Budget News Nov. 8-12

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News
FRIDAY
IMF Shadow Looms as Irish Sacrifice to Avoid Bailout
Unlike neighboring Britain in the 1970s, Ireland has never turned to the IMF for aid and the government is determined to avoid being propped up like Greece.
Scottish Parliament Faces Budget Crisis
While EU monetary commissioner Oli Rehn has been in Dublin trying to force through the Republic’s budget, across the water in Scotland a budgetary crisis looms large.
State budget hole deepens
Maryland lawmakers will face a $1.6 billion budget hole when they return to Annapolis in January, state fiscal analysts are reporting today, a deficit larger than what they had anticipated earlier this fall.
Greek Jan-Oct Budget Deficit Down 30% But Lags Targets
This result also significantly lags the International Monetary Fund and European Union EUR110 billion bailout agreement that requires a 36.9% reduction of the 2010 budget deficit on an annual basis.
Budget Deficit in U.S. Narrowed to $140.4 Billion in October
The deficit totaled $140.4 billion last month compared with $176.4 billion in October 2009, according to the Treasury Department’s budget statement released in Washington.
Facing Austerity, Britain Unveils Welfare Cuts
The measures include tough and politically contentious penalties aimed at what government ministers have described as the “work-shy” and “scroungers” among Britain’s five million long-term unemployed.

WEDNESDAY
Balance Budget Amendment to be pushed in new Congress
When Utah Senator-elect Mike Lee arrives in Washington, he will push for a balanced budget amendment in the Senate, while simultaneously, a group called Balanced Budget Amendment Now will pressure Congress through a grassroots campaign that encourages voters to write to their senators and ask them to support the amendment.
Federal workers vie to save the most money
No matter how savvy the ideas, they represent mere drops in a rather large bucket. Cutting the deficit is no easy task for a nation that racked up a $1.29 trillion deficit in fiscal year 2010.
Senate GOP to Vote Next Week on Earmarks, Balanced Budget
At the top of the pile of conference resolutions — none of which would be binding on Members — is an across-the-board earmark ban backed by Sen. Jim DeMint.
Fiscal Commission at Impasse over Debt Reduction
Although some deficit hawks believe the midterm elections were a defining moment for the country in facing the mounting federal debt, Senate Budget Committee Chairman Kent Conrad thinks Obama’s fiscal commission may not be able to pull the trigger.
UK: New dark age on our streets: Up to 75% of councils are dimming the lights to save money
Councils take step in order to slash costs in face of 26% funding cut.
Panels Tackling Deficit, but Doubts Remain that Consensus Can Be Forged
The cavalcade of recommendations is set to continue Wednesday, when the joint Peterson-Pew Commission on Budget Reform plans to release its report, "Getting Back in the Black," a project helmed by former congressmen Bill Frenzel (R-Minn.), Tim Penny (D-Minn.) and Charles Stenholm (D-Tex.).
White House: Rail funds are for rail. Period.
...Transportation Secretary Ray LaHood is threatening to take back stimulus funds from states if they do not follow through on proposed rail projects.

TUESDAY
Virginia operating budget grows 59 percent over past decade
Driven by spending on services like health care, education and social services, Virginia's total operating budget increased 59 percent between 2001 and 2010, a report released Monday shows.
Anti-Smoking Programs Are Slashed
As Budget Constraints Prompt States to Trim Cessation Efforts, Rate of Adult Smokers Stops Declining

MONDAY
GOP to Use Debt Cap to Push Spending Cuts
The U.S. currently has $13.7 trillion of debt outstanding, just shy of the $14.3 trillion limit Congress set in February. Barring big changes in federal spending, taxes or the economy, the government is expected to hit the ceiling by May, and administration officials have already said it will have to be raised by then.
Irish Debt Woes Revive Concern About Europe
An Irish bond market already in free fall plunged further after Ireland announced on Thursday that it planned to nearly double its package of spending cuts and tax increases to try to rein in its huge deficit.
$14,300,000,000,000: Debt Limit Showdown Looming
...Rep. John Boehner, the likely new Speaker of the House, told ABC's Diane Sawyer on Thursday that there are "multiple options" for how to deal with the debt limit, noting that Congress will make sure the country is "ready to meet our obligations."
Now in Power, G.O.P. Vows Cuts in State Budgets
States face huge deficits, even after several grueling years of them, and just as billions of dollars in stimulus money from Washington is drying up.

Economist Comments
FRIDAY
On Fixing Social Security, and the Budget
So the commission has proposed a little bit from Column A, a little bit from Column B--a lengthy phased in hike in the retirement age; a refocus of benefits on the bottom 50% of the lifetime earnings distribution; and, of course, more taxes, so that Social Security levies will ultimately cover about 90% of taxable payrolls. Perhaps this isn't the best way it could be done--but I think it's better than trying to divine an answer from the polls.
Deficit Reduction Plan Draws Scorn From Left and Right
By putting deep spending cuts and substantial tax increases on the table, President Obama’s bipartisan debt-reduction commission has exposed fissures in both parties, underscoring the volatile nature and long odds of any attempt to address the nation’s long-term budget problems.
EDITORIAL: T&A at the TSA
Bureaucratic, one-size-fits-all approaches to security invite disaster. The $2.4 billion in taxpayer funds the agency plans to waste on whole-body scanners will do nothing to make America more secure. The new Congress needs to take note and rein in this rogue agency.
A Deficit of Nerve
Obama's commission has ideas that Republicans can use.
Beware Commissions Bearing Gifts
Bring federal spending from its present 25% of GDP down to 21%. Nice, but as the Cato Institute's Chris Edwards noted Wednesday, "federal spending was just 18% of GDP in President Clinton's last two years in office."

WEDNESDAY
Debt Limit Impasse Could Drag On For Months
The consensus view seems to be that a debt limit impasse will lead to an acute crisis: at least a government shutdown, possibly a failure to make interest payments on government bonds, and an ensuing spike in bond yields and fall in stock prices.

TUESDAY
Analysis: If Kansas' GOP fiscal conservatives want to cut budget, 2011 is their big chance
The incoming Republican governor has received a pessimistic scenario from legislative researchers, projecting a deficit of $492 million on June 30, 2012, the end of the next fiscal year.
The Republicans Will Have To Cut Some Lemons
Getting rid of small government programs like the Corporation for Public Broadcasting will put a dent in the deficit and earn GOP credibility to take on Medicare and Social Security.
WaPo’s Fiscal Truths
A Washington Post editorial today discusses the National Academy of Sciences “Fiscal Future” study. The NAS report modeled four possible tax and spending paths for the nation over the next 70 years.
RAHN: The real test for the GOP
What is new is the big jump in federal government spending in the past two years, from an average of about one-fifth of GDP to about one-quarter of GDP, and to this must be added another 13 percent for state and local government spending as a percentage of GDP, causing the total government sector to rise from about one-third of GDP to almost 40 percent.

MONDAY
SCHILLER: The anatomy of (stimulus) failure
The $100 billion in tax rebates was spent quickly by consumers. In the process, the negative growth in gross domestic product of the first calendar quarter was reversed in the second quarter. The tax rebates did the job of stimulating short-term growth, and did it quickly. The ideologues advising Mr. Obama ignored this evidence, relying instead on surveys of consumer intentions.
California: The Lindsay Lohan of States
You've racked up nearly $70 billion in general obligation debt, and that doesn't include your $500 billion unfunded pension liability. Your own analysts predict you'll face a hole of at least $80 billion over the next four years.
The Race to Erase Debt
American households are turning away from debt and embracing thrift, says columnist Chris Farrell. Can government do the same?

Blogs
FRIDAY
The Deficit Commission: A Good Try That Falls Short
...ultimately the report falls short because it fails to address the proper role of government. In fact, it tacitly accepts the idea that government should be doing everything it is doing now.
Fiscal Responsibility Commission Draft Report Quick Take
After taking a first brush through the fiscal commission co-chairs’ 50-page report, my initial conclusion is that the authors are headed in the right direction but remain trapped in a philosophical framework that misunderstands the role of government.
Debt Commission Reform Proposals – What Are Their Chances?
To improve the chances that history does not repeat itself, the commission’s proposals need to be combined with proposals to reform the budget process.
Heritage Reacts to Simpson-Bowles Deficit Reduction Panel Proposal
They would hike taxes to 21% of America’s economic output (i.e., gross domestic product or GDP), well over the historical average of 18% of GDP.
Obama’s Fiscal Commission: The Good and Bad
The report proposes to cut $200 billion from discretionary spending by 2015 from Obama’s proposed spending that year of $1,309 billion. That’s a 15 percent cut. However, the word “cut” needs to be qualified because discretionary outlays were $1,041 in the pre-stimulus year of 2007, and they were just $615 billion in the pre-Bush year of 2000.
European Debt Update
There is no immediate liquidity crisis for Ireland (unlike for Greece earlier this year), but clearly bond investors are spooked by the discussions of bond holders having to take haircuts if there is a bailout.
Co-Chairmen of Obama’s Fiscal Commission Unveil Real Tax Increases and Fake Spending Cuts
If you read through their report, it sounds like there are lots of spending cuts. But they never explain that these supposed cuts are really just reductions in previously-planned increases.
So, About That Deficit Commission …
The magnitude of deficit reduction required is far greater than anything we've had to do so far (except in post-war interludes where the solution was to um, not spend so much money shooting at people). There is no magic pot of money out there that does not come attached to some angry interest group.

Reports
FRIDAY
Bowles–Simpson Commission Co-Chair Report: A Good and Welcome First Step
These statistics offer a quick preview of one of the flaws of their plan—a 50/50 approach to eliminating the deficits and lowering the projected trajectory of the debt through tax increases and spending cuts. As revenues are projected to soon return to their historical level—even if the tax cuts are made permanent—spending is clearly the problem.

WEDNESDAY
Take the Austerity Cure: G-20 Should Resist U.S. Efforts to Spread More Debt Around
Austerity-favoring conservatives in the G-20 group—including U.K. Conservative Party Chancellor of the Exchequer George Osborne, European Central Bank President Jean-Claude Trichet, U.S. Nobel laureates in economics (such as Edward Prescott, Vernon Smith, and James Buchanan), and the leaders of several European governments—have the better answer: By reducing deficits, nations facing deepening deficits like the U.S. and U.K. can shore up confidence in their futures, encourage private investment, and accelerate their economic recoveries.

TUESDAY
The U.N. Should Pay What Its Owes the U.S. from Its Tax Equalization Fund
The United Nations reported that, as of December 31, 2009, it was holding nearly $180 million owed to the United States from the U.N.’s Tax Equalization Fund (TEF).
The Negative Consequences of Government Expenditure
The U.S. national debt currently stands at 62 percent of GDP—its highest level since WWII. Under plausible assumptions, this ratio will rise to at least 80 percent and possibly 185 percent of GDP by 2035 and continue increasing thereafter.