Obama to Seek Spending Freeze to Trim Deficits, says the NYTimes.
So!
Is he cutting the proposed second stimulus bill? No.
The Obamacare bill(s)? No.
Medicare? No.
Medicaid? No.
Social Security? No.
But one administration official said that limiting the much smaller discretionary domestic budget would have symbolic value. That spending includes lawmakers’ earmarks for parochial projects, and only when the public believes such perceived waste is being wrung out will they be willing to consider reductions in popular entitlement programs, the official said.
“By helping to create a new atmosphere of fiscal discipline, it can actually also feed into debates over other components of the budget,” the official said, briefing reporters on the condition of anonymity.
Matt Welch already zeroed in some of the more b.s.-laden aspects of President Obama’s Braveheart-level brave pledge to freeze a tiny wafer-thin aspect of federal spending. To use Obamaesque rhetoric: Let’s be clear. This freeze is likely to be as effecfive in curbing spending as cryogenic freezing of Ted Williams’ head was for keeping the Splendid Splinter in good shape for the baseball draft in the year 2525.
Another point to note on Obama’s three-year freeze on discretionary non-defense, non-homeland-security spending: The part of the budget that Obama is chilling is responsible for a whopping one-eighth of annual federal spending. By the prez’s own accounting, the action (which I guarantee won’t hold up anyway) would save at max a whopping $15 billion in fiscal year 2011.
To put that in perspective: The budget em>deficit in 2009 was $1.4 trillion. Which will likely be matched, or nearly matched, in 2010. The budget in 2009 was a hair under $4 trillion and was first figured at around $3.5 trillion for 2010 (expect that to rise, as it normally does).
To talk about possibly trimming $15 billion (and that’s only in foregone increases to whatever is already being spent) on a budget this size is like an already-broke dinner companion foregoing his third appetizer. It’s not gonna help much when the bill comes due.
President Obama plans to call on Thursday for taxing about 50 big banks and major financial institutions for at least the next decade to recoup all taxpayer losses from the bailout of Wall Street.
The tax on banks, insurance companies and brokerages with more than $50 billion in assets would start after June 30 and seek to collect $90 billion over 10 years, according to a senior administration official who briefed reporters late Wednesday.
But the levy but would remain in force longer if all losses to the bailout fund, the Troubled Asset Relief Program, are not recovered after a decade.
This is to punish the financial institutions, even when,
the big banks have been objecting that taxpayers actually made money on the bailout loans. Many, including Goldman Sachs and JPMorgan Chase, have repaid their federal funds with interest and the government has also made money in selling the banks’ warrants that it held as collateral.
The taxed firms are expected to pay the cost of bailout money that went to General Motors Co. and Chrysler LLC, which are exempt from the tax. The administration official defended the omission by contending that U.S. auto makers collapsed in part because of a financial crisis of the banks’ making.
The deal would temporarily exempt union health plans from a significant surtax on unusually generous health policies plans, giving union leaders time to negotiate new contracts, according to sources familiar with the talks.
Of course, Chris Dodd, Barney Franks, and Congress’ own Community Reinvestment Act (which is still law and will be expanded) had nothing to do with the financial crisis.
House Financial Services Chairman Barney Frank “is mounting a new effort to limit executive compensation as Wall Street prepares this month to pay out huge bonuses.” Frank, “said he is looking at levying new taxes or fees on financial firms as well as ways to further empower shareholders to restrict pay.” Frank, “called a hearing for Jan. 22 and said he is not convinced by arguments that restrictions would hurt the industry by forcing well-paid employees to go elsewhere.”
On Christmas Eve, when most Americans’ minds were on other things, the Treasury Department announced that it was removing the $400 billion cap from what the administration believes will be necessary to keep Fannie Mae and Freddie Mac solvent. This action confirms that the decade-long congressional failure to more closely regulate these two government-sponsored enterprises (GSEs) will rank for U.S. taxpayers as one of the worst policy disasters in our history.
Bad news then,
Fannie and Freddie’s congressional sponsors—some of whom are now leading the administration’s effort to “reform” the financial system—have a lot to answer for. Rep. Barney Frank (D., Mass.), chairman of the House Financial Services Committee, sponsored legislation adopted in 2008 that established a new regulatory structure for the GSEs. But by then it was far too late. The GSEs had begun buying risky loans in 1993 to meet the “affordable housing” requirements established under congressional direction by the Department of Housing and Urban Development (HUD).
Most of the damage was done from 2005 through 2007, when Fannie and Freddie were binging on risky mortgages. Back then, Mr. Frank was the bartender, denying that there was any cause for concern, and claiming that he wanted to “roll the dice” on subsidized housing support.
Roll the dice he did, and the Republicans were not able to stop him,
There is more to this ugly situation. New research by Edward Pinto, a former chief credit officer for Fannie Mae and a housing expert, has found that from the time Fannie and Freddie began buying risky loans as early as 1993, they routinely misrepresented the mortgages they were acquiring, reporting them as prime when they had characteristics that made them clearly subprime or Alt-A.
…
An Alt-A mortgage is one in which the quality of the mortgage or the underwriting was deficient; it might lack adequate documentation, have a low or no down payment, or in some other way be more likely than a prime mortgage to default. Fannie and Freddie were also reporting these mortgages as prime, according to Mr. Pinto.
Was reading this article in the Wall Street Journal when I remembered this song from Dire Straits, where they said that to make real money you should be a rocker instead of someone with a real job, say, selling appliances:
We got to install microwave ovens
Custom kitchen deliveries
We got to move these refrigerators
We got to move these color TV’s
Now that ain’t workin’ that’s the way you do it
You play the guitar on that MTV
That ain’t workin’ that’s the way you do it
Money for nothin’ and your chicks for free
Climategate, as readers of these pages know, concerns some of the world’s leading climate scientists working in tandem to block freedom of information requests, blackball dissenting scientists, manipulate the peer-review process, and obscure, destroy or massage inconvenient temperature data—facts that were laid bare by last week’s disclosure of thousands of emails from the University of East Anglia’s Climate Research Unit, or CRU.
But the deeper question is why the scientists behaved this way to begin with, especially since the science behind man-made global warming is said to be firmly settled. To answer the question, it helps to turn the alarmists’ follow-the-money methods right back at them.
Consider the case of Phil Jones, the director of the CRU and the man at the heart of climategate. According to one of the documents hacked from his center, between 2000 and 2006 Mr. Jones was the recipient (or co-recipient) of some $19 million worth of research grants, a sixfold increase over what he’d been awarded in the 1990s.
Why did the money pour in so quickly? Because the climate alarm kept ringing so loudly: The louder the alarm, the greater the sums. And who better to ring it than people like Mr. Jones, one of its likeliest beneficiaries?
Thus, the European Commission’s most recent appropriation for climate research comes to nearly $3 billion, and that’s not counting funds from the EU’s member governments. In the U.S., the House intends to spend $1.3 billion on NASA’s climate efforts, $400 million on NOAA’s, and another $300 million for the National Science Foundation. The states also have a piece of the action, with California—apparently not feeling bankrupt enough—devoting $600 million to their own climate initiative. In Australia, alarmists have their own Department of Climate Change at their funding disposal.
And all this is only a fraction of the $94 billion that HSBC Bank estimates has been spent globally this year on what it calls “green stimulus”—largely ethanol and other alternative energy schemes—of the kind from which Al Gore and his partners at Kleiner Perkins hope to profit handsomely.
That doesn’t include the $1.5 million Al got from his Nobel Prize, by the way.
Supported by $300 million from the economic stimulus, the program will offer rebates to consumers who buy energy-efficient refrigerators, dishwashers, air conditioners and other appliances to replace their older models.
The timing will make a difference:
Although the $787 billion stimulus program was signed by Obama in February of 2009, much of the cash-for-appliances money won’t hit the streets until next February, March or April. The rebate program is being run by state governments, which must define and enact their rebate plans with federal government funding and approval. A survey of some of the largest states shows that California is planning to begin its program in March, New York in February, Pennsylvania in the spring, Illinois in January and April.
Under the program, Virginia is expected to receive $7.5 million, Maryland $5.4 million and the District $568,000, but the requirements and rebates have not yet been disclosed.
This is called price signaling, and consumers would be crazy to ignore it.
Yes, indeed. Still, do you expect you’ll be able to replace your small fridge for a full-size Sub-Zero with what you’ll get from the “cash for appliances”? Nope:
While the programs will vary by state, some of the proposed rebates that have been announced so far range from $50 to $100 per appliance.
That $100 won’t go far if you have to pay for having the old fridge removed and the new one delivered.
The bottom line on all this “green”, global-warming related spending is budgetary policy made to spend huge sums of money are on what has been shown to be a fraud – the premise of anthropogenic global warming.
Think about it: $300 million to be spent on subsidizing appliance purchases to the tune of $100 per appliance? Do you expect that 3 million appliances are going to be replaced? Heck no, instead it’ll go down the sinkhole of government bureaucracy, bankrupt businesses that the government has found it expedient to bail out, and vested interests that exist in what the WSJ calls “an ecosystem of their own”
Today these groups form a kind of ecosystem of their own. They include not just old standbys like the Sierra Club or Greenpeace, but also Ozone Action, Clean Air Cool Planet, Americans for Equitable Climate Change Solutions, the Alternative Energy Resources Association, the California Climate Action Registry and so on and on. All of them have been on the receiving end of climate change-related funding, so all of them must believe in the reality (and catastrophic imminence) of global warming just as a priest must believe in the existence of God.
None of these outfits is per se corrupt, in the sense that the monies they get are spent on something other than their intended purposes. But they depend on an inherently corrupting premise, namely that the hypothesis on which their livelihood depends has in fact been proved. Absent that proof, everything they represent—including the thousands of jobs they provide—vanishes. This is what’s known as a vested interest, and vested interests are an enemy of sound science.
The 62-year-old branch head of one German bank was hailed as a hero after she confessed to transferring money from rich customers to help her poorer clients. Already, she has been dubbed “Die Robin Hood Bankerin”.
She was given a 22-month suspended sentence after moving more than €7.6m (£6.9m) in 117 transfers between 2003 and 2005. The court in Bonn was told that the employee, who has not been named, took no money for herself.
The judge referred to her stealing as “altruistic behavior”.
Here in the US we get the government to take our money and bailout the banks and financial firms because they are “too big to fail”.
Because at some point, investors may suddenly realize that America’s already somewhat devalued currency should not be trusted.
As Senator Judd Gregg, a New Hampshire Republican and noted budget hawk, said recently, “We’re basically on the path to a banana-republic type of financial situation in this country … You can’t keep throwing debt on top of debt.”
Indeed, the evidence points to a nation fairly far along that path. Healthcare reform is supposed to be deficit neutral — everything paid for via spending cuts or tax increases — while also helping bring government’s overall long-term budget into balance.
But to keep the 10-year price tag under $900 billion, Democrats have quietly shunted $247 billion in spending for Medicare physician payments into a separate bill. And no effort is being made to pay for it.
Just as egregious, though less expensive, is the Obama administration’s $14 billion plan to send a $250 “stimulus” check to 57 million American Social Security recipients in lieu of an annual cost-of-living increase.
See, a 5.8 percent COLA increase was paid last January to compensate for a 5.8 percent jump in consumer inflation driven by surging oil prices in 2008. Then oil prices and inflation collapsed.
“In effect, a COLA was paid on inflation that no longer existed,” notes Andrew Biggs of the American Enterprise Institute.
So even though none of this makes seniors essentially any worse off, Uncle Sucker is still going to cut them a check.
Two examples — one ridiculously expensive, one just ridiculous. But both reveal a nation completely unwilling to deal with current trillion-dollar deficits or long-term shortfalls many multiples of that number.
What confidence should dollar investors have that America will really cut entitlement spending? Very little. Instead, we are more likely to see huge tax increases that could cripple productivity, or further dollar neglect, or a central bank that turns dovish on inflation. Or perhaps all three.
If Washington doesn’t care to support the dollar, why should investors?
As for the rise in the stock market, I have already stated that the amount of money the Fed injected into the economy would find its way to the markets. The second stage is the inflation combined with tax increases.
The federal credit provides from $4,200 to $5,500 for the purchase of an electric vehicle, and when it is combined with similar incentive plans in many states the tax credits can pay for nearly the entire cost of a golf cart. Even in states that don’t have their own tax rebate plans, the federal credit is generous enough to pay for half or even two-thirds of the average sticker price of a cart, which is typically in the range of $8,000 to $10,000. “The purchase of some models could be absolutely free,” Roger Gaddis of Ada Electric Cars in Oklahoma said earlier this year. “Is that about the coolest thing you’ve ever heard?”
The IRS has also ruled that there’s no limit to how many electric cars an individual can buy, so some enterprising profiteers are stocking up on multiple carts while the federal credit lasts, in order to resell them at a profit later.
What it comes down to is this:
This golf-cart fiasco perfectly illustrates tax policy in the age of Obama, when politicians dole out credits and loopholes for everything from plug-in cars to fuel efficient appliances, home insulation and vitamins. Democrats then insist that to pay for these absurdities they have no choice but to raise tax rates on other things—like work and investment—that aren’t politically in vogue. If this keeps up, it’ll soon make more sense to retire and play golf than work for living.
Retire and tango!
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There will be no podcast today due to a business appointment.
The aftershocks of the global financial crisis may now be propelling the dollar back to the political forefront. The greenback’s continuing slide makes it a handy metric that neatly encapsulates America’s current economic troubles and possible long-term decline. House Republicans for instance, have been using the weaker dollar as a weapon in their attacks on the Bernanke-led Federal Reserve.
…
A recent Rasmussen poll, for instance, found that 88 percent of Americans say the dollar should remain the dominant global currency. Now, the average voter may not fully understand the subtleties of international finance nor appreciate exactly how a dominant dollar has benefited the U.S economy. But they sure think a weaker dollar is a sign of a weaker America.
And that’s the political problem for the Obama administration. Its benign neglect of the dollar is another example of an economic policy — along with TARP and the $787 billion stimulus — that the White House thinks is helping the economy, but many Americans find wrongheaded.
As you may recall, rumors abound on whether Gulf Arab states were in secret talks with Russia, China, Japan and France to replace the dollar as the currency used on oil trading.
As James points out, the huge deficit is a big threat to the stability of the dollar. The bad thing is, every aspect of fiscal policy the current administration is implementing will increase that deficit.
The bottom line is this: The available empirical evidence does not support the idea that spending multipliers typically exceed one, and thus spending stimulus programs will likely raise GDP by less than the increase in government spending. Defense-spending multipliers exceeding one likely apply only at very high unemployment rates, and nondefense multipliers are probably smaller. However, there is empirical support for the proposition that tax rate reductions will increase real GDP.
Fat chance for any of those, considering how the administration is intent on bankrupting the economy.
