3, 2011

Photos From of the Debt Ceiling Crisis

The White House was kind enough to release some of their behind-the-scenes photos of the debt ceiling debate. I find myself staring at each one trying to figure out who was winning at the moment, and who was looking desperate. Take a gander. There are 20 of them. 

President Barack Obama meets with Speaker of the House John Boehner on the patio near the Oval Office, Sunday, July 3, 2011. (Official White House Photo by Pete Souza)

Monday, August 1, 2011

Debt Ceiling Debate Sinks Obama's Approval Ratings

There is no question that the media has been hard on Obama through this whole debt ceiling problem. The consensus seems to be that Obama keeps caving to the demands of the Republicans and his base is furious with him. Recent polls confirm this view as the President's approval ratings have been in a free fall. The current Real Clear Politics average has the President's approval rating at 44.8% which is very close to the lowest of his presidency so far (it was 44.4% in October of 2010). The trend is negative as two polls came out yesterday from Gallop and Rassmussen with disapproval ratings ahead of approval rating by a margin of 11%. In my opinion, it is likely that this margin will increase as the President's liberal base is angry that he was not able to get any tax increases in to final deal. It's probably too late for any Democrat to launch a Presidential campaign to try to beat Obama in a primary, but if it were earlier in the year, I would think it a real possibility. Check out Obama's historical approval ratings after the break:
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