Budget News Nov. 1-5

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News
FRIDAY
The cost of doing nothing for two years
By 2013, the total U.S. federal debt will total 76% of GDP if Congress remains gridlocked, and digging out at that point will be unimaginably painful.
Managing the Federal Debt
In Washington, on Wall Street, and in foreign capitals, all eyes are on mounting government debt, particularly America's. The scope of American borrowing, and the ease of the government's access to credit, offer useful signals about the strength of our economy and about the future direction of global public finances — especially during this time of economic uncertainty.

THURSDAY
GOP Faces Test on Budget Cuts
Brian Riedl at the conservative Heritage Foundation says he can save $343 billion next year. His recipe: Cut $15 billion in farm subsidies, $10 billion in aid to states, $8 billion in aid to college students, $8 billion more by lower cost-of-living adjustments to Social Security and other benefits, and so on.
Fiscal Reality to Hit Quickly for New Governors
The stakes are particularly high in California, which faces a 12.4% jobless rate and a projected $12 billion budget shortfall.

WEDNESDAY
AIG set to repay $37B of bailout
AIG said Monday it raised nearly $37 billion from the divestment of two foreign insurance units and will use that money toward repaying a government bailout.

TUESDAY
As Europe Cuts, America Spends
The results of this natural experiment will be highly valuable because they'll teach us so much. But they will also be very bad news for one side or the other.
W.H. Spending Plans Still Murky
If the White House were seriously considering creating a detailed list of potential cuts of its own, it would have very likely leaked by now.

MONDAY
Portugal Ends Long Standoff Over Budget
Portugal avoided a possible collapse of its government after the country’s two leading parties ended on Saturday a monthlong standoff over next year’s budget.
Hungary Unveils Budget
The Hungarian government has prepared the 2011 budget bill based on a budget deficit target of 2.94% of gross domestic product, meeting European Union budget-deficit requirements for the first time, Economy Minister Gyorgy Matolcsy said Saturday.

Economist Comments
THURSDAY
GOP: Unlock the American Economy
You cannot understand the way any business functions and then pass a 2,000-page law to regulate the health economy and then a 2,000 page law to re-regulate the entire financial economy. You cannot—in one year—load 4,000 pages of limitless uncertainty on the back of the economy and expect it to grow without Washington life support.
BACON: No cuts, no glory
In the 10-year forecast submitted with the midyear review of the fiscal 2011 budget, President Obama already assumes a $75 billion reduction in discretionary spending between 2011 and 2012, thanks to resumed economic growth, reduced unemployment, higher payroll taxes and reduced entitlement payouts to the poor.

WEDNESDAY
The New Deal Was Anything But A Success
Franklin D. Roosevelt blamed the country's woes on the problems he inherited from his predecessor, much as Barack Obama does today. But unemployment was 20% in the spring of 1939, six long years after Herbert Hoover had left the White House.
State Bailouts? They've Already Begun
Bond subsidies and transfers have allowed states to avoid making tough decisions. It won't last.
Paul Ryan's big plans for a small budget
Ryan has been shaping a detailed plan to achieve a balanced budget strictly through dramatic reductions in spending, with no tax increases, for years.

MONDAY
No, We Do Not Need More Fiscal Stimulus
The thinking undergirding the assertion that fiscal stimulus is what we need is built on the assumption that there exists some tipping point at which an economic recovery becomes self-sustaining and stimulus is no longer needed. Maybe that is true in certain contexts. But it is clearly not true in this one.
US Debt: A Recipe for Economic Disaster?
The foundation of the US dollar is already under threat. If it collapses, it will take other economies and currencies down with it.
BACON: Obama spends billions, only adds to college costs
A blizzard of cash creates inflationary snowdrifts.
Running Afoul of Obama's Adding Machine
The White House attacks the special inspector general for the $700 billion TARP, who stated that the bailout program is falling short of its goals.
Bipartisan Budget Cuts
Over at the Huffington Post, Andrew Moylan (National Tax Payers Union) and Nicole Tichon (Public Interest Research Group) forget about their political differences and propose $600 billion worth of budget cuts.

Blogs
FRIDAY
The Remedy Is Also the Problem
Meredith Whitney writes in yesterday’s Wall Street Journal, there’s no need to guess if states will be bailed out of their debt troubles. They are being bailed out right now, many times over. They are being bailed out by federal bonds, federal transfers, and as I and many others have argued, by fictional accounting.
A Budget Plan: Don’t Buy Stuff You Cannot Afford
Some 75 new Republican members of Congress got there by promising to stop the federal government’s massive overspending. And as Chris Edwards noted, there have been a number of lists of budget cuts proposed recently.

THURSDAY
Pennsylvania Capital Struggles to Pay Bondholders
The debt-beleaguered city of Harrisburg needs $305,952 to pay its creditors by November 15.
Morning Bell: Get To Work On Spending Cuts
The verdict is out on how many Americans believed President Obama then, but the verdict is in on his first two years in office: instead of a net spending cut, federal spending has exploded. Since 2008, federal spending has surged from $25,000 to $30,000 per household. And under President Obama’s budget it would reach $36,000 per household by 2020.

WEDNESDAY
It's Official: The Government Isn't Getting Its Money Back Out of GM
Even with the billions they've already "paid back"--by not using all the money--Uncle Sam needed the company to be worth more like $70 billion to break even on the bailout.

TUESDAY
A Visual History of U.S. Government Deficits
...the belief that the deficit is "mostly" due to collapsing tax revenues is only technically true in that, if you assume robust revenue growth had otherwise continued, the deficit would "only" be a colossal $600 billion, instead of a sickening $1.4 trillion.

MONDAY
Two Problems in One: Unemployment Funds Used to Balance Budget
Shaking the unemployment piggy bank into the general fund I think raises another important problem. How do we ensure governments don’t raid social insurance programs? Why not give workers individual control of their own unemployment savings accounts.
Krugman Wrong About Cause of Growing Deficits
In fact, lower tax revenue - because of the recession, not because tax rates are lower - explain only one third of the increase in the deficit. Two thirds of the increase in the deficit is due to more spending.
Morning Bell: Solutions for Sanity
Congress should enact a firm cap on the annual increase in total government spending, limited to inflation plus population growth. Lawmakers should exert all effort to keep overall federal spending to less than 20% of U.S. GDP, the historical post–World War II average for federal spending.

Reports
FRIDAY
The U.S. Postwar Miracle
We often hear that big cuts in government spending over a short time are a bad idea. The case against big cuts, typically made by Keynesian economists, is twofold. First, large cuts in government spending, with no offsetting tax cuts, would lead to a large drop in aggregate demand for goods and services, thus causing a recession or even a depression. Second, with a major shift in demand (fewer government goods and services and more private ones), the economy will experience a wrenching readjustment, during which people will be unemployed and the economy will slow. Yet, this scenario has already occurred in the United States, and the result was an astonishing boom.

THURSDAY
GET TO WORK: Freeze and Cut Spending
Congress must immediately freeze discretionary budget authority at 2010 levels and cut at least $170 billion from the federal budget for fiscal year 2012.
The U.S. Postwar Miracle
...dramatically reducing government spending and deregulating an economy can take that economy from sickness to health. In short, one of the main things a government can do to help a weak economy recover is to step aside.

MONDAY
RCM: The Case Against the Fiscal Stimulus
...the structure of a fiscal stimulus is crucially important and that the package Congress adopted was far from ideal, regardless of the merits of the Keynesian model.