Budget News Oct. 25-29

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News
FRIDAY
UPDATE: 11 EU States Say Must Cap 2011 Budget Rise At 2.91%
A group 11 European countries said Thursday that next year's European Union budget shouldn't rise by more than 2.91% and proposals to increase it by around 6% were "unacceptable."
High-speed trains get new U.S. funds
The Department of Transportation awarded $2.4 billion Thursday for high-speed rail projects, though a lot more money is needed to make the project a reality.

THURSDAY
Spain's Deficit Cuts Rewarded With Cheaper Funding: Euro Credit
Spain’s central government trimmed the deficit by 42 percent in the first nine months, compared with 31 percent in Greece and a widening budget gap in Portugal.
Tuition, Pell Grants Rise in Tandem
...the federal government gave out $28.2 billion in Pell grants to students in the 2009-10 school year, almost $10 billion more than the previous year.

WEDNESDAY
Deficit that sparked Greek crisis tops 15 pct
Greece's 2009 budget deficit, whose wildly gyrating figures triggered the country's fiscal crisis, will be set "once and for all" at above 15 percent of GDP, the finance minister said on Wednesday.
Va. governor tells agencies to prepare cuts
Mr. McDonnell's memo tells the directors of state bureaucracies to submit contingencies for reductions of 2 percent, 4 percent and 6 percent.
Ireland Needs to Turn Focus to Economic Recovery, Economists Say
The planned spending cuts and tax increases are twice as much as the government previously said it would put in place to narrow the budget gap to the European Union limit of 3 percent of gross domestic product in four years.
Canada watchdog to issue stimulus spending report
The extra spending is due to stop at the end of March 2011. A report into the program as a whole will be issued in about a year's time, Fraser said in a CBC radio interview on Saturday.
UPDATE: Ireland: EUR15B In Budget Cuts Needed Over 4 Years
The EUR15 billion of savings from 2011-2014 will cut a swathe across all government departments--including social welfare, education and health.

TUESDAY
S&P boosts U.K. outlook, lauding cutbacks
So far, austerity is working for the U.K.
Aggressive Deficit Reduction: Will Congress Buy It?
With a Dec. 1 deadline fast approaching, President Obama’s bipartisan fiscal commission is struggling between recommending aggressive and painful ways to reduce the $1.2 trillion annual deficit and more politically prudent proposals that would skirt cuts in Social Security, Medicare and other costly but highly sensitive entitlements.

MONDAY
Britain's austerity: 4 lessons for Washington
The U.K. coalition government last week spelled out spending reductions that average 19% across all agencies over 4 years. That's 500,000 public-sector jobs. Little is spared. Housing benefits and education funds will be cut. Defense will be pared 8%. The cuts go on.
Gov. Bobby Jindal outlines $107 million in state budget cuts
The governor plans to order an executive order later today outlining the specifics of what will be cut, but he confirmed that $34.7 million will come from public colleges and universities, and $20.8 million will be taken from the Department of Health and Hospitals.
British-Style Spending Cuts Would Shock U.S. Budget -- But Could It Work?
The British government this past week announced the steepest set of spending cuts in decades, vowing to slash department budgets by close to 20 percent and eliminate a half-million public sector jobs -- all in the name of closing the country's stubborn deficit

Economist Comments
WEDNESDAY
Economy is running out of gas
The federal government has taken on a lot of debt, but it’s mostly offset deleveraging in the rest of the economy.
Rattner: Our Leaders Aren’t Truthful about the Deficit
In a freewheeling conversation with The Fiscal Times, former ‘car czar’ Steven Rattner says that our leaders – including President Obama – haven’t been straight enough with the American people about what’s needed to get deficit spending under control.
United States can follow Britain's lead with budget overhaul
Britain’s budget deficit, now 11.4 percent the size of its overall economy, is not that much larger than the United States’ — 8.9 percent — but the debate has been similar in both countries.
Analysis: France may face "Thatcher moment" on EU budget
Nearly three decades after British Prime Minister Margaret Thatcher famously told Europe "I want my money back," President Nicolas Sarkozy faces a similar financial predicament as France crawls, cash-strapped, out of recession.

TUESDAY
U.S. Deficit 2010: Are We Heading Down The Same Path As The French
For those who depend on these programs for survival they will find themselves living no better than someone in a third world nation. For those whose taxes have increased they will see their hard work and effort diminished into a government fund that produces nothing. For those living in between they will gradually join the masses at the bottom.

MONDAY
The Fiscal Disaster Set to Explode in December
States have been borrowing from Washington to fund their unemployment trust funds. Next month, they have to start paying that money back.

Blogs
FRIDAY
How To Cut Federal Spending
Our nation’s deficits are, in reality, a spending problem. Even if the 2001 and 2003 tax cuts are made permanent, revenues are set to return to their post-World War II average of 18% by 2020. Spending, on the other hand, continues to explode. After averaging 20% since World War II, federal spending is set to soar to 26% of the gross domestic product (GDP) by 2020. If Congress is to have any chance of cutting the deficit, spending must be cut. But how?
Consumer, Tax Groups Offers Spending-Cut Ideas
An unusual joint-project by the U.S. Public Interest Research Group and the National Taxpayers Union has come up with 30 different cuts in government spending that it says would save taxpayers $600 billion.
New papers on fiscal policy
I don't think the multiplier is zero for the United States, but very likely it's zero in a bunch of places.

THURSDAY
Report: Greece Falling Short of Rescue Package Deficit Goal
According to Bloomberg, the yield on the Greece 10-year bond jumped to 10.39% from 9.36% on Tuesday, and the yield on the Ireland 10-year bond increased to a new crisis closing high of 6.77%.

WEDNESDAY
City watchdog offers cost cut recommendations in controversial report
Chicago faces future annual budget shortfalls of more than $1 billion, but it has options that could cut $250 million in yearly costs, the city's top internal watchdog concludes today in a report that’s sure to stir controversy at City Hall.

TUESDAY
Michigan’s Pension Reform Experience
This pension reform was not comprehensive. The Michigan Public School Employees’ Retirement System (MPSERS) was left untouched and continues to operate as a defined benefit plan. A study by Richard C. Dreyfuss of the Mackinac Center estimates, based on the state’s assumptions, that the unfunded liabilities for pension and health care benefits for Michigan’s public school teachers range between $28 and $39 billion.
Secondary Sources: Recovery Stalled, Deficit, Mortgage-Interest Deduction
A roundup of economic news from around the Web.

MONDAY
Professor Krugman lambasts Britain’s coalition government in his latest column
The big point missed by those who think elevated public debt doesn’t matter is that these periods of excessive debt utterly crippled the UK economy.
Updated Cost of Fannie and Freddie Bailout
The $148.3 billion Treasury has given from taxpayer coffers to the GSEs has been to cover losses on mortgage deals made from the bubble period. I.e. today's defaults are on yesterdays mortgages.

Reports
FRIDAY
How to Cut $343 Billion from the Federal Budget
Federal spending is on an unsustainable path that risks disaster for America. Runaway spending has increased annual federal budget deficits to unprecedented levels, adding $2.7 trillion to the national debt in the past two years alone. Each year’s huge federal deficit increases the mountain of national debt borrowed from future generations of Americans. Congress needs to cut federal spending sharply and quickly. This paper sets forth $343 billion in available spending cuts.

THURSDAY
The Effects of Fiscal Stimulus: Evidence from the 2009 'Cash for Clunkers' Program
We find that the program induced the purchase of an additional 360,000 cars in July and August of 2009. However, almost all of the additional purchases under the program were pulled forward from the very near future; the effect of the program on auto purchases is almost completely reversed by as early as March 2010 – only seven months after the program ended. The effect of the program on auto purchases was significantly more short-lived than previously suggested. We also find no evidence of an effect on employment, house prices, or household default rates in cities with higher exposure to the program.

WEDNESDAY
The U.K. Budget Cuts: Lessons for the United States
The Conservative-led coalition government in London plans to cut a total of £81 billion ($130 billion) from public spending over the next four years, as well as 490,000 public sector jobs.

MONDAY
Preventing a National Debt Explosion
Without changes in tax and spending rules, the national debt will rise from 62 percent of GDP now to more than 100 percent of GDP by the end of the decade and nearly twice that level within 25 years.