All Things Reform: budgets

Showing posts with label budgets. Show all posts

Saturday, March 28, 2009

Analysis: How will the federal government handle a much larger national debt after big economic stimulus spending?

US Capitol, Washington, DC, USA. Image via Wikipedia

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From: Public Agenda

As the projections for the national debt keep going worse and worse, a lot of people are probably wondering one thing: Can we really get away with this?

"This" is the federal government's strategy of spending huge amounts of money to keep the economy going, despite the fact that the federal budget was in pretty bad shape to begin with. The independent Congressional Budget Office now projects that the federal deficit will be $1.7 trillion this year, and that if President Obama's budget plans are enacted, we'll add $9.3 trillion to the national debt over the next decade. That's $4.8 trillion more than previously estimated.

Scott Bittle, in a blog posting, notes that despite fierce argument over the specifics, there's still a bipartisan consensus in Washington that the government has to borrow and spend to stimulate the economy, because nobody else will - the private sector is effectively sidelined as long as credit markets are "frozen," unwilling to lend because of all the bad debt that's already out there.

But in addition to the fight in Washington, this is also starting to make people overseas nervous. China, the largest foreign holder of U.S. debt, is starting to send none-too-subtle signals about how the U.S. manages its money, The new president of the European Union was even blunter this morning, calling American policy "the way to hell." All this will likely lead to an extremely uncomfortable session with world leaders next week on how to deal with the global financial crisis.

So can we spend like crazy now, pile up the national debt, and yet still recover later? For some possible answers to this compelling question, see our full story "The Budget: Can We Pull This Off?" and FacingUp.org, our web site dedicated to the looming problems of the budget deficit and national debt.

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Saturday, March 21, 2009

Commission on how best to strengthen the budget process used by federal lawmakers

Ida May Fuller, the first Social Security recipient. Image via Wikipedia

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From: The Pew Charitable Trusts

Peterson-Pew Commission on Budget Reform

The Peterson-Pew Commission on Budget Reform will convene the nation’s preeminent fiscal and budget experts to make recommendations for how best to strengthen the budget process used by federal lawmakers. Significant attention to budget reform over the next few years is imperative given the current economic conditions, the tremendous amount of borrowing taking place to help stabilize the economy, and the large and growing promises for Social Security, Medicare and Medicaid benefits.

The commission will convene over the next two years to produce recommendations that address a host of shortcomings in current budget rules, concepts and processes.

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Monday, March 09, 2009

President Obama's health care reform proposals

Centers for Medicare and Medicaid Services. Image via Wikipedia

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From: Concord Coalition

Washington Budget Report: March 9, 2009
Health care reform aims to control spending, expand coverage

With rollout of the President's Budget and last week's White House Summit on Health Reform, a major push to (1) expand health coverage and (2) reduce the rapid growth of health care costs is under way.

Reducing the rapid rate of growth in health care costs is a fiscal policy imperative. Rapid cost growth is dramatically boosting government spending on Medicare, Medicaid, Veterans Health Care, TRICARE coverage for military families, and the Children's Health Insurance Program (SCHIP).

The rapidly rising costs of these programs -- especially Medicare and Medicaid -- has led to broad agreement among our nation's top economic officials that the United States is currently on a perilous fiscal path that threatens the long-term stability of the U.S. economy.

Earlier this year, Peter Orszag -- current OMB Director and former CBO Director -- warned the Senate Budget Committee that "over the long term, the federal budget is on an unsustainable path....the principal driver of our long-term deficits is rising health care costs....If costs per enrollee in our two main federal health programs, Medicare and Medicaid, grow at the same rate as they have for the past 40 years, those two programs will increase from about five percent of GDP to 20 percent by 2050. That's roughly the entire size of the federal government today."

Treasury Secretary Geithner has emphasized that rapidly rising U.S. health care costs harm competitiveness in the global market. Health costs in 2009 are projected to consume 17.6% of the U.S. economy (GDP), nearly double spending in other mature (OECD) economies. (Organization for Economic Cooperation and Development)

To begin the health reform process, President Obama's budget proposes to spend at least $634 billion over 10 years on health care reform aimed at making health coverage affordable, researching comparative effectivness of treatments, investing in prevention and wellness, and improving quality of care. The initiatives would be contingent on securing funding from: (1) placing a 28% cap on the tax deductions that upper-income earners can claim; and (2) making $316 billion in reforms to Medicare and Medicaid.

Politically, health care reform will be a heavy lift. The Washington Post reports that opposition to details of the Administration plan have already emerged: strong opposition has emerged to the proposal to cap itemized deductions for upper income earners; AARP opposes raising Medicare prescription premiums on wealthy retirees; major insurers oppose switching the Medicare Advantage program (which markets managed-care plans to seniors) to a competitive bidding process; and home health care providers object to cuts in their Medicare reimbursements.

On limiting itemized deductions, the Administration has asserted it would impact only 1 percent of taxpayers and would have only a modest negative impact on charitable giving.

Tentative Schedule: According to Congress Daily, Senate Finance Chairman Max Baucus (D-MT) is aiming for a June mark-up of health reform legislation in close coordination with HELP Committee Chairman Edward Kennedy (D-MA). The two chairmen are aiming for their respective committees to produce one comprehensive bill.

New White House Health Reform Website

White House Health Care Summit

Tuesday, February 24, 2009

Week's activity from The Concord Coalition Washington Budget Report

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From: Concord Coalition

From The Concord Coalition Washington Budget Report: February 23, 2009

[...]

Completing FY 2009 Appropriations and War Supplemental

This week, the House is expected to vote on an omnibus appropriations bill for the remainder of fiscal year 2009. The bill has been negotiated between House and Senate Democrats and Republicans and will likely not require a House-Senate conference.

Reason for the omnibus bill: Last fall, Congress completed action on only 3 of the 12 regular FY 2009 appropriations bills.

Background -- Last year's FY 2009 appropriations process was one of the worst on record. Only one FY 2009 appropriations bill made it to the House Floor.

There were two reasons for the serious disruption of the regular appropriations process. First,President Bush threatened to veto any appropriations bills that exceeded his requests, and Democrats--as reflected in the Budget Resolution--called for nearly $25 billion more than the President requested. Second, House Republicans attempted to amend appropriations bills with off-shore oil drilling amendments, strongly opposed by many Democrats.

Consequently, in late September, Congress enacted a stopgap measure to keep Federal programs operating. The stopgap measure:

included detailed, full-year appropriations measures for the Departments of Defense, Homeland Security, and Veterans Affairs (based upon provisions informally negotiated by House and Senate Appropriators); and

included stopgap funding through March 6, 2009 for all other departments and agencies of government at FY 2008 levels.

Impending $83 Billion War Supplemental: Bloomberg News reports that the Administration will send to Congress, within the next few weeks, an $83 billion war supplemental for the remainder of FY 2009. This would bring total war spending for the current fiscal year up to $149 billion.

Link to late September Continuing Resolution

President to Release FY 2010 Budget Outline; Bans Gimmicks

Following Tuesday's State of the Union Address, the President will release on Thursday, February 26, 2009 a "budget outline" for FY 2010.

(The President is normally required to transmit the annual budget request to Congress by the first Monday in February; however, this being a presidential transition year, President Obama will transmit a budget "outline" on February 26, 2009, with detailed budget documents to be released by the Office of Management and Budget (OMB) in late March or April.)

A few details have been made available about the impending 2010 budget outline:

In his Saturday radio address, President Obama said he is determined to "get exploding deficits under control" and said his budget request is "sober in its assessments, honest in its accounting, and lays out in detail my strategy for investing in what we need, cutting what we don't, and restoring fiscal discipline."

According to the Washington Post, President Obama is aiming to cut projected budget deficits in half over the next four years from $1.1 trillion in FY'10 to $533 billion in FY'13--about 3% of GDP. According to the Post, these projections assume some of the Bush tax cuts (those benefitting high income taxpayers) expire after 2010. (That would mean that for taxpayers with incomes over $250,000, the top rate would jump from 35% to 39.6%; the tax on capital gains would jump from 15% to 20%, and the tax on estates worth more than $3.5 million would be taxed at the currate rate of 45%.) Also, the earnings of hedge fund managers would be taxed as normal income, rather than the lower 15% capital gains rate. According to a senior White House official, the budget will "create running room for health reform," by reducing spending on current health programs--such as subsidies to privately run Medicare programs, known as "Medicare Advantage"--in order to expand coverage for the uninsured.

According to Congressional Quarterly, the Pentagon and OMB have agreed on defense spending of $537 billion for FY 2010, excluding war costs. This is $10 billion more than numbers floated last month, and is about 5% higher than defense funding appropriated for FY 2009.

According to the New York Times, President Obama has banned four budget "gimmicks" that were used in recent years to make deficit projections appear smaller:

War spending will be included in the regular budget submission, as opposed to recent practices of funding the war in later "supplemental" bills;
The budget will no longer assume drastic reductions in Medicare payments to physicians that are technically required by a 1997 law, but have never been allowed to take effect.
An effort will be made to appropriately fund disaster accounts at the beginning of the year rather than paying for disasters on a piecemeal basis and declaring the emergency spending to be exempt from budgetary limits.
The budget will not assume higher revenues from letting the Alternative Minimum Tax (AMT) extend to upper middle income Americans, since Congress has routinely acted to prevent the expanded reach of the AMT.

Stabilizing the Financial, Housing, and Auto Sectors

The Treasury Department and the Federal Reserve are engaged in ongoing efforts to stabilize the financial, housing, and automobile sectors. Following is an update on recent developments:

Homeowner Recovery Plan: President Obama last Wednesday, February 18, 2009, announced a "Homeowner Affordability and Stability Plan" to stem the tide of foreclosures and falling home prices. The plan would allow up to 5 million individuals to refinance their mortgages through Fannie Mae and Freddie Mac and assist 3 million homeowners to modify their monthly payments. Highlights of the plan:

Help 4-5 million home owners--suffering from falling home prices--to refinance loans owned or guaranteed by Fannie Mae or Freddie Mac.
Create a $75 billion fund to incentivize lenders to modify the mortgages of at-risk homeowners--bringing monthly payments down to 31 percent of the borrower's income.
Steps to keep mortgage rates low for middle class families by strengthening Fannie Mae and Freddie Mac through Treasury purchases of mortgage-backed securities and other steps.

Link to Executive Summary
Link to Fact Sheet
Housing Example Sheet

Q&A

More Assistance for the "Big Three" automakers: GM announced last Tuesday that it would need a $2 billion loan to make it through March; another $2.6 billion in April; and another $12 billion by 2011 (including $7.5 billion in loans and $4.5 billion to pay off credit that comes due).

Chrysler requested another $5 billion in loans, without which the company said it would have to go into liquidation.

These two requests, according to Congressional Quarterly, bring total automaker assistance to $39 billion.

In return for their federal assistance, GM and Chrysler were required to submit comprehensive viability plans for administration review. If the plans fail to show significant progress, Treasury can recall the loans. Those plans are now under review by an Presidental Task Force on Autos chaired by Treasury Secretary Geithner and National Economic Council Director Summers.

Financial Stability Plan: On Tuesday, February 10, 2009 Secretary of the Treasury Timothy Geithner released the outlines of a sweeping Financial Stability Plan. Early responses by the markets and analysts have been luke warm with many expressing concern about the sparse details.

Highlights of the plan:

Treasury would operate a Capital Assistance Program (CAP) to serve as "bridge funds" for relatively healthy banks until they can access private capital markets. Treasury's assets in the banks would be placed in a new Financial Stability Trust.
Treasury, in partnership with FDIC and the Fed, would create a Public-Private Investment Fund of $500 billion - $1 trillion to purchase troubled assets.
Treasury, in partnership with the Fed, would create a Consumer & Business Lending Initiative of up to $1 trillion to boost the secondary market for purchase of auto, small business, credit card, and other consumer and business loans.
In cooperation with FDIC, Treasury would establish a Housing Support and Foreclosure Prevention initiative for purchase of mortgage-backed securities (up to $600 billion), and a facility to reduce monthly mortgage payments ($50 billion).
In cooperation with SBA, Treasury would establish a Small Business and Community Bank Lending Initiative to boost the secondary market for SBA loans, as well as increase the federal guarantee of (and reduce fees associated with) such loans.
Require greater transparency, accountability, and conditionality for firms receiving extraordinary assistance.

Link to Treasury Fact Sheet

Stimulus Bill Signed into Law

On February 17, 2009, the President signed into law the economic stimulus bill, the American Recovery and Reinvestment Act of 2009 (PL 111-5).

The previous week, the House passed the measure on a 246-183 (without any Republican votes) and passed the Senate by the narrowest of margins 60-38 (with 3 Republican votes). 60 votes were needed in the Senate to waive a budgetary objection to the bill.

According to estimates by the nonpartisan Congressional Budget Office (CBO), the bill's spending and tax provisions will cost $185 billion over the remainder of 2009, $399 billion in 2010, $134 billion in 2011, and $787 billion over fiscal years 2009-2019. Approximately 3/4 of the bill's spending and tax cuts will occur by the end of FY 2010 -- the target the Administration had been aiming for.

In a letter analyzing the likely economic effects of the stimulus bill, CBO estimated that "in the short run the stimulus legislation would raise GDP and increase employment by adding to aggregate demand and thereby boosting the utilization of labor and capital that would otherwise be unused because the economy is in recession. Most of the budgetary effects...would occur over the next few years, and as those effects diminished the short-run impact on the economy would fade....In contrast to its near-term macroeconomic effects, the legislation wold reduce output slightly in the long run...."

Following are links to bill summaries, CBO and JCT estimates, bill text, and report language.

Final Stimulus Bill: Detailed Summary of Appropriations Provisions

Final Stimulus Bill: Summary of Tax, Health, and Entitlement Provisions

Final Stimulus Bill: CBO Estimates

Final Stimulus Bill: CBO Economic Analysis

Final Stimulus Bill: JCT Tax Cut Estimates

Final Stimulus Bill: Legislative Text of Spending Provisions

Final Stimulus Bill: Legislative Text of Tax, Unemployment, Health, and State Fiscal Relief Provisions

Final Stimulus Bill: Joint Explanatory Statement (Report Language) on Spending Provisions

Final Stimulus Bill: Joint Explanatory Statement (Report Language) on Tax Unemployment, Health and State Fiscal Relief Provisions

[...]

Wednesday, January 07, 2009

How much do we really owe in federal financial obligations?

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From: Peter G Peterson Foundation

What is the Real National Debt?

"How exactly does a $56.4 trillion bill add up?" you ask. We know that the federal government carries both publicly held debt and debt for money it has borrowed from itself. Together, these sums are closing in on $11 trillion. This is the figure most commonly cited as our "national debt," but actually, that’s only the start of the REAL national debt.

Right now, you are carrying a burden of about $184,000. That is each and every American’s share of the US government’s approximated $56.4 trillion in current obligations. And every year in which no down payments or reforms are made to these obligations, the total grows by $2 trillion to $3 trillion – or $6,600 to $10,000 per person – on autopilot.

How exactly does this $56.4 trillion bill add up? First, there are the federal government’s known liabilities that it is legally obliged to fulfill. These include publicly held debt, military and civilian pensions and retiree health benefits. As of September 30, 2008, these liabilities added up to $12.2 trillion.

Then there are various commitments and contingencies – i.e., contractual requirements that the government is expected to fulfill when, and if specified conditions are met. These include federal insurance payouts, loan guarantees, and leases. As of September 30, 2008, they added up to $1.4 trillion.

So where does the remaining $43 trillion or so come from? That’s what the government has promised to pay in Social Security and Medicare benefits in excess of related revenues. As of January 1, 2008, current and promised future Social Security benefits amounted to $6.6 trillion. And between Medicare’s three programs (hospital insurance, outpatient, and prescription drug), current and future promised Medicare benefits amounted to $36.3 trillion.

Keep in mind that although people rely on the promise of these benefits, the government can – and does – change these programs in ways that increase or decrease the value of the expected benefits, which has the effect of expanding or shrinking the total amount of obligations. Such changes can be made to the size of payroll tax contributions, cost-of-living adjustments, beneficiary premiums, eligibility ages and benefit levels, among other examples.

That’s how you get to $56.4 trillion. And remember: every year in which no down payments or reforms are made to any of the obligations above, this total grows by $2 trillion to $3 trillion.

Stick with www.pgpf.org to keep track of how much you owe.

SOURCE: 2008 Financial Report of the United States Government. Social Security and Medicare benefits are present values as of January 1, 2008. Burden per person calculated using estimated December 2008 US Census Bureau data. Other data as of September 30, 2008.

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Monday, December 08, 2008

Dec. 10th is the deadline for students to enter the Students Face Up to the Nation's Finances contest

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From: Facing Up to the Nation's Finances

Students Face Up to the Nation's Finances

The Federal Budget Deficit And The National Debt: Let's Hear Your Plan!

The Challenge

Be the policymaker, the advisor, or the opinion columnist. What do you think about the federal government’s fiscal crisis, and what do you think should be done?

Make your voice heard and submit your thoughts as part of a national contest (as well as for an assignment in your class). Please write a short essay or create a video or other multimedia presentation (“Entry”) addressing any or all of these questions:

Please discuss the causes and potential consequences of growing national debt for America and your generation.

What are some reforms that you would support in order to reduce debt and restore a healthier economic future for the United States?

In addition to being part of a national competition with four prizes of $500 each awarded at the end of the semester, your work may be posted on Public Agenda’s website, featured on YouTube, and elsewhere, republished in other forms, and brought to the attention of national leaders and news media.

Deadlines

Entries will be accepted starting Oct. 1, 2008, on FacingUp.org. All Entries must be received by Dec. 10, 2008, at 11:59 p.m. ET. The winners in all categories will be selected by Dec. 19, 2008, and announced on the FacingUp.org website that day.

Eligibility

Students are eligible to participate if they are currently enrolled in a participating college or university and have participated in Students Face Up in a course or in an event on your campus. Proof of participation will be required by the winner.

Each participant can only submit one entry.

[Facing Up article has further contest details]

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Tuesday, October 21, 2008

Bailouts deepen the already deep financial condition of the US government

A Medicare card, with several areas of the car...

A Medicare card.
Image via WikipediaGovernment reform orgs. deliver news on major events within their areas of expertise.
From: Facing Up to the Nation's Finances

[The deepening federal fiscal condition is receiving increasing alarm and entreaties from America's fiscal watchdogs. -David Weller]

The crisis after this one

By ScottBittle on October 20th, 2008

More and more economists are arguing that a global financial crisis isn't the time to worry about the federal deficit. A wide range of budget expert and economists – even the ones who'd normally be considered budget hawks -- say the government has to do whatever it takes to stabilize the financial markets, get credit flowing, and mitigate the recession that's almost certainly upon us. If that means running deficits, they argue, then that's what we'll have to do.

And make no mistake about it: the federal government will run deficits over the next few years. The Congressional Budget Office projected deficits of more than $400 billion for the next two years, even before the global financial crisis hit. Since then, we've added a $700 billion bailout plan, and the next presidential administration will very probably add some sort of additional stimulus package to that. That could add up to an unprecedented $1 trillion deficit next year.

Despite any campaign rhetoric you may have heard, it's going to be almost impossible to balance the budget under those circumstances. You can't possibly cut spending enough or raise taxes enough to bring those figures into line without doing massive damage to vital programs or to the broader economy.

So, fair enough. When you're trying to put out a fire, you don't worry about how much water you're using. No one wants the U.S. economy to wind up like Japan in the 1990s. The real challenge facing us will be making sure the solution to the current crisis doesn't set us up for the next one.

It's absolutely true, there are times when running a deficit makes sense. And if the government only ran in the red during recessions and national emergencies, we'd be laughing. But in this country, we routinely ask more of the government than we're willing to pay for. The U.S. has run a deficit for 31 of the last 35 years, and we weren't in a constant state of crisis for those decades. Deficits are the default setting, and they make it harder to deal with real emergencies when they do crop up.

Secondly, the long-term outlook for the federal budget is very, very ugly. Every expert who looks at the long-term state of the budget uses the same word to describe it: unsustainable. The national debt has reached a staggering $10 trillion, and we've got another $53 trillion in liabilities ahead of us to pay for Medicare and Social Security for the baby boomers.

The national debt and those future liabilities could represent the next crisis, after this one. Unless we get the government's financial house in order, unless we find a way of paying for Medicare and Social Security, we'll be looking at a government debt crisis that could be just as painful – and just as avoidable – as the current financial meltdown.

The good news is that, unlike the global financial meltdown, we still have time to deal with the federal budget. Not much time, perhaps, but some. The key thing now is to cope with the current credit crisis and slumping economy without making our long-term budget problems too much worse. We probably can't avoid adding to the national debt to get through the current emergency. But we can at least make sure the money we're borrowing is used wisely: to stimulate the economy and make decisions that will strengthen us in the long run. And we can – we absolutely must -- start the hard work of fixing Social Security and Medicare before they get out of hand.

Otherwise, we may find a second fire has been smoldering while we're been preoccupied with putting this one out.

Sunday, October 19, 2008

On our next president's fiscal priority

Kent Conrad, U.S. Senator from North Dakota.

US Senator Kent Conrad (D-ND).
Image via WikipediaGovernment reform orgs. deliver news on major events within their areas of expertise.
From: Taxpayers for Common Sense

[With the recent, large bailouts, the federal government has gone way beyond its means as reflected in the total national debt of over $10 trillion and fiscal promises. -David Weller]

Notable Quote

"The next Administration will have no choice but to immediately address these mounting problems. The worsening budget picture makes it clear that the country needs a dramatic change of course in fiscal policy – the sooner, the better."

--Sen. Kent Conrad (D-ND), October 7, 2008.

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Monday, October 06, 2008

Tell Tom Brokaw to question candidates in second presidential debate about our nation's fiscal future

JACKSON HOLE, WY - JUNE 28: In this photo supp...

Tom Brokaw.
Image by Getty Images via Daylife
Government reform orgs. deliver news on major events within their areas of expertise.
From: Peter J. Peterson Foundation

Demand Answers From The Next Presidential Debates!

In the first presidential debate last week, moderator Jim Lehrer asked the candidates, "If I hear the two of you correctly, neither one of you is suggesting any major changes in what you want to do as president as a result of the financial bailout? Is that what you're saying?"

Neither Senator McCain nor Senator Obama had substantive answers.

Click here to demand answers at the next debates. Sign our petition today and we will forward your responses to Tom Brokaw, moderator of the upcoming debate on October 7.

When our leaders don't take steps to fix serious and undeniable problems, all Americans pay the price. As disruptive and damaging as today's mortgage sub-prime crisis is, we're looking at a "super sub-prime" crisis that, if left unaddressed, will hurt many more Americans - and hurt much worse.

Our politicians promise neat solutions, but these are convenient myths. The truth is,

We cannot grow our way out of these problems. To do so, our economy would have to grow by double digits in real terms for decades. Even during the relative prosperity of the 1990s, the economy grew at an average rate of 3.2% per year.
We cannot solve the problem simply by eliminating earmarks and pork-barrel spending, cancelling the Bush tax cuts, and ending the war efforts in Iraq and Afghanistan. Combined, these actions would get us only 15% of the way to solvency.

With two debates left, McCain and Obama must answer real, hard questions about our financial future.

Here's what you can do: Act now to demand answers at the next debates. Our suggested questions are attached below, but feel free to add your questions when you sign the petition.

Here are our suggested questions for the upcoming debates:

1. How will you make fiscal responsibility and intergenerational equity a priority?

2. How will you slow the rate of growth in health care costs that threaten to bankrupt America?

3. How will you encourage the country to save more and reduce our dangerous dependence on foreign lenders?

4. Will you put everything on the table - statutory budget controls, entitlement reform, and current tax policies - to encourage bipartisan action?

5. Will you support the creation of a bipartisan commission to review everything on the table and make recommendations with a guaranteed up-or-down vote by the next Congress?

We need a President who will tackle these critical issues, help educate the public, and lead a bipartisan effort to make meaningful reforms a reality. Join 150,000 of your fellow Americans who have expressed their concern at www.pgpf.org. Tough choices and shared sacrifices will be required, but solutions exist. Together, we can bail out America - and the time to start is now.

For our future,

Dave Walker, President and CEO
Peter G Peterson Foundation

Sunday, October 05, 2008

Effect of the rescue portion of bailout bill on nation's debt and deficits

Government reform orgs. deliver news on major events within their areas of expertise.
From: EconomistMom.com

The Rescue Bill Is Signed, and the Market Is Down

October 3rd, 2008 . by economistmom

[...]

Here’s how the official CBO cost estimate describes the effect of the rescue portion on the debt and deficits (”net budget impact”) (emphasis added):

CBO expects that the Treasury would use most or all of the $700 billion in purchase authority within two years (after which the authority to enter into agreements to purchase various troubled assets would expire). To finance those purchases, the Treasury would have to sell debt to the public. Federal debt held by the public would therefore rise by about $700 billion, although the government would also acquire valuable financial assets in the process. As noted above, CBO expects that since the acquired assets would have some value, the net budget impact would be substantially less than $700 billion; similarly, net cash disbursements under the program would also be substantially less than $700 billion over time because, ultimately, the government would sell the acquired assets and thus generate income that would offset much of the initial expenditures.

In addition to any net gain or loss on the purchase of $700 billion or more in assets, the government also would incur administrative costs for the proposed program. Those costs would depend on the kinds of assets purchased or insured. On the basis of the costs incurred by private investment firms that acquire, manage, and sell similar assets, CBO expects that the administrative costs of operating the program could amount to a few billion dollars per year, as long as the government held all or most of the purchased assets.

[...]

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Monday, September 29, 2008

How to bailout the bailout

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From: Taxpayers for Common Sense

Financially Bailing out the Bailout

Pub Date: Sep 26, 2008

Missing in the debate over whether taxpayers should bailout Wall Street is any plan or attempt to explain how to pay for the $700 billion bailout.

It is not news to say that Congress and this Administration like solving problems by spending money. And in the case of the Wall Street mess, it is looking inevitable that taxpayers will be forced to fork over an unprecedented level of cash. But what is frustrating to us is that piling up more debt will cost our nation even more than the current price tag if we don't start to make some hard decisions on spending priorities now. We may never see the full extent of our nation's budgetary problems, but our kids certainly will.

Some are saying that if Uncle Sam is able to sell at a fair price the bad debt that we are planning to buy, the bailout will likely cost us well below $700 billion. That would be great. But it is just as likely that the costs of the bailout plan could balloon to well over a trillion dollars.

The Administration and Congress have already blown a $400 billion deficit hole in the current budget, so the budgetary deck is stacked against us. Hoping that the bailout costs a "modest" $250 billion or so should not delay our cutting wasteful and unnecessary spending from the federal budget. We need to start today figuring out how to save some money, and all proposals should be on the table. Here are a few ideas to get us started:

Cut Defense Spending – Spending items in the Defense budget should not escape scrutiny simply because some lawmaker said it is important to the national defense. Defense spending has become the third rail in spending cuts, and very few lawmakers even consider touching it. But just the very fact that non-emergency defense spending now makes up half of all discretionary spending in the budget makes it a critical place to start. Our nomination: start with the F-22 and other weapons systems not necessary to fight the Global War on Terror.

Social Security, Medicare and other entitlements – In order to shore up our credit rating internationally, we need to consider ways to reduce the long-term budgetary impact of these important programs sooner rather than later. Right now, Medicare spends more than it brings in. That day looms for Social Security. Enacting reforms to ensure these programs do not depend on deficit spending would send an important signal to international financial markets that the U.S. is getting serious about our long-term budgetary liabilities.

Stop Wasteful Contracts - The government wastes tens of billions of dollars on failed contracts where the government gets nothing. A recent report estimated the cost of failed contracts with the Department of Homeland Security at $15 billion. We have seen similar results in Iraq. Let's end these contracts earlier and stop wasting our hard-earned tax dollars.

Lead by Example - There are also small but symbolic acts lawmakers can take. For instance, at a time when lawmakers are asking taxpayers to fork over $700 billion, all 535 lawmakers should say no to their annual pay raise. They should also say no to the $6.6 billion in earmarks just passed for this year.

Nobody expects Congress to find $700 billion in spending cuts to pay for this massive bailout package. But what has to change is that taxpayers need to pressure Washington to adopt the same fiscal discipline that they are now demanding of Wall Street. Uncle Sam just cannot keep spending money without figuring out a way to pay for it.

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Sunday, September 28, 2008

Comment on the financial services bailout bill at PublicMarkup.org

The House Financial Services committee meets. ...

US House Financial Services Committee.
Image via WikipediaGovernment reform orgs. deliver news on major events within their areas of expertise.
From: Sunlight Foundation

Emergency Economic Stabilization Act of 2008

On Sunday, September 28, congressional leadership issued the Emergency Economic Stabilization Act of 2008, posted online (in PDF) by Speaker Pelosi and by the House Financial Services Committee. This bill is the latest version of Congress' gigantic taxpayer bailout of the financial sector, with a potential cost of $700 billion or more than $2000 per American citizen. We believe, as Justice Brandeis said, that "Sunlight is the best of disinfectants," and that all legislation ought to be open to public comment and consideration in real-time, not just after the fact. So, as a public service, we're posting the 110-page text for public comment.

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Washington policymakers must budget for the bailout

The Lincoln Memorial, Washington Monument, and...

Washington, DC at night.
Image via WikipediaGovernment reform orgs. deliver news on major events within their areas of expertise.
From: The Concord Coalition

FOR IMMEDIATE RELEASE:
Friday, September 26, 2008

CONCORD COALITION URGES POLICYMAKERS TO BUDGET FOR THE BAILOUT

WASHINGTON -- As Congress and the Bush Administration negotiate a $700 billion plan to shore up credit markets by purchasing “troubled assets,” The Concord Coalition urged them to heed the lesson of Wall Street’s failure: corrective actions are more effective and much less costly if taken in advance of a crisis rather than in the face of one.

Concord said that in dealing with the immediate crisis, policymakers should limit taxpayer exposure, maximize transparency of any new obligations and develop a debt repayment plan to ensure that the short-term emergency measures do not result in further deterioration of the long-term budget outlook. More fundamentally, however, policymakers must acknowledge and begin to address the fact that the federal budget is itself suffering from the same over-reliance on debt and lack of transparency that doomed the institutions they are now rushing to rescue. If they fail to do so, the eventual and inevitable consequences for the economy are no less stark.

“It’s fine to hope for the best, but we should budget for the worst. While the intent of this plan is to recoup much, if not all, of the initial cost to taxpayers there are no guarantees. The value of the assets to be purchased is highly uncertain. What we know for certain is that the government will incur a huge upfront cost, immediately adding to the debt and immediately incurring compounding interest payments. All of this will be layered on top of a deficit expected to exceed $500 billion next year, and an overall fiscal policy that is unsustainable. Meanwhile, we are borrowing increasing amounts from abroad to make up for our inability to make crucial budgetary decisions. The answer to every problem in Washington seems to be more debt. That simply cannot go on. Given the uncertainty of the return on this $700 billion of new borrowing, and the daunting challenges already confronting the fiscal outlook, Congress should adjust budget policy either though phased-in spending cuts or tax increases to ensure against any permanent fiscal deterioration,” said Concord Coalition executive director Robert L. Bixby.

The Concord Coalition further stressed that once the immediate threat has passed, and the new administration and Congress start their work next year, their agenda must confront the nation’s long-term fiscal challenges.

“Washington can normally act in the face of a crisis. We don’t need to relearn that lesson. A more fundamental issue is whether we can learn from the current crisis and finally break the pattern of routinely ignoring long festering problems. It is no secret that our nation is entering an unprecedented and permanent demographic transformation to an older society and that we are doing so with steadily rising health care costs and steadily falling national savings. This is a dangerous combination for the future health of the economy. And yet, nothing in the budget process requires Congress to review the current-law outlook beyond the next five years, much less take corrective action. If we learn from Wall Street’s mistakes, we can act more effectively, with less pain, and more time to prepare the public for difficult but necessary choices. If we don’t change course, the federal government itself will be in need of a bailout,” Bixby said.

###

The Concord Coalition is a nonpartisan, grassroots organization dedicated to balanced federal budgets and generationally responsible fiscal policy. Former U.S. Senators Warren Rudman (R-NH) and Bob Kerrey (D-NE) serve as Concord's co-chairs and former Secretary of Commerce Peter Peterson serves as president.
CONTACT:
Jonathan DeWald
(703) 894-6222
communications@concordcoalition.org

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