Budget News Jan. 24 - 28

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News
FRIDAY
State pension + debt = big numbers
States' debt loads are high enough, but when you combine them with their pension obligations, the numbers are really eye-popping.
U.S. needs to make progress on deficit, IMF warns
U.S. officials must act quickly to control government deficits or face slower growth and even more difficult choices in the future, the International Monetary Fund said Thursday in a report criticizing the tepid U.S. response to its rising public debt.
Budget Committee Chides Obama on Debt
Conrad warns that members, not White House, may lead the way to balanced budget.
House passes bill eliminating public financing
The House of Representatives voted Wednesday to eliminate the federal public financing system that helps pay for presidential campaigns and political conventions.
Stairway to Spending
Obama seeks to buy time on the debt ceiling; conservatives push for a standoff.

THURSDAY
Obama's Spending Freeze Just 'Spare Change': Roubini
The White House plan to partially freeze government spending is just "spare change" compared to a budget deficit of more than $1 trillion and eventually the US will have to raise taxes, economist Nouriel Roubini of Roubini Global Economics told CNBC Wednesday.
Social Security fund will be drained by 2037
New congressional projections add sense of urgency to policymakers' efforts to reform system.
CBO: Social Security to Run $45 Billion Deficit in 2011
The Congressional Budget Office (CBO) reports that Social Security will effectively run a $45-billion deficit in 2011 and continue to run deficits totaling $547 billion over the coming decade.
Obama’s Deregulation Plan: It May Not Save Money
President Obama is courting business with his pledge to review government regulations, but he may find that the savings aren’t as great as he expects.
Moody’s to Factor Pension Gaps in States’ Ratings
Moody’s Investors Service has begun to recalculate the states’ debt burdens in a way that includes unfunded pensions, something states and others have ardently resisted until now

WEDNESDAY
Budget Deficit Is Expected to Hit $1.48 Trillion
The federal government's budget deficit is expected to grow about 14% to $1.48 trillion by the end of the current fiscal year, an increase largely resulting from the extension of lower tax rates, the Congressional Budget Office said Wednesday.
Obama on debt: What he said - and didn't
In his State of the Union address on Tuesday, he offered a few ideas, but didn't spell out a comprehensive plan.
Obama Counters G.O.P. With Plan to Extend Spending Freeze
By proposing a two-year extension to the three-year domestic spending freeze he called for a year ago, President Obama sought to quickly counter Republican demands for deeper cuts to shrink government and reduce annual budget deficits.
What a Tea Party budget looks like
With Washington buzzing with proposals to cut the budget, Sen. Rand Paul and Rep. Michele Bachmann -- two high-profile Tea Party members -- have each released laundry lists of spending cuts.
House Pushes Deep Spending Cuts
Contrasting Obama's Proposed Five-Year Freeze, Republicans Back More Drastic Curbs in Fiscal 2011 .
Illinois Plan for Pensions Questioned
Federal regulators are examining disclosures by Illinois about its unorthodox pension funding method, trying to determine whether the state misled bond investors about the risks.
GOP Plans to Move Spending Bill the Same Week Obama Releases Budget
House GOP leaders are looking to keep pace with the White House in the coming budget battle by bringing a major spending- cut bill to the floor the same week the Obama administration releases its budget.

TUESDAY
What if Your State Goes Bankrupt?
Changes Will Hit Pensioners, Bond Holders Hardest, If a State Goes Broke.
No State Bailouts, Lawmaker Says
House Majority Leader Eric Cantor said he didn't support allowing states to seek bankruptcy protection and ruled out any federal bailouts of state governments.
Republicans Propose Amendment to Block Bailouts
Such a change would bar government equity investments, but it has little chance of adoption.
Conservative House Members Keep Pushing for $100 Billion in Fiscal 2011 Cuts
GOP leaders have talked about cutting at least $55 billion to $60 billion in non-defense, non-security discretionary spending in fiscal 2011, which began Oct. 1.
Paul: Tea Party Caucus Puts All Cuts on Table
Nothing is off the table for the Senate’s Tea Party Caucus when it comes to proposing budget cuts, not Social Security or federal jobs, according to Sen. Rand Paul…

MONDAY
A 'state of the union' fight ahead over US government spending
How furiously to cut government spending is likely to be a major point of departure between Obama, who gives the State of the Union address on Tuesday, and congressional Republicans.
Tea Partiers: Defense budget in the mix for cuts
Defense Secretary Robert Gates, in a recent pre-emptive move, proposed $78 billion in spending cuts and an additional $100 billion in cost-saving moves. While that amounts to $13 billion less than the Pentagon wanted to spend in the coming year, it still stands as 3 percent growth after inflation is taken into account.
Spain's Progress on Deficit Creates Cushion for Savings Banks: Euro Credit
The deficit fell 46 percent in the first 11 months of 2010, though December is the biggest month for spending. By contrast, Portugal’s central government shortfall widened.
STATES IN CRISIS: After Cutting Budgets Last Year, Where to Find Money Now?
For the second year in a row, most states face gut-wrenching budget shortfalls. The three states with the biggest gaps to fill -- Illinois, New Jersey and Nevada -- held the same distinction last year.
A Promise Made
INFOGRAPHIC: A promise made… is a debt unpaid.

Economist Comments
FRIDAY
If Munis Are Perilous, What About Treasuries?
But consider the federal situation — excluding, as with the state numbers, health care obligations. To the $9 trillion of debt at the end of the 2010 fiscal year, by the Congressional Budget Office’s numbers, add the $5.4 trillion of unfunded Social Security obligations through 2084 as calculated by the trustees of the related funds.

THURSDAY
Federal budget battle: Can Congress avoid a government shutdown?
GOP proposals to cut the federal budget range from $100 billion to $500 billion to a symbolic $1.5 trillion. With Democrats wary of stifling the economic recovery, the divide just may be too wide.
Obama vs. Ryan: The Choice Is Clear
On Tuesday, Republicans offered an alternative to the president's big-government vision.
The spin, and the facts, on Obama’s spending freeze
Here’s the spin and the facts from the White House – and from Republicans – on the spending freeze in President Obama’s State of the Union address.
Obama's 'Investment' Charade
Milton Friedman warned that government spending cancels out higher-return private investment.
A Missed Opportunity On the Budget
The State of the Union gave Obama the opportunity to confront the contradictions and educate Americans in the unpleasant realities of uncontrolled government. He declined.
What Sent States' Fiscal Picture Into a Tailspin?
State and local governments are a big and growing part of the U.S. economy. They account for 15% of all economic output, up from less than 12% two decades ago. They employ one in every seven workers, more than manufacturing.
Showing the Way On Spending Cuts
President Obama's State of the Union address demonstrated anew that although he pays lip service to smaller government, less regulation, and deficit reduction, his heart is elsewhere.

WEDNESDAY
For the Nation's Sake, Cut Education Spending
Education is, indeed, very important. But while Washington spends huge sums on things that are education-related, the riches produce almost nothing of educational value. If anything, the feds keep stuffing donuts into an already obese system.
State Budget Reform Toolkit
Most of the legislative "fixes" over the past few years for state budget gaps have merely postponed or obscured the problems rather than addressing them directly.

TUESDAY
Dear Mr. President: Don't punt on debt
Big speech, tonight, sir. I have a plea: Focus on large and specific proposals to truly fix the budget. Please.
Obama Spending Drive Will Suffocate Job Growth: Amity Shlaes
Private-sector jobs will be created. That’s the argument President Barack Obama will present tonight in his State of the Union address to justify his plan for any federal spending increases.

MONDAY
An Ugly Side Effect of New 1099 Law: More Tax Evasion
They say more small businesses will likely opt to do all-cash transactions under the table to avoid the 1099 reporting requirement, and all of its onerous provisions, which are worse than small businesses may realize.
State Bankruptcy Is a Bad Idea
Politicians already have the power to tame public unions without roiling municipal bond markets. They merely have to use it.
WILLIAMS: Coming collapse of state pensions
...if we assume an 8 percent return on investment rate for the pension funds (which we can't) states will begin running out of money by 2018, with Illinois being the first, and 20 states by 2025.
Indebted America risks an age of austerity
The president must break his silence and educate Americans on the cuts and tax increases that cannot be avoided…
The Unsustainability of the US Fiscal Situation
We are on an insupportable path. Long before we get to 2019, the bond markets will have taken away our ability to finance our debt at low rates.
More spending is a threat to America
Reaching the debt ceiling should be a warning bell to Congress that our debt has reached scorching levels. But all Washington politicians want to do is shut off the alarm instead of put out the fire.

Blogs
FRIDAY
Treasury takes a step to avoid debt ceiling
The Treasury says the balance in its Supplementary Financing Account will decrease to $5 billion.
New CBO Numbers Re-Confirm that Balancing the Budget Is Simple with Modest Fiscal Restraint
If federal spending is capped so it grows 1 percent each year, the budget is balanced in 2019. And if the crowd in Washington can limit spending growth to about 2 percent each year, red ink almost disappears in just 10 years.
The Contribution of Student Loans to the U.S. National Debt
What we find is that since 2008, the net outflow of money the federal government borrowed to provide direct student loans has exploded, rising by $89.7 billion dollars, or 17.8% of the $504 billion discrepancy.

THURSDAY
The Rand Paul Budget
Sen. Rand Paul (R-KY) has proposed a budget that will cut $500 billion in federal spending in one year.
Why the CBO may not believe all its own deficit projections
The CBO had to make assumptions about US policies its officials seem to have little faith will be implemented.
Treasury to Cut Fed Program as Debt Ceiling Nears
The Treasury Department Thursday said it will allow holdings in a special account at the Federal Reserve to fall to $5 billion from $200 billion as it looks for more flexibility as the U.S. approaches its debt limit.
Nondefense Discretionary Spending Freezes
That category accounts for about 18 percent of total spending, so let’s see how such a freeze would affect the overall budget.
Get Out The Scissors -- It's Time to Start Cutting
Government is trying to do too much, for too many people, and is burying us all in the process. It's time to start slashing--not “growing” through central planning.
Debt Limit Reality
Debt limit reform should exclude economically irrelevant intragovernmental borrowing, and instead should apply a limit only to the debt held by the public—the debt that matters. First set the rules correctly, then set the limit appropriately.
A Visual Guide for 2011's Federal Spending Debate
If you want to quickly see how President Barack Obama and the Congressional Democrats' federal government spending proposal for 2011 stacks up against what Congressional Republicans have in mind, shown against a background illustrating the trend in U.S. federal government spending since 1967, here you go!

WEDNESDAY
I Wish the Government Would Stop Investing and Get Out of the Way
Every year, presidents talk about how government can help the economy by investing money, and each time this “investment” fails to bring the promised results.

TUESDAY
Making the Big Cuts
One thing the president is not expected to cut is the bloated Department of Education. In fact, it looks like he plans to increase it.
GOP Conservatives Propose Spending Cuts
The vast majority of the savings, $2.3 trillion, would come from freezing non-defense discretionary spending at fiscal 2006 levels over the next ten years.
Muni bonds taking a double hit
State and local government have been in the news for all the wrong reasons: bankruptcies (Vallejo, CA) and threats of bankruptcies, mushrooming budget deficits, burgeoning debt, sluggish tax revenue growth, falling property tax revenues and various contractual problems with unionized municipal and state workers.
Obama Won’t Endorse Social Security Reform
For one thing, by refusing to reform Social Security, President Obama is guaranteeing automatic benefit cuts of about 22 percent for everyone on the program in 2037 (when the trust funds run dry) without having had retirees plan for a replacement income.
Government Spending vs Economic Growth
The Obama administration clearly believes that more government spending is necessary for better economic growth. But what does the data say?

MONDAY
When the Long Run Shows Up Today
...the short and the long-run are pretty tightly-connected and a failure to focus on fiscal problems in the short run can manifest itself in pretty serious problems over the long haul.
UPDATE: Cantor seems to confirm $60b in cuts now, more later
House Majority Leader Eric Cantor (R-Va.) on Sunday appeared to confirm that House Republicans would stretch out their pledge to cut $100 billion in spending over the 2011 and 2012 budgets.

Reports
FRIDAY
Congress Has Time and Options on Debt Limit
Assuming that current tax-and-spending policies continue, publicly held debt will top $23 trillion by the end of the decade.

WEDNESDAY
Budget and Economic Outlook: Fiscal Years 2011 Through 2021
For 2011, the Congressional Budget Office (CBO) projects that if current laws remain unchanged, the federal budget will show a deficit of close to $1.5 trillion, or 9.8 percent of GDP.

MONDAY
Obamacare and the Budget: Playing Games with Numbers
A close examination of what CBO said, as well as other evidence, makes it clear that the deficit reduction associated with PPACA is based on budget gimmicks, sleights of hand, accounting tricks, and completely implausible assumptions.
They Can’t Spend What You Don’t Approve: Rethinking the Appropriations Clause
The Appropriations Clause is the cornerstone of Congress’s “power of the purse.” It assigns to Congress the role of final arbiter of the use of public funds.