Posts Tagged ‘Obama’

The BUDGET CREEP phenomenon

Thursday, April 22nd, 2010

Nearly every budget in the last 10 years is guilty of the “budget creep” phenomenon.  The table below outlines both President Bush and President Obama’s future budget proposals:

The problem:

From President Bush’s FY2007 budget to President Obama’s FY 2011 budget, proposed spending for FY 2011 grew by $594 billion.  If we were actually going to spend in FY2011 what was slated in FY2007 the deficit would be half of the size.  The graph below shows spending estimates for FY2011 in each of the last five administration budget proposals.

This year’s budget proposal increases FY2011 spending by more than $200 billion over what the Administration proposed for FY2011 last year – yet another piece of evidence of the budget creep phenomenon.

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California is Greece in America, but worse for America?

Tuesday, March 9th, 2010

President Obama will meet with Greece’s prime minister George Papandreou today to discuss Greece’s economic problems.  Some experts worry that Greece’s debt crisis could have a domino effect on other nations – including the U.S. – similar to the 1997 Asian Financial Crisis.

Yet the domino effect of California defaulting on its debt would have a greater impact on the U.S. than Greece defaulting, according to the CEO of JP Morgan Chase.

California’s problems primarily stem from over-spending.  This year, California is expected to spend $179.9 billion – double what it spent just 10 years ago. Yet, California’s economy grew by just over 50 percent during the same period.  Today, California faces an estimated deficit of $20.7 billion.

The state’s Legislative Analyst Office (LAO) predicts the budget gap will widen for at least two more years.  The LAO expects the gap to begin shrinking by 2013 but only if the state’s economy substantially recovers.

Every year that California runs such deep deficits, the state compounds its problem.  As a percent of the budget, it took twice as much to pay the interest on California’s debt in 2008 than it did in 2000.  Paying interest on debt, or “servicing the debt,” will cost more as the risk of California defaulting on its debt increases.

Governor Arnold Schwarzenegger and California lawmakers have been struggling to create a budget that reduces spending while still complying with the state’s many peculiar budget rules.  Some citizens are protesting proposed reductions in spending.  For example, a group of students and teachers held a “Day of Action” with rallies and demonstrations to oppose cuts in education spending and increases in student fees.  (Fortunately, the rallies aren’t nearly of the same intensity as the violent protests in Greece.)

Yet polls indicate that Californians recognize the need for cuts in spending.  A Field Poll found that half of voters surveyed support using spending cuts mostly or entirely to close California’s deficit. Just 13 percent – or one in every eight voters – thought tax increases should be used to close the deficit.

As the situation in Greece has the world worried about a domino effect of debt crises, California provides an unwelcome preview of what other states and the U.S. federal government will face unless they reign in deficits.

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VIDEO: Quick look at Obama visiting OPOWER in Arlington, VA on March 5, 2010

Friday, March 5th, 2010

Bankrupting America got a quick look at President Obama and his motorcade visiting OPOWER, a small business in Arlington, Virginia.

Among the President’s appeals to employers is his pending “jobs bill” — and its temporary payroll tax credit. Unfortunately the tax credit is too temporary, too targeted and creates perverse hiring incentives for employers. Check http://bankruptingamerica.org next week for more on this…

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Root canals surpass Washington in popularity

Wednesday, March 3rd, 2010

Well probably not but Washington lawmakers face more bad news in the polls.

56 percent of respondents – including 63 percent of Independents and 37 percent of Democrats – believe the federal government is doing so much that they now consider it to be a threat to individual rights, according to the CNN/Opinion Research Corporation survey.

CNN also finds that 86 percent of Americans believe government is broken.

63 percent of respondents said current federal lawmakers do not deserve to be reelected.  Only 51 percent of respondents think their representative should be reelected – an all-time low.

These results weren’t an anomaly.  Polls show President Obama’s job disapproval has almost caught up with his approval rating and Congress’s job disapproval averages almost 76 percent.  According to Rasmussen’s poll, Congress’s job disapproval jumped 10 points in just one month.  70 percent of that poll’s respondents said Congress hasn’t passed anything to improve their lives.

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Take Notice: news on the economy and spending

Tuesday, March 2nd, 2010

Washington Post:

Deal on consumer agency nears: Sens. Dodd and Corker are close to agreement on proposing regulator housed inside Federal Reserve.

President sells stimulus package in Ga.: To hear President Obama tell it, his plans for reshaping the nation’s economy are aimed at helping people like Ray Gaster, whose small chain of lumberyards here has been walloped by the recession.

New York Times:

Hoyer Urges Bipartisanship on Debt: Representative Steny H. Hoyer calls on both parties to come together to tackle tough fiscal questions.

Biden to Labor Leaders: Things Could Be Worse: The vice president counsels patience on creating jobs, and continues to say that things could’ve been a lot worse without the stimulus package.

Wall Street Journal:

Staffing Woes Slow Jobs Program: As Washington debates new job-creation initiatives, one federal program already in place is hitting obstacles to boosting employment—in part because the program itself could use some more staffers.

Lawmakers Keep Change From Trips: When lawmakers travel overseas on official business they are given up to $250 a day to cover meals and expenses. Congressional rules say they must return any leftover cash to the government. They usually don’t.

Firms Map Routes to Recovery: Corporate America is emerging from the worst downturn since the Great Depression smaller and thriftier. Wrenching layoffs and plant closures have left them more financially conservative and wary of risk, affecting their plans for recovery.

USA Today:

Postal Service seeks 5-day delivery: The U.S. Postal Service will move this month toward reducing mail delivery from six days a week to five, a change Postmaster General John Potter has said is critical to reducing its massive debt.

Stalemate holding up jobless benefits: Hundreds of thousands of out-of-work Americans will begin losing unemployment and health benefits this week as a one-man filibuster in the Senate continued to block a measure to extend those and other programs for one month.

Obama balances between jobs and health care: Today, jobs; tomorrow, health care. These days, President Obama is trying to maintain a delicate political balance between two top domestic priorities, his health care plan and his efforts to revive the slumping jobs market.

Politico:

House Dems short on jobs bill votes: The legislation is facing opposition from some Blue Dogs and members of the CBC.

The Hill:

Hoyer: Raising taxes a realistic option: Tax increases may be necessary to rein in $12 trillion in federal debt, House Majority Leader Steny Hoyer said Monday.

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The State of the States: will governors get serious on spending?

Friday, February 19th, 2010

Governors from across America are packing their bags and polishing their agendas to come to Washington, DC this weekend for the National Governors Association Conference.  Only 11 governors described their state’s 2009 economic conditions as “good” or “strong.”  41 governors face budget shortfalls for the current fiscal year.  Surprisingly this problem isn’t at the top of the NGA Conference’s agenda.

The governors could learn a thing or two from their newly elected colleague in New Jersey, Governor Chris Christie.  The state currently has the largest per capita budget shortfall in America, bearing a $2.2 billion deficit.  Christie recently declared a “fiscal emergency” in the state.  This executive order allows Christie to freeze state spending for an indefinite amount of time.

Like many states, New Jersey has been using temporary tax increases and federal aid to lessen the problem.  Christie deserves applause for recognizing that these aren’t permanent solutions and thereby proposing the freeze.

Despite similarities in name, Christie’s freeze is different (and has greater expectations) than the spending freeze proposed by President Obama in his State of the Union address.  Christie has already announced budget cuts in 375 programs that will, according to his executive order, add up to an “amount sufficient to ensure that the state budget is in balance.”  The President’s spending freeze is more like mild frostbite – the plan applies to about 13% of the federal spending budget and will have a negligible effect on the fiscal crisis we face.

Only time will tell if New Jersey can beat back special interests and truly cut the state’s out-of-control spending.  For now though, the proposal looks promising and could serve as a lesson for federal leaders and other governors in Washington this weekend.

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Pay-As-You-Go is no panacea

Tuesday, February 16th, 2010

President Obama recently signed legislation that would restore pay-as-you-go, or PAYGO, rules to the federal government’s budget process.  During his weekly address, he celebrated this move as a return to fiscal discipline, ignoring the fact that the legislation he signed also raised the debt limit by another $1.9 trillion.  Here’s how the President described PAYGO:

It’s pretty simple.  It says to Congress, you have to pay as you go.  You can’t spend a dollar unless you cut a dollar elsewhere.  This is how a responsible family or business manages a budget.  And this is how a responsible government manages a budget, as well.

The problem is, it’s actually not that simple.  PAYGO will most likely have a negligible impact on government spending and encourage Congress to raise taxes rather than make spending cuts.  In fact the Congressional Budget Office has said that the PAYGO “process has other features that could lead to greater spending or lower revenues in the coming decade than would occur under the existing House and Senate rules.”

PAYGO rules don’t apply to all government spending.  40 percent of total spending is appropriations bills, which are exempt from PAYGO.  In the past this loophole has been used to increase mandatory spending programs.  Congress can also get around PAYGO requirements by declaring spending necessary because of an “emergency.”  For instance the Republican Caucus’ Budget Committee contends that “the $787 billion ‘stimulus’ bill (now estimated by CBO to be $862 billion) was designated as an ‘emergency,’ so pay-go did not apply to it.”

If the President wants to compare the PAYGO budget procedure to how a responsible family manages a budget, he should be clear that this family would be allowed to make ad-hoc exceptions to their rules and could still increase their yearly debt by more than eight times – just like PAYGO allowed for from 2007-2009.

Though the term might function as word candy for politicians trying to look tougher on spending, PAYGO rules will do little to encourage real fiscal responsibility or reduce deficits.  Restoring fiscal discipline will take a commitment from policymakers to not just create new budget rules but to directly cut government spending.

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The Odd Couple: 5 unfortunate similarities between Bush and Obama

Tuesday, February 16th, 2010

At first glance former President Bush and President Obama seem like opposites when it comes to economic policy making.  Talk of Bush as a free-marketeer and deregulator abounds as Obama’s reputation as a big spender and intervener grow stronger by the day.  A closer look shows their economic policies have more in common than meets the eye.

5. They love to spend. Bush passed a $3 trillion budget for 2009.  Obama posted a $3.5 trillion budget in 2010.  Bush doubled the debt to almost $6 trillion and Obama’s plans would leave us with an IOU of an additional $8.5 trillion by 2020.

4. They shop at the same stores. Contrary to popular belief, defense and homeland security spending only made up about 40 percent of Bush’s new spending.  He increased spending across most non-defense categories – like education, Medicare, Medicaid, income security and regional development – by four to six times the rate of inflation.  In Obama’s first half year in office, as he demanded a departure from the “investment deficit” years under Bush, these budgets rose another 70 percent or 40 times the rate of inflation.

3. They dabble with stimulants. In 2001 and 2008, Bush spent billions on rebates to stimulate consumer spending.  In 2009, Obama upped the ante with his $862 billion stimulus package.

2. They give sweetheart deals to failing corporations. Obama carried out Bush’s unpopular $700 billion bailout for failing corporations.  Together, the presidents have bailed out over 600 businesses since Spring 2008.

1. They enjoy regulating in their free time. Once again contrary to popular belief, President Bush was the biggest regulator since Richard Nixon.  Under his leadership in 2007, the number of pages of regulation added to the Federal Register reached an all-time high of 78,090  – a 21 percent increase from Bush’s first year.  And spending on regulatory activities rose to $42 billion in 2009 – a 62 percent increase.  Since taking office, Obama has proposed a large and sweeping increase in regulation that many worry could lead to another financial crisis in the future.

Despite rhetoric that suggests the contrary, President Obama’s economic policies are strikingly more of the same failed policies that Bush tried before him.  This is unfortunate because, as New York Times columnist Paul Krugman claims, the last decade has seen declining private-sector employment and declining median household income.

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Budget Breakdown

Monday, February 15th, 2010

On the first of the month President Obama released his proposed budget for fiscal year 2011.  He calls for $3.8 trillion in spending, up $300 billion from fiscal year 2009 (the most recent year with complete data).  To put the FY2011 budget in perspective, let’s breakdown FY2009 spending numbers (which equaled about $11,000 per citizen):

Note: all years below are referring to fiscal years

The average American worked 111 days to pay off their share of the federal government. This is one month longer than it took a decade ago.

The government is growing fast. Outlays (i.e. spending) increased 18 percent, or $535 billion, from the year before.  Over the last four years outlays have grown 42 percent, or more than $1 trillion.

The government is growing faster than the U.S. population. Since 1960 the U.S. population has grown by 70 percent while federal spending has grown by over 500 percent.

Federal spending represents more and more of the economy. As a percentage of the nation’s economy, outlays grew from 20.7 percent in 2008 to 24.7 percent in 2009.

Total revenues cost each citizen $6,500 on average, or $2.1 trillion total. The public paid $915 billion in income taxes.

Taxes and debt burdened America’s families. According to the Tax Foundation, Americans worked five months (until May 29) to pay off the total burden of federal, state, and local taxes and the national debt.

Lastly, here’s the breakdown of how the money was doled out:

About 60 percent of the budget was spent on mandatory spending. Nearly $678 was spent on Social Security programs.  $425 billion on Medicare.  $251 billion on Medicaid.  $607 billion on “Other” mandatory spending programs.

About five percent was spent on paying interest on the national debt. The Department of the Treasury spent $187 billion paying the national debt’s interest.

Departments spent a lot. The Defense Department spent $637 billion.  The Agriculture Department spent $114 billion.  The Transportation Department spent $73 billion.  The Department of Housing and Urban Development spent $61 billion.  The Education Department spent $53 billion.  The Department of Homeland Security spent $52 billion.

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5 proposed budget cuts by President Obama

Thursday, February 11th, 2010

In his fiscal 2011 budget released last week, President Obama targeted 126 programs to be completely shut down or have their budgets cut.

While this proposal will only save an estimated $23 billion next year, it’s a start, and we applaud the President for taking this first step.  (Actually it’s his second step: in last year’s budget, President Obama proposed 121 cuts or reductions.  Congress didn’t enact all of them, but what they did cut saved taxpayers $6.8 billion.)

A full list of the proposed cuts can be found here, but we pulled out five of our favorites below (in order of most to least dollars saved):


1. Cancel NASA’s Constellation Systems Program

This program is a classic government cost overrun. The program was supposed to send U.S. astronauts to Mars.  The first phase was to be completed by 2012, but last year it was revealed that goal couldn’t be met without, you guessed it, more money.  President Obama is scrapping this program for a savings of nearly $3.5 billion.


2. Terminate C-17 production

The Obama Administration says the military already has enough C-17s to fill its needs.  This would save taxpayers $2.5 billion.


3. Eliminate election reform grants

According to the Administration’s budget, the federal government has spent $3 billion since 2002 to help states upgrade their voting systems.  They say no more money is needed at this time.  Taxpayer savings; $75 million.


4. Cut subsidies to wool manufacturers

This program was created a decade ago to help worsted wool manufacturers adjust to trade law changes.  As President Obama rightly points out, they’ve had plenty of time to adjust, so why not cut the program?  Doing so would save taxpayers $25 million over 10 years.


5. Eliminate funding for the Christopher Columbus Foundation

This would only save $1 million, but, as the Administration points out, no White House has requested funding for the Foundation from Congress in more than a decade.  So why is Congress still funding it?

These changes won’t even make a dent in the federal deficit, but we’re pleased with the fact President Obama put something on the table.  Now, go back and look again because there’s no shortage of outdated, wasteful programs that can be cut.

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