Budget News Oct. 18-22

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News
FRIDAY
Day of the long knives
The government has specified its spending cuts. Now it must implement them
Ireland Had Highest 2009 Euro-Area Budget Deficit as Greek Data Is Delayed
All 16 euro-region nations reported a shortfall last year, with Ireland at 14.4 percent of gross domestic product, revised from 14.3 percent in April, and Spain at 11.1 percent, the European Union’s statistics office in Luxembourg said today in its second budget report for 2009.

THURSDAY
States Will Put Raters On Muni Hot Seat
Regulators who oversee some of the nation's biggest municipal-bond buyers will hold a hearing in November to assess whether bond ratings adequately reflect looming pension-fund and health-care costs for government workers.
Britain Plans Deepest Cuts to Spending in 60 Years
The British government on Wednesday unveiled the country’s steepest public spending cuts in more than 60 years, reducing costs in government departments by an average of 19 percent, sharply curtailing welfare benefits, raising the retirement age to 66 by 2020 and eliminating hundreds of thousands of public sector jobs in an effort to bring down the bloated budget deficit.

WEDNESDAY
Spending Review: Osborne wields axe
Chancellor George Osborne has unveiled the biggest UK spending cuts since World War II, with welfare, councils and police budgets all hit.

TUESDAY
National Debt Up $3 Trillion on Obama's Watch
The National Debt stood at $10.626 trillion the day Mr. Obama was inaugurated. The Bureau of Public Debt reported today that the National Debt had hit an all time high of $13.665 trillion.
Deficit fighting: The first cut is the deepest
Even with all the willpower in the world, getting the annual deficit down to 3% of the economy by 2015 -- Obama's goal -- will be no mean feat. It could mean having to cut spending or raise taxes by $240 billion that year alone.
GOP May Face Shutdown Fight
...with the deficit running over $100 billion a month and the national debt already above $13.6 trillion, Treasury Department officials predicted earlier this month that they would need Congress to raise the debt limit again in the first or second quarter of 2011. A failure to raise the debt limit could result in a government shutdown, because the government could not borrow more money to operate.

MONDAY
EU Ministers Struggle over Budget Rules
European finance ministers locked horns Monday over stricter budget rules to avoid another government debt crisis as protests against spending cutbacks rattled France and Italy — a sign of the politically difficult choices ahead.
FY '10 continued torrent of federal red ink
September's deficit was $34.5 billion, and it brought the total deficit for fiscal year 2010, which ended Sept. 30, to $1.294 trillion — the second-highest total on record, behind 2009's staggering $1.416 trillion figure.
Sovereign Debt Default Risk
...default risk has fallen the most for Japan, China, Australia, Chile, and South Korea since July 2nd. It has risen for just four countries -- Egypt, Portugal, Ireland, and the US. Yep, the US has seen default risk rise 15.7% since the start of July, even as the equity market has performed well. Germany has the lowest default risk of all the countries shown.
Obama Administration Set to Announce Second Year of $1.3 Trillion Deficit
The Obama administration will announce it has exceeded the $1 trillion mark in the federal deficit -- predicted by Congress' research arm last week as $1.29 trillion -- for the second straight year as it projects an even larger gap between revenues and spending for fiscal year 2011.

Economist Comments
FRIDAY
San Francisco's Public Pension Revolt
The city has cut back on almost every service: Summer schools have been shut, potholes deepen, parks close early, and services for the poor have been pared to the quick.
Fools Rush In Where Europe Rushes Out
All of these countries--and many more--are going through painful retrenchments because they spent too much money, made too many promises, and expected too little from their citizens. The era of European austerity is upon us, because the Europeans--or at least those in charge--understand the mess they've made of their economies.
Britain's 'Austerity' Lessons
What Margaret Thatcher can teach David Cameron—and the Republican Party.
Can Obama match Britain's guts on budget cuts?
Amid widespread frustration over government spending, US politicians should heed British Prime Minister David Cameron's frank talk on debt – and his plan to spend only what his government takes in.
Five Fiscal Policies To Reclaim Economy
Americans respond to incentives and disincentives. Higher costs of new regulations, the threat of higher tax rates embedded in the huge federal deficits and major increases in federal government control in this economy over the past 21 months have created major roadblocks for business creation, hiring and business expansion.

THURSDAY
U.K. Cuts Invite Comparison With Thatcher
Helped by further economic reforms—including the privatization of public assets and deregulation of the financial sector—the U.K. entered a period of sustained growth.
British budget cuts: two big lessons for America
Only time will show whether severe budget cuts in Britain are too deep for that fragile economy to sustain. Even so, the political will to cut spending and the readiness to sacrifice sacred cows stand out as examples for America.
Why Britain's Age of Austerity Is So Important
At 70 percent, Britain's public debt to GDP ratio is no worse than healthier European economies like Germany and Austria. But when you look at public and private debt combined, the picture gets very bleak very quickly.

WEDNESDAY
BACON: The once and future kingdom of austerity
I'm betting austerity will pay off for the United Kingdom. I can only pray that the United States can embrace serious cost-cutting before the gravitational tug of our massive debt pulls the economy into oblivion.
Examiner Editorial: Government's spending binge must be stopped
...create a Spending Realignment and Closure (SPRAC) commission to do for the federal budget what was done in the 1980s by the immensely successful Base Realignment and Closure (BRAC) panel in closing unneeded military facilities.

TUESDAY
BLANKLEY: Routing the regulators
Between 1978 and the late 1990s, under four presidents, real legislative efforts were taken to reduce some regulations by statute.
RAHN: A Congress of children
Children like to spend other people's money on themselves and their friends without thinking about how it was earned and the hard work that went into earning it.

MONDAY
Shamed By What America Owes
Barack Obama apparently never figured out that he had been elected in part because that massive Republican borrowing had sickened the American people. So in near-suicidal fashion, he took Bush's last scheduled budget deficit of more than $500 billion — in a Keynesian attempt to get the country out of the 2008 recession and financial panic — and nearly tripled it by 2010.
The Economist on the U.S. Pension Crisis
San Jose offers workers its own muncipal plan and according to Robert Novy Marx and Joshua Rauh, their unfunded liability is about $4 billion, or 321% of the city’s 2006 revenues

Blogs
FRIDAY
Size Really Does Matter
The direct control governments have over the size of their budgets also influences how fast their economies grow—as it turns out a bigger state really does translate into slower growth in developed countries.
The national debt problem is here
We have wasted plenty of money over the past few years on foolish and frequently unnecessary Federal spending programs. Though enormously wasteful, government stimulus spending pales by comparison with two programs Americans have been paying into for years–Medicare and Social Security
Unsustainable Spending Growth Hurts
...it is not reasonable (and ultimately more painful) to bury one’s head in the sand and pretend that state and local government spending can continue to go on at its current pace.

THURSDAY
U.S. Federal Spending for Higher Education Since 1962
How much does the federal government subsidize the cost of college in the United States?

WEDNESDAY
Spending Is Choking Us And Tax Cuts Are No Heimlich Maneuver
The real impediment to economic growth is not taxes, but the government spending that makes high taxes necessary in the first place.
The False Choice Between a VAT and Impossible Spending Cuts
...it’s worth pointing out that the VAT has not prevented gigantic deficits in nations such as Greece, Japan, Ireland, Spain, England, etc, etc. Politicians in those nations implemented VATs, usually with promises that the money would be used to reduce other taxes and/or lower red ink, but all that happened was more spending and bigger government...
Forget Keynes. Spending cuts don’t hurt the economy, they help it
...what most people value is not money itself but the things that money can buy. Government spending merely reallocates wealth, to the detriment of long-term wealth creation.
Chicago, Other Cities Face Huge Tab for Their Government Pensions
...Chicago has only about $22 billion in pension assets to pay for $66 billion in pension promises to its city workers, while New York City has $93 billion available to pay $215 billion in city pension promises, and Boston has only $3.5 billion available to pay $11 billion in promises.

TUESDAY
Charitable Donations to the Government
Last year, the Bureau of the Public Debt received $3.1 million in such donations. Looking at the federal budget, I found a total of $241 million in “gifts and contributions” for fiscal year 2010.
The ‘New Normal’ Myth Calls For Ronald Reagan 2.0
If we get tax, regulatory, trade and currency policy right, today’s faddish notion of a new normal will quickly fade into the dustbin of history.

MONDAY
Another Year of Trillion-Dollar Deficits
To put these figures in perspective, the annual budget deficit between 1789 and 2008 never reached $500 billion. As a percentage of the gross domestic product (GDP), the past two years’ deficits of 10.0 and 8.9 dwarf all other deficits since World War II.
Historic government spending by area: get the data back to 1948
Historic government spending has changed rapidly since the second world war - see how those priorities have altered
Number of the Week: Slow Growth Adds to Deficit
32%: The increase in U.S. government debt over the next five years if US economic growth stays as slow as it is now.
Spending Cuts: Possible But Not Probable
There's a ton of fat to cut -- such as per diem expense allowances for government employees -- but a list of programs on the chopping block is conspicuous in its absence.
Secondary Sources: National Debt, 2010 Taxes, Infrastructure as Stimulus
A roundup of economic news from around the Web.
Pelosi’s PAYGO Ploy: Budgetary Gimmick Provides Cover for Liberals
Four years after Democrats campaigned on the promise of using pay-as-you-go budgeting, their record is dismal. Since gaining control of Congress in 2007, they’ve gamed, ignored or employed PAYGO on 32 occasions to justify new spending or tax increases.

Reports
FRIDAY
Government Size and Implications for Economic Growth
...where government size is measured as total taxes or total expenditure relative to gross domestic product (GDP), there is a negative correlation between government size and economic growth--where government size increases by 10 percentage points, annual growth rates decrease by 0.5 to 1 percent.

MONDAY
Making Budget Rules Work
...Congress faces two sets of problems, a commitment problem and an enforcement problem, that prevent well-meaning legislators from effecting change.