Budget News Jan. 17 - 21

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News
FRIDAY
A Path Is Sought for States to Escape Their Debt Burdens
Policy makers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers.
Debt crosses $14 trillion mark
The amount of U.S. debt subject to the country's legal maximum has topped $14 trillion for the first time.
Bonus Payments to City Retirees Are Drawing Ire
As San Francisco struggles under ballooning pension and health care costs, the city’s retirees will receive unexpected cost-of-living bonuses totaling $170 million. The city’s anticipated budget deficit for the coming year is $360 million.
Obama Plans $42 Billion Cut in Iraq, Afghanistan War Costs as Troops Leave
The proposed $117 billion for fiscal year 2012, which begins Oct. 1, would be the lowest expenditure for the wars since fiscal 2005.

THURSDAY
Conservatives Propose Trillions in Federal Spending Cuts
House conservatives signaled Wednesday that they were serious about making a significant dent in the size of the federal government, offering a proposal that would cut $2.5 trillion from the government’s bankroll over a decade.
Even budget deficits are bigger in Texas
Texas lawmakers unveiled a Spartan budget late Tuesday night that slashes $31 billion in spending to close the state's massive budget deficit. Education, Medicaid and corrections would be hit particularly hard.

WEDNESDAY
Texas House to unveil deep cuts, balance budget without tax increases
Budget writers will have a tough job because spending in the current two-year cycle exceeds $180 billion, though $20 billion of federal stimulus money and increased Medicaid matching funds will not be replaced.
Debt ceiling: Geithner won't let us default
Writing to congressional leaders, Timothy Geithner warned that failing to increase America's debt ceiling, currently $14.3 trillion, "would precipitate a default by the United States."
China: The new landlord of the U.S.
And while the amount of China's debt holdings are roughly the same now as at the start of 2010, the U.K.'s holdings has surged from $208 billion in January to $511 billion in November.
New House Budget Rules Could Cause Problems in the Senate
Conflicting House and Senate budget rules could complicate negotiations on budget and spending legislation, even as both parties call for fiscal discipline.
Toomey: Pay Interest on Debt First
Senator plans to introduce legislation designed to avoid default if Congress doesn't raise debt ceiling.

TUESDAY
City Drafts Bankruptcy Exit
Vallejo's Cuts to Pensions and Benefits Viewed as Vital Lesson Plan.
Foreigners bought more U.S. debt in November
Foreign investors bought $93.9 billion in long-term Treasuries in November, increasing their net holdings after purchasing $56 billion the month before, the Treasury Department said Tuesday.
GOP Moves to Cut Spending to 2008 Levels
Proposed measure would give Budget chair unprecedented power to set spending levels.

Economist Comments
FRIDAY
JOHN STOSSEL: Will Republicans Really Cut Spending This Time?
America is on a path to bankruptcy. It's easy to get bogged down arguing about lots of small cuts, but we'll only make progress by abolishing whole departments and entire missions. I hope the public understands it has to be done.

THURSDAY
Reform, Don't Raise, The Debt Limit
The limit, as currently defined, is meaningless. Here's a solution.
The Budget Process: A Maze Perverted by Trickery
When President Obama unveils a fiscal 2012 budget in February, one can only hope that lawmakers act more quickly than they have in the past. The major legislative accomplishments of the lame-duck session of Congress — including extending the Bush-era tax cuts — should have and could have been consummated months ago. Why are so many issues left to the last minute?

WEDNESDAY
What Congress Should Cut
Let's scrap the Departments of Commerce and Housing and Urban Development, end farm subsidies, and end urban mass transit grants, for starters.
Budget Crisis Rhetoric
Bankruptcy conveys the plain facts that political rhetoric tries to conceal. It tells people who depended on the bankrupt government that they can no longer depend on that bankrupt government. It tells the voters who elected that bankrupt government, with its big spending promises, that they made a bad mistake that they would be wise to avoid making again in the future.
EDITORIAL: Nickel, diming and quartering the public
Windy City privatization scheme props up big government.
The Utah Pension Model
The state adopts 401(k)s for new state employees.
RIEDL: Spending-cut myths can be dispelled by facts
Federal spending has expanded by $726 billion over the past three years, and now exceeds $30,000 per household.
How to Freeze the Debt Ceiling Without Risking Default
Next year, the government will have 10 times more income than it needs to honor its interest obligations.

TUESDAY
Year ahead looms as toughest yet for state budgets
States that already have raided their reserve funds, relied on borrowing or accounting gimmicks, and imposed deep cuts on schools, parks and public transit systems no longer can protect key services in the face of another round of multibillion dollar deficits.
A Bankruptcy Law—Not Bailouts—for the States
We can see the fiscal crisis coming from miles away. Congress has no excuse not to act.
BACON: Debt limit opportunities
Educate the public by playing chicken.
The GOP Will Win the Debt-Limit Fight
The national debt has grown by $3.4 trillion since Obama took office. According to the Congressional Budget Office, our public debt is now about 62 percent of our economy--the highest percentage since shortly after World War II--and could reach 87 percent of our economy in just 10 years.
National debt: The ugly facts
The federal debt, which has averaged less than 40% of the total economy, now represents more than 60%. It's likely to hit 100% in a little over a decade.

Blogs
FRIDAY
What Do You Call $2.5 Trillion in Spending Cuts? A Good Start
Altogether, the legislation would create $2.5 trillion in savings over the next decade, significantly reducing the federal budget. But Jordan says this proposal should be seen as the beginning, not the final solution.
Re: Repeal and the Deficit
Also, as Peter Suderman of Reason reminds us, there’s a reason why the CBO alternative scenario assumes that the PPACA’s long-term Medicare savings won’t work.
Give me $1 billion to cut the budget deficit
I have a plan to reduce the budget deficit. The essence of the plan is the federal government writing me a check for $1 billion. The plan will be financed by $3 billion of tax increases.
Debt-Limit Votes Fall on the Party in Power
Donald Marron has a good chart of past votes on raising the debt limit. His conclusion: “Debt limit votes are about politics, not principle.”
Spending Restraint and Red Ink
...these studies largely echo the findings of recent research by the International Monetary Fund, we may have reached a point where even the establishment finally understands that government is too big.

WEDNESDAY
Governors set a new tone for FY 2012
Governors in many states are beginning the calendar year with sobering rhetoric.
Sen. Rand Paul’s Plan to Cut Spending
According to Politico, Sen. Rand Paul (R., Ky.) is about to unveil a plan to cut $500 billion in the upcoming year’s budget.
Swap Debt Limit for ‘Cut and Cap’
The GOP should insist on the $100 billion in initial cuts they promised, and also demand passage of a legal cap on overall federal spending.

TUESDAY
Political Ignorance and Federal Spending
The detailed data reveal that only 23% know that Medicare and Medicaid take up between 20 and 30% of federal spending, and only 15% realize that Social Security takes up between 20 and 30%. Some 48% underestimate the extent of Social Security spending, with a much smaller percentage overstating it. Similarly, only 23% recognize that defense spending takes up between 20% and 30% of the budget.
Debt limit will get raised. But who'll vote to do it?
Raising the debt limit is about politics, not economics.
Why the debt ceiling isn't actually a ceiling on debt
Increasing the debt limit guarantees that the US will pay the debt it has – it doesn't stop the government from going deeper into debt. That requires unpopular policy changes.

Reports
THURSDAY
Making the Federal Budget
How do you spend four trillion dollars? Turns out, you don't; it takes the President and the Congress to allocate, authorize, appropriate, resolve, outlay, sequester, impound, and just plain spend that much in 2011. Such a process is baffling at times. It's so complex that you may marvel that Washington can get any action accomplished and paid for at all. So how does the federal budget happen?

TUESDAY
Eleven Ideas for State Legislatures in 2011
Across the country, state legislatures and governors are looking for opportunities to reduce spending and fill revenue holes as state budget deficits totaled some $191 billion and $130 billion in the 2010 and 2011 fiscal years, respectively.