Here’s a look at some of this week’s most interesting, and consequential, budget- and economy-related issues in the 50 states:
The Las Vegas Review Journal reports that according to a Las Vegas business consultant, the effects of Nevada’s share of stimulus money are “too little, too late.”
The Pittsburgh Post Gazette reveals that Pennsylvania Governor Ed Rendell has started to implement cuts to close the state’s $282 million budget deficit.
According to the Richmond Times Dispatch, the Virginia budget surplus has grown to about $400 million after further analysis.
In an editorial, the Pittsburgh Post Gazette writes that Pennsylvania lawmakers received $67,000 worth of perks last year. This, however, does not even include “$18,000 in food and rental facilities for events hosted by lawmakers for constituents. And it doesn’t include tangible gifts of less than $250.”
The Associated Press reports that the Bell, CA compensation controversy continues. The city council voted Tuesday to lower property taxes “after a state audit showed it overcharged residents to cover pension costs for exorbitantly paid staffers.”
An opinion piece in Forbes by Brian S. Wesbury and Robert Stein asks an important question: when is government spending necessary, and when is it not?
The two write: “Up to a point, some government spending is good. Defending the nation and the rule of law, and helping create some national efficiencies are positive additions to growth.”
They’re right: there are some things the federal government, and surely the state governments, must provide.
But the two caution, “[T]he U.S. is past that point.”
We’d say we’re way past that point. Our current spending trajectory is simply unsustainable. The U.S. is more than $13.3 trillion in debt. (See Public Notice’s fact sheet on irresponsible governing.) Taxpayers pay interest on that debt just like homeowners pay interest on their mortgage. That interest alone, when adjusted for inflation, will nearly triple from $221 billion to $637 billion between 2011 and 2020. (See Public Notice’s fact sheet on unsustainable spending.)
Furthermore, this spending is not helping the economy. Wesbury and Stein turn north to make this point. Our neighbors in Canada have been cutting spending and taxes for some time. Their unemployment rate, while still high by U.S. historical standards, is 1.5 percentage points lower than the current U.S. rate of 9.5 percent.
The Las Vegas Review-Journal — the leading newspaper in a state with the unfortunate distinction of having the nation’s highest unemployment rate — today looks into the effects of planned tax hikes.
While Treasury Secretary Tim Geithner has tried to assure Americans that increasing taxes won’t hurt the economy, taxpaying families and businesses fear otherwise. And it looks like they’re right to be so concerned. Below is an excerpt from the editorial highlighting the impact of one tax hike (the estate – or so-called “death” – tax) on a family-owned business:
Up in Seattle there’s a high-tech business called GM Nameplate — no relation to General Motors. The CEO, Donald Root, bought controlling interest in this manufacturer of graphic overlays, touch screens, brand identity nameplates and other machined components from the founding families in 1977. Under his leadership, GM Nameplate added plants around the United States as well as in Singapore and China, and grew to $80 million in annual revenue.
But Don Root is now 70, and he has Parkinson’s disease. He’d like to turn over the business to his four sons, all of whom are involved in the company in some way.
Problem is, unless the elder Mr. Root takes things into his own hands and arranges to die by Dec. 31, the expiration of the Bush tax cuts will increase the federal death tax from today’s “zero” rate to 55 percent, effective Jan. 1. Should Don Root die and leave his company to his children in 2011 or 2012, they estimate they’ll owe $25 million in taxes on a business purchased and grown with after-tax income.
To get that amount of money, they’d almost certainly have to sell the company at a fire sale price.
Instead, according to Dick Patten, who runs the American Family Business Institute, lobbying against the death tax on behalf of America’s millions of owners of small businesses and family farms, the Root family is now in discussions with a buyer who’d like to purchase GM Nameplate right now, at a market price. The only catch? The buyer wants to move the entire company — with all its machine tools and all its jobs — to Indonesia.
Secretary Geithner suggests that tax increases are necessary to show the world that the U.S. is committed to reducing the deficit. But Washington might think about sending that message another way: cut your own unsustainable spending instead of taking even more from American families and businesses.
Here’s a look at some of this week’s most interesting, and consequential, budget- and economy-related issues in the 50 states:
Last week, the Las Vegas Review Journal published an editorial lamenting government’s fuzzy math when it comes to awarding “stimulus” money.
In the Denver Post, Amy Goodman argues that in order to really deal with the debt and deficit, defense spending has to be on the chopping block.
With Denver’s ballooning budget deficit, the Denver Post’s John Bennett makes the case for cutting the pay of Denver’s city council members. He points out council members in comparable sized cities in Colorado are paid much less.
On Tuesday, the Las Vegas Review Journal reported that 500,000 city and county government jobs across the country could be lost due to budget shortfalls.
Shane Goldmacher wrote yesterday in the Los Angeles Times that California is nearing the fifth week of the fiscal year without a budget. He reports that closed-door meetings have “produced little but tension and finger-pointing.”
Today marks the 100th day since Congress’ deadline for passing a budget has passed. Earlier this month, the House passed a budget “outline” that set next year’s spending levels but lacks any of the tough decisions or politically undesirable votes necessary for a real budget resolution.
This abandonment of long-term budgeting responsibilities is just one more example of Congress refusing to take fiscal responsibility seriously.
USA Today has an interactive graph today showing the growth of U.S. and international debt since 1943. In the last 30 years, debt-per-American has increased from $10,210 to $38,655. However, the trend line in the last four years might be the most astonishing thing on the page.
Viewers can compare debt-as-a-percentage-of-GDP between several countries. Greece’s ratio still far outpaces the U.S.’s, but both have moved up in recent years.
The White House announced yesterday the launch of its second annual SAVE (Saving American’s Value and Efficiency) award. The award asks federal government workers to submit their best money-saving ideas. The winner gets to meet with the President and his or her idea earns a spot in the Administration’s next budget.
The ideas are compiled on this website, where average Americans can weigh in. The White House also tracks ideas submitted last year that are being implemented.
These cuts and efficiencies will generally save thousands or millions of dollars each so they won’t go that far in tackling our $13 trillion debt (which is almost the size of our entire economy), but this is a good step in the right direction, nonetheless. And it mirrors the type of decisions families around America have to make when it comes to their own budgets.
The June jobs report shows yet another sobering month of stubbornly high unemployment.
The jobless recovery has many public opinion polls showing “jobs and unemployment” as Americans’ top concern. Other polls are beginning to find “federal debt” is most worrisome to the public.
It’s no wonder why: since the stimulus was passed, unemployment has gone from 13 to 15 million, and government spending has created a debt close to the size of our entire economy.
We know of a way to help halt the growth of debt AND create jobs. Just follow the 5 easy steps outlined in the video.
Step 6 (if there was a Step 6): send this video to your friends, family and co-workers before government policy bankrupts our country.
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In their monthly meeting, members of the Admistration’s Fiscal Commission acknowledged real spending cuts must be made to tackle our nation’s growing fiscal crisis. Key quotes:
Commission Co-Chair Erskine Bowles:
“We are really going to have to reduce discretionary spending. There’s no way around it, and I think we ought to be very specific about how we’re going to address that.”
Chris Edwards, Director of Tax Policy Studies at the Cato Institute said the following in his testimony:
“Unless today’s massive deficit spending is reduced, the nation is headed for a fiscal calamity. The freedom and prosperity of young people will be crushed by debt piling up at over $1 trillion a year.”
Congressisonal Budget Office Director Douglas Elmendorf:, who also testified at the hearing, said:
“If debt grows unchecked. It means declines in people’s standard of living.”
Veronique de Rugy, Senior Research Fellow Mercatus Center at George Mason University, said:
“All parts of the budget must be on the table for review and potential cuts. Failure to do so will jeopardize the goal of addressing our fiscal problems.”
The Congressional Budget Office – the non-partisan entity charged with determining costs associated with the federal government – today released its annual Long-Term Budget Outlook. The news is not great, but shouldn’t come as a surprise to readers of this blog. Here is an excerpt from the report:
[P]rojections understate the severity of the long-term budget problem because they do not incorporate the significant negative effects that accumulating substantial amounts of additional federal debt would have on the economy:
– Large budget deficits would reduce national saving, leading to higher interest rates, more borrowing from abroad, and less domestic investment—which in turn would lower income growth in the United States.
– Growing debt would also reduce lawmakers’ ability to respond to economic downturns and other challenges.
– Over time, higher debt would increase the probability of a fiscal crisis in which investors would lose confidence in the government’s ability to manage its budget, and the government would be forced to pay much more to borrow money.
