On Budget

I have spoken with many clients recently

Many of them tell me….

This is the most dreaded time of the year

I have been busy working on the budget for next year

How do you budget…..

Many people admit to budgeting by…

How much did we spend last year

How do you know what you spent last year was the correct amount

It may be a comfort level amount…

In today’s growing market it is good to look at all your costs

Do not take what you paid last year

As the cost of doing business

HBS leaves no stones unturned in our search for savings

We find ways to save you money

Contact us for a free consultation

Every Day is a Gift…..

Lower Heating Prices

From CNBC

Lower heating prices
A drop in energy costs is good news for consumers as the temperatures fall. Most households may only see $20 to $30 in savings on their heating bills this season compared to last winter, but some customers could see a nearly $800 drop in their overall heating costs, according to the U.S. Energy Information Administration.
More than a third of U.S. households use natural gas to heat their homes and the price of that fuel is likely to be higher than last winter (electricity prices, which follow natural gas, are on the rise too), but the forecast for milder temperatures should mean overall consumption for the heating season–and your bill–will be lower than last year. If you’re in the Northeast and use heating oil or propane to heat your home, you could see a 15-percent drop in your winter heating bill versus last winter. Propane users in the Midwest may pay the most in the country to heat their homes, but with the drop in propane prices, the overall cost will be about 30 percent less than last year, according to the EIA.

Obama’s debt reduction plan is not equal to Simpson-Bowles

By Editorial Board, Published: September 10The Washington Post

THE SIMPSON-BOWLES commission recommended that the federal government undertake $4 trillion in debt reduction. So did President Obama. Mr. Obama’s advocates want to make it appear that the two $4 trillion figures are equivalent.

“He has offered a reasonable plan of $4 trillion in debt reduction over a decade,” former president Bill Clinton said last week in his Democratic convention speech. “That’s the kind of balanced approach proposed by the Simpson-Bowles commission, a bipartisan commission.”

“He put forward a budget . . . that would get to the $4 trillion goal that came from Bowles-Simpson,” Obama economic adviser Austan Goolsbee said on “Fox News Sunday.”

Not exactly. First of all, the Simpson-Bowles plan envisioned $4 trillion in debt reduction over nine years; the president’s plan would spread the cuts over 10 years — a difference that matters because the value of the savings piles up at the end of the window. For instance, the Simpson-Bowles report shows $817 billion in deficit reduction in 2020 alone. Another year makes a huge difference.

Second, Simpson-Bowles assumed the expiration of the Bush tax cuts for the wealthiest Americans before laying out its $4 trillion in reductions. In budget-speak, that was built into the base line. The Obama plan counts as “savings” allowing the top-end Bush tax cuts to expire ($849 billion from 2013 to 2022) along with keeping the estate tax at its 2009 level ($119 billion over the same 10 years). Again, another huge difference.

Lastly, Simpson-Bowles assumed lower spending on the wars in Iraq and Afghanistan. The president’s plan pads his debt reduction with “savings” in comparison to the wars continuing at the same pace for a decade. This amounts to an $800 billion difference.

When the president released his budget in February, the Committee for a Responsible Federal Budget assessed its savings to be “far below those” of Simpson-Bowles. After aligning assumptions, the nonpartisan committee found Mr. Obama’s $4.3 trillion to be comparable to $6.6 trillion of Simpson-Bowles savings. That’s a difference of $2.3 trillion, or more than 50 percent.

The best measure of whether the country is on a sustainable fiscal path is where federal debt would stand as a share of gross domestic product. At the end of a decade, the Obama plan would have debt at an unhealthy 76 percent of GDP, according to the Congressional Budget Office. The comparable ratio from Simpson-Bowles: 69 percent, still high but less troubling. At least as important, the president’s plan would leave the debt stuck at that level. Simpson-Bowles would put it on a downward path.

Mr. Obama can claim to have outlined an initial plan to tackle the debt, one that follows the Simpson-Bowles approach of combining revenue increases with spending cuts. He can claim that his plan, unlike Mitt Romney’s, has detailed proposals behind the numbers. He can claim to have achieved $1 trillion of the promised savings already, through spending cuts.

But Mr. Obama cannot claim to be seeking anywhere near as much in debt reduction as his appointed commission said was needed to preserve the nation’s fiscal health.

Unemployment Insurance Cuts Come After Tax Cuts: Report

As reported in Huffington Post

WASHINGTON — In March, the commissioner of Georgia’s Department of Labor, Mark Butler, explained how the state’s unemployment insurance trust fund had gone broke.

“In an attempt to curry favor with Georgia businesses, Gov. Roy Barnes declared a ‘tax holiday’ before Barnes’ failed 2002 re-election campaign,” Butler wrote. “Businesses stopped paying into the trust fund. By the time we hit the Great Recession –- and many, many Georgians became unemployed through no fault of their own — the $2 billion Unemployment Insurance Trust Fund had been reduced by $1.3 billion.”

“Plainly speaking,” Butler added, “Georgia had not saved for that rainy day.”

Georgia lawmakers agreed to much of Butler’s plan to restore the trust fund to solvency — cutting the duration of benefits in an effort to save money. The legislature also modestly increased the amount of wages subject to the state payroll taxes that fund the unemployment system.

While the cuts to unemployment benefits were relatively drastic, the tax cutting that preceded them was typical. Most states failed to make prudent decisions about funding their unemployment trust funds over the years, according to a comprehensive report from the National Employment Law Project, a worker advocacy group.

States now owe $43 billion to the federal government, according to NELP policy analyst Mike Evangelist, and it’s likely lawmakers will rely more heavily on benefit cuts than tax hikes in order to get out of debt.

“Over the past 30 years, support for accepted norms in the UI program has been systematically eroded, with state lawmakers now more willing to go after long‐standing features of the program, such as the duration of state benefits or suitable work protections that were previously seen as untouchable,”  Evangelist wrote in the report.

Businesses pay both state and federal unemployment taxes for each worker on payroll — state taxes fund the first 26 weeks of benefits for laid off workers, and federal taxes pay for extra benefits that Congress puts in place during recessions. When a state unemployment trust fund runs dry, the state can borrow from the federal government to pay benefits. If a state borrows for too long, federal payroll taxes go up.

When under pressure to refill trust funds, it used to be that state lawmakers would seek savings by tightening eligibility rules. But this year Georgia joined six other states states that had cut the standard 26 weeks duration of benefits for the first time ever. While each state differed in how they cut benefits, Georgia put benefits on a sliding scale that goes up and down with the state’s unemployment rate. When the rate goes down, the duration of benefits could be as low as 14 weeks. The upper limit is 20 weeks.

The states were strapped for cash because tens-of-millions of additional people filed claims, but also because of tax cuts.

According to Evangelist, 31 states cut unemployment taxes 20 percent or more between 1995 and 2005. And from 2000 to 2009, the overall percentage of wages subject to state unemployment taxes fell to the lowest level in the history of the federal-state unemployment system. In 2007, states were collectively $38 billion shy of recommended trust fund reserves.

Doug Holmes, an unemployment insurance expert who advocates for businesses, suggested states would be unwise to try and meet funding thresholds “because to do so would require dramatic increases in state unemployment taxes that would place these states in an uncompetitive position to attract and keep businesses in their states.”

It’s unlikely states will want to hike taxes to pay for unemployment, Evangelist wrote in his report. “Realistically, it is unreasonable to believe that states will close this gap without doing further harm to the UI program’s ability to sustain unemployed workers and their families through periods of temporary job loss.”

‘We’ll Fight This To The Death’: The Vicious Capitol Hill Battle Between Banks and Credit Unions

As reported by Zach Carter and Ryan Grimm of the HuffingtonPost

 

WASHINGTON — In early February, Alabama Republican Spencer Bachus called for a meeting between two of the most quietly influential interest groups in the nation’s capital: credit unions and community banks.

Bachus, chairman of the powerful House Financial Services Committee, was looking to ensure the passage of a slew of federal favors benefiting both sides. All the lobbyists had to do was show up at a meeting and figure out how to work together.

It was too much to ask.

The Credit Union National Association and the Independent Community Bankers Association immediately agreed to the sit-down, but as the meeting approached the community bankers abruptly cancelled the event, according to lobbyists and congressional staffers familiar with the plans.

“There was supposed to be a couple of joint meetings with different congressional offices and with the leadership of Financial Services. And the banks decided that we had too many bills in play and they didn’t want to meet with us,” says Linda Armyn, a senior vice president for Bethpage Federal Credit Union.

It’s no small matter to cancel on a committee chairman. ICBA had performed the Capitol Hill equivalent of cussing out the boss at an office Christmas party. Still, the group has no regrets.

“There won’t be any meetings. There won’t be any compromise. There won’t be any deals. There won’t be any discussions,” says ICBA chief economist Paul Merski.

To most folks, community banks and credit unions are indistinguishable. Both are often viewed as good-guy alternatives to Wall Street banks, eschewing the too-big-to-fail crowd’s phantom, subprime profits in favor of safe, consumer-friendly products. After the 2008 financial crash, that strategy allowed them to reap financial rewards and reputational halos. The “Move Your Money” movement and Bank Transfer Day shifted billions of dollars worth of business from Wall Street to these small lenders.

But community banks and credit unions each operate under different government charters and regulatory regimes. They compete for the same good-guy customer base, and are openly hostile  with each other on Capitol Hill. Their mutual animosity is frequently unmoored from profit margins and bottom lines, a passionate conflict that at times seems like a Washington version of the Hatfields and McCoys.

“The credit unions have become the skunk at the garden party,” Merski says.

“The hypocrisy of the bank lobby appears to have no end,” Credit Union National Association (CUNA) CEO O. William Cheney said during a November hearing.

But while the dispute between the two groups goes back decades, their most recent clash serves as a window into the way American government works — or doesn’t work — in the 21st century. Legislative scuffles between entrenched interest groups occasionally gather enough momentum to attract public attention. Last year’s blowout over debit card swipe fees hijacked the Senate schedule for nearly six months, and the Stop Online Piracy Act sparked furious online protests.

Most of the time, the special interest stranglehold over Congress is exercised relatively quietly, in small-bore negotiations that never really get off the ground. Even if the bills go nowhere, they present lucrative fundraising opportunities for lawmakers, while devouring the time and attention that elected officials could be using to attend to the public good — say, solving the jobs crisis, ending homelessness or improving the standard of living for the one in four American children who currently live in poverty.

Instead, lawmakers expend tremendous amounts of energy trying to bridge emotional divides between favored interest groups that are accustomed to getting their way and have little interest in compromise — like, for example, credit unions and community banks.

Few fight harder in Washington than your cuddly local lenders.

“People always say it’s Wall Street, but the big banks aren’t the most potent lobbyists, because everybody hates them,” says Rep. Barney Frank (D-Mass.). “It’s the credit unions and the community banks because of their grassroots networks.”

A big bank like Citigroup appears to have oceans of lobbying clout that a small community bank lacks. But every congressional district has a community bank and a local credit union. As united forces, the ICBA and CUNA can (sometimes) defeat even their Wall Street competitors on the Hill.

This week, they will flex that muscle. CUNA expects 4,000 members of the credit union community to fly in to Washington for the group’s annual lobbying convention — including at least one from every congressional district.

Like the credit unions, community banks will be making their annual descent on Capitol Hill later this year. Both groups have profitable requests pending in Congress.

The Communities First Act, introduced in April 2011, reads like ICBA’s wish-list for the entire year. During a November hearing on the bill, Georgetown University Law School professor Adam Levitin criticized the bill as a set of unearned giveaways for small financial firms — tax cuts, accounting gimmicks to hide losses, weaker capital requirements and even immunity from some forms of scrutiny by the Securities and Exchange Commission. But whatever its impact on communities, the bill would undoubtedly help banks pad their profits.

“It does nothing for communities,” Levitin said, calling the bill “narrow, special-interest pleading.”

Credit unions, meanwhile, are seeking legislation that would allow them to expand their business lending operations. Credit unions are currently barred from issuing business loans in excess of 12.25 percent of their total assets, an arbitrary rule that banks were able to slip into a 1998 law over the objections of both credit unions and President Bill Clinton’s administration.

Over the past year, credit union lobbyists have amassed 121 co-sponsors — 46 Republicans and 75 Democrats — for the Small Business Lending Enhancement Act, a bill that would raise that business lending cap to 27 percent. Credit unions argue that allowing them to make more business loans will help small firms hire, claiming the bill will create 140,000 jobs.

Community banks and credit unions need each other. Neither the Communities First Act nor the Small Business Lending Enhancement Act is likely to pass on its own, prompting Rep. Bachus’ attempt to combine them. (Bachus’ office did not return requests for comment). The only trouble? The credit unions and community banks have been at each other’s throat for decades.

“It’s a very visceral reaction they have,” says Ryan Donovan, a top CUNA lobbyist, referring to community bankers. “The ICBA would rather have their entire legislative agenda burned than let our small bill pass.”

On the bill that would lift the lending cap on credit unions, ICBA’s Merski says,”We’ll fight this to the death because of the fundamental philosophical unfairness. It’s almost un-American, really.”

Banks have little to lose from the credit union bill, and large potential profits to gain from their own legislation. Credit unions do very little business lending. For the most part, they stick to simple, standardized consumer products like checking accounts, mortgages and credit cards. Credit unions are generally small, even compared to community banks, and account for just 1 percent of the commercial lending market nationwide, according to CUNA, with an average loan amount of only $220,000.

“We’re not talking shopping malls,” explains CUNA senior vice president for communications Mark Wolff. “We’re talking landscaping and bakeries.”

Even community banks that compete head-to-head with specific credit unions simply will not lose very much if the credit union bill passes. The credit union group only pegs the gains from their legislation at 140,000 jobs — a drop in the bucket relative to the jobs crisis. Yet the legislative arm-wrestling continues.

“If you look at the marketplace, the banks have 95 percent of the market share. There isn’t a whole lot of data that supports we’re taking their business,” says Armyn of the Bethpage Federal Credit Union. “I mean, we’re taking a piece of their business, but if you look at it on the grand scale, they still have 95 percent of the market share.”

But the battle isn’t really over balance sheets. It’s over those “philosophical” differences Merski cites. Talking to members of both groups, bankers essentially think credit unions are tax cheats, while credit unionists see bankers as greed-mongers.

Credit unions are nonprofits owned by their customers, a unique status among financial institutions which allows them to be exempt from income taxes. But a credit union charter comes with major drawbacks — they can’t pay dividends to shareholders, since they don’t have any shareholders, nor can their executives enjoy wild paydays in the form of stock options. They also only have one option for growth: profit. Banks can take on debt or issue stock to capitalize on profit opportunities, but credit unions have nothing but year-end earnings to draw on.

Bank executives do enjoy higher paydays. Among credit unions with at least $100 million in assets, the median CEO pay comes out to $211,558, according to CUNA. According to data compiled by SNL Financial, publicly traded banks with less than $10 billion in assets (a common threshold in regulation and legislation to define a “community bank”) pay out  median CEO compensation of $385,577.

As with most CEO pay in the financial industry, the bigger the bank, the better the potential payday, but community banks with less than $500 million in assets still paid a median of $248,437 — about 15 percent better than the median for all credit unions over $100 million in assets, according to the SNL Financial data. The largest credit union is Navy Federal, with $46 billion in assets.

But both sides use such relative metrics to criticize the other.

“They don’t pay taxes!” says ICBA’s Merski.

“They don’t get that we really are a different model,” counters CUNA’s Wolff.

Both sectors, of course, have always been free to change their charters whenever they wish. Credit unions file to become banks all the time, and there is no law barring banks from adopting a credit union model.

This year’s skirmish between community banks and credit unions will almost certainly dwindle into obscurity, a common fate for special interest legislation. Next year the two groups will undoubtedly concoct new slates of legislative demands, as is the nature of lobbying. But the public has still paid the opportunity cost for the lobbying push.

The dispute between credit unions and community banks is one of an endless array of Washington feuds that tend to not connect with the broader public interest. Even if the two groups had been able to put aside their differences and move their legislation forward, the tangible benefits for everyday Americans would have likely been minor. It doesn’t make much difference for most businesses whether they get their loan from a small bank or a credit union, so long as they get their loan. And the benefits that ICBA was seeking amount to a set of unhelpful deregulation.

Even if the uncounted hours of attention that were devoted to introducing the bills, garnering co-sponsors, holding hearings and briefing lawmakers had borne fruit, the public would still have been left out of the equation. Similar disputes take place every year between dozens of special interests, on every committee in Congress. And, in this case, the special interests groups themselves say the fuss has largely proved to be just that.

“We all just want to move forward and grow,” says Armyn, the Bethpage Federal Credit Union executive, frustrated with the political gridlock. “To me, it’s just silly.”

Fed is expected to take new action to lift economy

As reported in Drudge Report

Sep 21, 7:41 AM
(ET)

By MARTIN CRUTSINGER

(AP) In this Sept. 30, 2010 file photo, Federal Reserve Chairman Ben Bernanke testifies on… Full Image

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WASHINGTON (AP) – The Federal Reserve is running out of options to try to
boost a slumping economy and lower unemployment. So policymakers are expected to
reach 50 years back into their playbook for their next move.

Most economists expect the Fed to announce a plan Wednesday to shift money in
its $1.7 trillion portfolio out of short-term securities and into longer-term
holdings.

The plan could lower Treasury yields further. Ultimately, it could reduce
rates on mortgages and other consumer and business loans, too.

Fed Chairman Ben Bernanke is expected to advocate the move despite criticism
from within the Fed and from Republican lawmakers and presidential candidates.

On Monday, the four highest-ranking Republicans in Congress sent Bernanke a
letter cautioning the Fed against taking further steps to lower interest rates.
Their letter suggested that lower rates could escalate the risk of high
inflation.

The plan the Fed is considered most likely to unveil Wednesday has been
dubbed “Operation Twist” and dates to the early 1960s. The Fed used a similar
program then to “twist” long-term rates lower relative to short-term rates.

Expectations that the Fed will do so again, along with renewed fears of
another recession, have led investors to buy up U.S. Treasurys. Treasury yields
have dropped in response.

The yield on the 10-year Treasury note last week touched a historic low of
1.87 percent. On Tuesday, it finished slightly higher, 1.93 percent.

Once the Fed announced last month that it would expand its September meeting
from one to two days, most economists have predicted that policymakers would
unveil some new step. Chairman Ben Bernanke has said that the Fed is considering
a range of options.

The central bank is under pressure to revive an economy that has limped along
for more than two years since the recession officially ended. In the first six
months of this year, the economy grew at an annual rate of just 0.7 percent. In
August, the economy didn’t add any jobs, and consumers didn’t increase their
spending on retail goods.

Most economists foresee growth of less than 2 percent for the entire year.
Many say the odds of another recession are about one in three.

The Fed has offered its own bleak outlook. At its August meeting, it said the
economy will likely struggle for at least two more years. As a result, it said
it planned to keep short-term rates near record lows until mid-2013, as long as
the economy remained weak.

The decision to do so highlighted a rift within the central bank. Three
members dissented from the Fed’s decision – the most negative votes in nearly
two decades. The three, all regional Fed bank presidents, said the Fed’s
policies have increased the risk of inflation.

Bernanke has also faced criticism from congressional Republicans and GOP
presidential candidates. Some have argued that the Fed’s $600 billion
bond-buying program, which ended in June, weakened the value of the dollar
against other currencies and contributed to a spike in oil and commodity prices.

Texas Gov. Rick Perry, who is seeking the GOP nomination for president, went
so far as to say Bernanke would be “almost treasonous” to launch more bond
buying.

Bernanke has said that the Fed could consider another round of bond
purchases. It could also provide more specific guidance on future interest rate
moves.

Or it could reduce the 0.25 percent interest the Fed pays banks on their
reserves at the central bank. Doing so would reduce the banks’ incentive to keep
money at the Fed and might make them more likely to lend.

But many analysts expect the Fed to opt for Operation Twist over those other
actions.

President Barack Obama has unveiled a $447 billion jobs program made up of a
combination of tax cuts and increased government spending. But the proposal
faces an uncertain fate in Congress, where Republicans are focused on efforts to
trim soaring budget deficits.

Debt Ceiling Talks Make Way For Tough Trade-Offs

As reported in Huffington Post

By Andy Sullivan

WASHINGTON — Negotiators trying to tame the United States’ spiraling debt said on Thursday that they had tentatively agreed on a number of cuts and are now gearing up for tough trade-offs that could lead to trillions of dollars in savings.

“We’ve gone through a first, serious scrub of each of the categories that make up the total federal budget,” Vice President Joe Biden told reporters. “Now we’re getting down to the real hard stuff: I’ll trade you my bicycle for your golf clubs.”

Biden and top Democratic and Republican lawmakers aim to reduce the country’s stubborn budget deficits by $4 trillion over the next 10 years in order to give lawmakers the political cover to raise the $14.3 trillion U.S. debt ceiling to prevent a default.

The agreed-upon cuts will serve as bargaining chips in the coming weeks as the two sides tackle a stark divide over taxes and health benefits, participants said.

“Even stuff we agreed to that we may have refined today is all subject to be reopened if we don’t get agreement on some of the big issues. We’ve got a long way to go here,” said Democratic Representative Chris Van Hollen.

Farm subsidies, federal employee pensions, student loans and the trillion-plus dollars that Congress spends each year on everything from defense to river dredging could come under the knife.

But Republicans have refused to consider increased taxes, while Democrats have resisted wholesale changes to health benefits for the poor and the elderly.

COMPROMISE ON TAXES, HEALTHCARE?

Compromise is not impossible in these areas. Democrats hope to boost tax revenues primarily by ending breaks and closing loopholes, rather than raising rates. Two recent Senate votes have given them heart as Republicans backed closing tax breaks for ethanol providers.

On healthcare, Democrats have blasted a Republican plan that would scale back the Medicare health program for future retirees. But they have proposed less dramatic changes that could still save hundreds of billions of dollars.

Both President Barack Obama and Republicans have proposed significant changes to the Medicaid health program for the poor. Obama has also said he would support limiting medical malpractice lawsuits — a longtime Republican priority.

“I think we really are covering every type of spending program there is,” Representative Eric Cantor, the No. 2 House Republican, told reporters. “We are doing all that we have set out to do.”

The group is stepping up negotiations as it faces a self-imposed deadline of July 1, with longer and more frequent talks set for next week.

The Obama administration has warned that it will run out of money to pay the nation’s bills if Congress does not raise the debt ceiling by August 2 — a prospect that could push the country back into recession and upend financial markets across the globe.

Washington needs to show investors that it can rise above its dysfunctional reputation, Biden said.

“The single most important thing to do for the markets is convince them no, that’s not true, we can handle difficult decisions,” he said.

Republicans want at least $2 trillion in cuts, measured over 10 years, to go along with a similar increase in the debt ceiling to ensure Congress doesn’t have to revisit the politically toxic issue before the November 2012 elections.

The Biden group could claim another $2 billion in savings by mandating automatic cuts or tax increases if Congress doesn’t meet specified deficit targets in coming years.

Budget deficits in recent years have hovered at their highest level relative to the economy since World War Two. The deficit is projected to hit $1.4 trillion in the fiscal year that ends September 30.

(Additional reporting by Richard Cowan; Editing by Eric Walsh)

The Mistake of 2010

By PAUL KRUGMAN

Published: June 2, 2011

 

Earlier this week, the Federal Reserve Bank of New York published a blog post about the “mistake of 1937,” the premature fiscal and monetary pullback that aborted an ongoing economic recovery and prolonged the Great Depression. As Gauti Eggertsson, the post’s author (with whom I have done research) points out, economic conditions today — with output growing, some prices rising, but unemployment still very high — bear a strong resemblance to those in 1936-37. So are modern policy makers going to make the same mistake?

Fred R. Conrad/The New York Times

Paul Krugman

Mr. Eggertsson says no, that economists now know better. But I disagree. In fact, in important ways we have already repeated the mistake of 1937. Call it the mistake of 2010: a “pivot” away from jobs to other concerns, whose wrongheadedness has been highlighted by recent economic data.

To be sure, things could be worse — and there’s a strong chance that they will, indeed, get worse.

Back when the original 2009 Obama stimulus was enacted, some of us warned that it was both too small and too short-lived. In particular, the effects of the stimulus would start fading out in 2010 — and given the fact that financial crises are usually followed by prolonged slumps, it was unlikely that the economy would have a vigorous self-sustaining recovery under way by then.

By the beginning of 2010, it was already obvious that these concerns had been justified. Yet somehow an overwhelming consensus emerged among policy makers and pundits that nothing more should be done to create jobs, that, on the contrary, there should be a turn toward fiscal austerity.

This consensus was fed by scare stories about an imminent loss of market confidence in U.S. debt. Every uptick in interest rates was interpreted as a sign that the “bond vigilantes” were on the attack, and this interpretation was often reported as a fact, not as a dubious hypothesis.

For example, in March 2010, The Wall Street Journal published an article titled “Debt Fears Send Rates Up,” reporting that long-term U.S. interest rates had risen and asserting — without offering any evidence — that this rise, to about 3.9 percent, reflected concerns about the budget deficit. In reality, it probably reflected several months of decent jobs numbers, which temporarily raised optimism about recovery.

But never mind. Somehow it became conventional wisdom that the deficit, not unemployment, was Public Enemy No. 1 — a conventional wisdom both reflected in and reinforced by a dramatic shift in news coverage away from unemployment and toward deficit concerns. Job creation effectively dropped off the agenda.

So, here we are, in the middle of 2011. How are things going?

Well, the bond vigilantes continue to exist only in the deficit hawks’ imagination. Long-term interest rates have fluctuated with optimism or pessimism about the economy; a recent spate of bad news has sent them down to about 3 percent, not far from historic lows.

And the news has, indeed, been bad. As the stimulus has faded out, so have hopes of strong economic recovery. Yes, there has been some job creation — but at a pace barely keeping up with population growth. The percentage of American adults with jobs, which plunged between 2007 and 2009, has barely budged since then. And the latest numbers suggest that even this modest, inadequate job growth is sputtering out.

So, as I said, we have already repeated a version of the mistake of 1937, withdrawing fiscal support much too early and perpetuating high unemployment.

Yet worse things may soon happen.

On the fiscal side, Republicans are demanding immediate spending cuts as the price of raising the debt limit and avoiding a U.S. default. If this blackmail succeeds, it will put a further drag on an already weak economy.

Meanwhile, a loud chorus is demanding that the Fed and its counterparts abroad raise interest rates to head off an alleged inflationary threat. As the New York Fed article points out, the rise in consumer price inflation over the past few months — which is already showing signs of tailing off — reflected temporary factors, and underlying inflation remains low. And smart economists like Mr. Eggerstsson understand this. But the European Central Bank is already raising rates, and the Fed is under pressure to do the same. Further attempts to help the economy expand seem out of the question.

So the mistake of 2010 may yet be followed by an even bigger mistake. Even if that doesn’t happen, however, the fact is that the policy response to the crisis was and remains vastly inadequate.

Those who refuse to learn from history are condemned to repeat it; we did, and we are. What we’re experiencing may not be a full replay of the Great Depression, but that’s little consolation for the millions of American families suffering from a slump that just goes on and on.

For Our Own Deficit

Well……. we did avoid a government shutdown.

Thanks to some last minute wrangling down and DC,

the US economy lives on…..

limping until the end of September 2011.

All eyes now have turned to the vote on raising the debt ceiling.

Officially, the government states we should pass the debt limit sometime in early to mid-May.

What would happen if the Congress votes not to raise the debt ceiling?

Steps can be taken at that time to start shuffling who and what to pay…..

That should buy us another month.

Reports are that if the debt ceiling is not raised by the beginning of July,

The US will go into default.

What would happen should the US go into default?

• The United States would default on its bond payments and would see its credit rating fall dramatically
• Bondholders’ would be unable to receive interest payments
• Investors would have a difficult time trusting the United States to honor its obligations and demand for long term United States debt would fall.
• Senior citizen would not receive their Social Security checks
• loss of these dollars would likely further hurt domestic consumption in the United States and place an undue strain on the budgets of senior citizens
• A default will lead to increased risks for owning U.S. bonds.
• Increased risks equal higher rates
• Business loan borrowers and individuals looking for personal loans would see their borrowing costs rise astronomically
• home or auto loan rates will be drastically higher, since access to credit would be at a premium

           

That’s just a snap shot of what to expect.

We made it thru the Great Recession.

Many experts feel this would throw the US into another Great Depression.

.

Not much time to dawdle!!!

Several weeks ago….

Standard and Poors, for the first time lowered its long term outlook for the federal government’s fiscal health……

From stable

To negative……..

They warned of serious consequences

If the lawmakers fail to reach a deal to control the massive federal deficit

So when is Congress expected to start tackling this issue?

It is reported they will start meeting on this issue sometime in June.

Congress just passed the 2011 budget!!!!

Heck, we still have 5 months left until the 2011 fiscal year is over.

Yet they will resolve the debt issue in 30 days?

America is a great country

No matter what is said

There is no place better to live

Everyone would love to enjoy

The freedoms we take for granted.

The debt ceiling and the deficit…….

Should not be a political issue

It is not going to go away

What are we doing to provide a secure future for the next generation?

We must carefully look at all the programs

Analyze what works

And put a true dollar value on sustainability

We are at a fork in the road

And the decisions we make

Will determine what path we go down

Obama Deficit Reduction Plan To Be Detailed By President

JIM KUHNHENN   04/11/11 06:13 PM ET  

WASHINGTON — President Barack Obama, plunging into the rancorous struggle over America’s mountainous debt, will draw sharp differences with Republicans Wednesday over how to conquer trillions of dollars in spending while somehow working out a compromise to raise some taxes and trim a cherished program like Medicare.

Obama’s speech will set a new long-term deficit-reduction goal and establish a dramatically different vision from a major Republican proposal that aims to cut more than $5 trillion over the next decade, officials said Monday.

Details of Obama’s plan are being closely held so far, but the deficit-cutting target probably will fall between the $1.1 trillion he proposed in his 2012 budget proposal and the $4 trillion that a fiscal commission he appointed recommended in December.

The speech is intended as a declaration of Obama’s commitment to seriously tame the deficit while outlining his long-term budget principles – key components of his campaign for re-election in 2012. After gingerly avoiding any discussion until now of cuts in the government’s massive benefit programs for the elderly and poor, Obama will acknowledge a need to reduce spending on Medicare and Medicaid while at the same time tackling defense spending and calling for increased taxes on the wealthy, White House officials said.

If that sounds like a reprise of last week’s budget fight that barely avoided a government shutdown, it isn’t. The stakes are far higher, the political risks greater and the goals more ambitious. At issue are long-term budget deficits and a $14.3 trillion national debt that many say could threaten the nation’s economy.

The cuts accomplished last week were for $38.5 billion over the next six months; the cuts envisioned now are for trillions of dollars over the next 10 years.

Obama’s speech, to be delivered at George Washington University, comes as Congress readies for a fierce fight over raising the nation’s debt limit. Republicans have vowed to use that vote as leverage to extract greater budget discipline from the Democrats and the president.

Setting the terms of the debate and the likely brinkmanship to follow, White House spokesman Jay Carney said on Monday: “What I’m saying is that we support a clean piece of legislation to raise the debt ceiling. … We cannot play chicken with the economy in this way.”

The president’s speech also comes amid liberal apprehension over recent Obama spending concessions and a desire among some Democrats to make proposed GOP cuts in Medicare a 2012 election issue.

House Republicans, led by the chairman of the House Budget Committee, Paul Ryan, last week unveiled a plan that would cut $5.8 trillion over 10 years with a major restructuring of the nation’s signature health care programs for the elderly and the poor. Meanwhile, six senators have formed a bipartisan group to work on their own plan to rein in long-term deficits by making changes to Medicare and Medicaid and examining a fundamental overhaul of the tax system that would yield additional revenue.

Obama is expected to concede a need for overhauling Medicare and Medicaid and to even make adjustments to Social Security, always considered politically risky territory. But he will distinguish his plan from the Republican budget, which would shrink Medicare by shifting the program to private insurers and send block grants to states to pay for Medicaid, the health care program for the poor.

Unlike the Republican plan, Obama is also expected to call for cuts in defense spending and for tax increases, repeating his 2012 effort to increase Bush-era tax rates for families making more than $250,000. Obama shelved that plan in a budget compromise with Republicans.

His 2012 budget blueprint didn’t touch the health care entitlements or Social Security. Now that he plans to, some of his own supporters are wary, arguing that the president ceded too much ground when he cut a tax deal with Republicans last December and in yielding spending cuts last week.

“I want to have confidence, but I’ve got to see something,” said Barbara Kennelly, a former Democratic congresswoman and president of the National Committee to Preserve Social Security and Medicare, an advocacy group. “They can’t continue to give in.”

Many liberals say Obama has not been a strong bargainer.

“Their weakness in getting the most out of negotiations is their strategic belief that they don’t want to be seen as fighting, they want to appear above the fray and beyond partisanship,” said Lawrence Mishel, president of the labor-leaning Economic Policy Institute. “They also believe that they shouldn’t get out there on a position where they may not succeed. These are characteristics that make for a weak negotiator.”

Republicans on Monday said Obama’s speech was overdue.

“I’m anxious to hear what the president has to say,” House Speaker John Boehner said on Fox News. “We’ve been waiting for months for the president to enter into this debate with us. I can tell you that privately I’ve encouraged the president: `Mr. President, lock arms with me, let’s jump out of the boat together. We have to deal with this, this is the moment in time that we’ve been given to address the problems.

“Forget the next election, forget the next poll that’s going to come out. It’s time to do the right thing for the country.'”

The speech is expected to affirm Obama’s stand on the spending he is not willing to cut, chiefly in the areas of education, energy, infrastructure, research and innovation. On Medicare, the federal insurance program for senior citizens, the president is expected explain his case for cost savings without putting “all the burden on seniors,” as his senior adviser David Plouffe put it.

In choosing to wait until now, White House officials have looked at past precedents, including President George W. Bush’s plan to partially privatize Social Security, and have seen the pitfalls of staking out major policy initiatives that come undone in Washington’s combative environment.

Democrats have been torn over what Obama should do. Many believe the weight of the debt is a powerful issue with independent voters and that Obama needs to engage Republicans with a legitimate counterproposal and then conduct the “adult conversation” he professes to desire.

The debate over Medicare and Medicaid may not be resolved before the 2012 election, potentially making it the defining element of the presidential campaign.