As reported in Huffington Post

WASHINGTON — President Barack Obama is renewing an old fight with the business community by insisting that $400 billion in tax increases be part of a deficit-reduction package. His proposals have languished on Capitol Hill, repeatedly blocked by Republicans, often with help from Democrats.

Some would raise big money. Limiting tax deductions for high-income families and small business owners could raise more than $200 billion over the next decade. Others are more symbolic, such as scaling back a tax break for companies that buy corporate jets.

The corporate jet proposal would raise $3 billion over the next decade, according to GOP congressional aides. That’s a relatively small sum in the big scheme of Washington budgets, but Obama and Democrats call attention to it repeatedly in their effort to portray Republicans as defenders of corporate fat cats.

No matter how Democrats characterize their proposals as revenue raisers or plugging tax loopholes, GOP leaders oppose them all, arguing that raising taxes in a bad economy would only make matters worse.

“If we choose to keep those tax breaks for millionaires and billionaires, if we choose to keep a tax break for corporate jet owners, if we choose to keep tax breaks for oil and natural gas companies that are making hundreds of billions of dollars,” Obama said this week, “then that means we’ve got to cut some kids off from getting a college scholarship, that means we’ve got to stop funding certain grants for medical research, that means that food safety may be compromised, that means that Medicare has to bear a greater part of the burden.”

The White House has identified about $600 billion in tax increases it wants over the next decade. About $400 billion of them were offered as part of deficit-reduction talks led by Vice President Joe Biden. That would be paired with more than $1 trillion in spending cuts.

Some of the tax proposals are vague and budget experts have yet to calculate just how much they would raise. For example, limiting deductions for high-income families and small businesses could raise anywhere between $210 billion and $290 billion, depending on what threshold is established as high income.

Obama is proposing to eliminate $41 billion in tax breaks for oil and natural gas companies, raise taxes on investment fund managers by $21 billion and change the way many businesses value their inventories for tax purposes. The change in inventory accounting would raise an estimated $70 billion over the next decade, hitting manufacturers and energy companies, among others.

Treasury Secretary Timothy Geithner has given Congress an Aug. 2 deadline for raising the current debt ceiling, currently $14.3 trillion, to avoid defaulting on the government’s financial obligations for the first time in the nation’s history. He warns that a default could trigger potentially dire consequences for an already anemic economy, including higher interest rates, tighter credit and new rounds of job layoffs. The government hit the debt ceiling in May and has been juggling accounts since then to make all its payments.

Obama says he is proposing a balanced approach that spreads the pain among people who rely on government services and those most able to finance them.

While Republican leaders argue that raising taxes is bad policy, bad politics and too unpopular to pass the Republican-controlled House, several GOP senators have said they are willing to consider eliminating unspecified tax breaks to reduce the deficit.

Two weeks ago, 33 Republican senators joined a 73-27 majority to repeal a $5 billion annual tax subsidy for ethanol gasoline blends. On Wednesday, Sen. Ron Johnson, R-Wis., said, “I would like to do away with special tax breaks but not legitimate business deductions.”

But GOP leaders insist there is no support among Republicans to impose the kind of tax increases Obama is proposing.

“The president is sorely mistaken if he believes a bill to raise the debt ceiling and raise taxes would pass the House,” Speaker John Boehner, R-Ohio, said. “The votes simply aren’t there, and they aren’t going to be there because the American people know tax hikes destroy jobs.”

Among the tax increases proposed by the White House and the amount they’d raise over the next decade:

_ Limit itemized deductions, including those for charitable contributions and mortgage interest, for families and small business owners making more than $500,000. Under current law, if a taxpayer’s top income tax rate is 35 percent – the highest rate – a $100 deduction is worth $35 in tax savings. For several years, Obama has proposed limiting itemized deductions for people making above $250,000 to 28 percent, meaning a $100 deduction would be worth only $28 in tax savings at most. That would raise $293 billion. Increasing the income threshold to $500,000 would raise “in the ballpark of $210 billion,” said Maryland Rep. Chris Van Hollen, one of the House Democratic negotiators in the Biden talks.

_ Change the way businesses value their inventory, raising an estimated $70 billion. Current law allows businesses to lower their taxable profits – and their tax bills – by using an accounting method that can inflate the cost of goods sold. Obama proposes to phase out the practice, known as last-in, first out, or LIFO.

_ Increase taxes on investment fund managers, mainly hedge funds and private equity firms, raising about $21 billion. Investment managers typically pay capital gains taxes on their fees, with a top rate of 15 percent. Obama wants to tax the fees as regular income, with a top tax rate of 35 percent.

_ Eliminate about $41 billion in tax breaks for oil and natural gas companies. Obama has called for eliminating tax breaks for all oil and gas companies every year since he took office in 2009. The biggest is a deduction for production expenses that is available to all manufacturers. In May, the Senate rejected a smaller proposal that targeted the five biggest companies: Shell Oil Co., ExxonMobil, ConocoPhillips, BP America and Chevron Corp.

___

Associated Press writers Jim Kuhnhenn, Andrew Taylor and Laurie Kellman contributed to this report.

By KEN THOMAS 06/26/11 07:18 AM ET AP

 

COLUMBUS, Ohio — Vice President Joe Biden said Saturday the Obama administration wouldn’t let middle class Americans “carry the whole burden” to break a deadlock over the national debt limit, warning that the Republican approach would only benefit the wealthy.

Addressing Ohio Democrats, Biden said there had been great progress in talks with Republican lawmakers on a deficit-reduction plan agreement. But he insisted that his party wouldn’t agree to cuts that would undermine the elderly and middle-class workers.

“We’re not going to let the middle class carry the whole burden. We will sacrifice. But they must be in on the deal,” Biden said in a speech at the Ohio Democratic Party’s annual dinner.

Biden led efforts on a deficit-reduction plan but Republicans pulled out of the discussions last week, prompting President Barack Obama to take control of the talks.

The sides disagree over taxes. Democrats say a deficit-reduction agreement must include tax increases or eliminate tax breaks for big companies and wealthy individuals. Republicans want huge cuts in government spending and insist on no tax increases.

On tax breaks for the wealthy, Biden used the example of hedge fund managers who “play with other people’s money.”

“And they get taxed,” Biden said. “I’m not saying they don’t do good things, they do some good things. But they get taxed at 15 percent because they call it capital gains. Because they’re investing not their money, (but) other people’s money.”

To ask senior citizens receiving Medicare to pay more in taxes when people earning more than $1 million a year receive a substantial tax cut “borders on immoral,” the vice president said.

“We’re never going to get this done, we’re never going to solve our debt problem if we ask only those who are struggling in this economy to bear the burden and let the most fortunate among us off the hook,” Biden said.

Republican leaders say without a deal cutting long-term deficits, they will not vote to increase the nation’s borrowing – which will exceed its $14.3 trillion limit on Aug. 2. The Obama administration has warned that if Congress fails to raise the debt ceiling, it would lead to the first U.S. financial default in history and roil financial markets around the globe.

Obama and Biden are scheduled to meet with Senate Majority Leader Harry Reid, D-Nev., and Senate Republican leader Mitch McConnell of Kentucky on Monday. McConnell and House Speaker John Boehner, R-Ohio, say no agreement can include tax increases.

Biden assailed moves by GOP governors in Wisconsin and Ohio to strip away collective bargaining rights from most public workers while criticizing efforts by Republicans in Congress to alter the Medicare program. He defended Obama’s handling of the economy, pointing to difficult decisions on an economic stimulus package and the rescue of U.S. automakers.

Ahead of Biden’s visit, Republicans countered that Obama’s policies led to GOP gains in 2010 and have failed to revitalize the economy.

“All the visits in the world from President Obama, Vice President Biden and other top-level surrogates won’t change the administration’s job-killing policies,” said Republican National Committee spokesman Ryan Tronovitch.

Biden, who spoke frequently of his blue-collar roots in Scranton, Pa., during the 2008 presidential race, is expected to be a frequent visitor to the Midwest during next year’s campaign.

Obama won states such as Ohio, Michigan and Pennsylvania in 2008. But those states elected Republican governors in 2010 and are considered prime targets for Republicans next year.

Looking ahead to 2012, Biden called Ohio “the state that we must win and will win.”

As reported in Huffington Post
WASHINGTON (AP/The Huffington Post) — Efforts to find a bipartisan agreement blending huge budget cuts with a must-pass measure to increase how much the government can borrow have entered a new phase after Republican negotiators pulled out of talks led by Vice President Joe Biden.

The exit of House Majority Leader Eric Cantor from the talks on Thursday means the most difficult decisions have been kicked upstairs to GOP House Speaker John Boehner of Ohio and President Barack Obama. The Biden-led group had made solid progress in weeks of negotiations but was at an impasse over taxes.

Cantor, R-Va., said that the Republican-dominated House simply won’t support tax increases and that it’s time for Obama to weigh in directly because Biden and Democrats were insisting on tax increases. Democrats said it’s only fair to blend in additional revenues from closing tax breaks to balance trillions of dollars in spending cuts.

It had long been assumed that the Biden group would set the stage for more decisive talks involving Obama and Boehner. As a result, Cantor’s move was interpreted as trying to jump-start the talks rather than blow them up – a view shared by Cantor himself.

“The purpose here is to alter the dynamic,” Cantor said.

In fact, Cantor’s withdrawal came after Boehner had already made a trek to the White House – in a secret meeting Wednesday night that followed up on a golf outing over the weekend.

According to The Hill newspaper, Cantor’s walkout had been planned for weeks:

The timing of Cantor’s exit from the talks has been discussed for weeks, and senior House Republicans cast it as a natural progression for the negotiations.

For his part, Cantor didn’t inform Boehner of his decision to leave the talks until Thursday, shortly before the news broke, said a GOP official familiar with the situation. The official required anonymity because of the sensitivity of the information.

The White House sought to put a positive spin on developments.

“As all of us at the table said at the outset, the goal of these talks was to report our findings back to our respective leaders,” Biden said in a statement. “The next phase is in the hands of those leaders, who need to determine the scope of an agreement that can tackle the problem and attract bipartisan support. For now the talks are in abeyance as we await that guidance.”

The Senate’s Republican negotiator, Jon Kyl of Arizona, also exited the talks.

For his part, Cantor said the secretive Biden-led talks had “established a blueprint” for agreement on significant cuts in spending.

One of the byproducts of Cantor’s departure was to provide an opportunity for partisans on all sides to make statements at odds with the positions they may have to take to achieve a deal. Democrats insist that at least some new revenues are needed – both to soften spending cuts and to line up the Democratic votes needed to pass the measure.

“It will take Democratic votes to pass any debt-ceiling agreement,” said Sen. Chuck Schumer, D-N.Y. “As a result, certain things are going to have to be true. We cannot make cuts to Medicare benefits. We have to allow for revenues like wasteful subsidies for ethanol and oil companies. And we have to do something on jobs.”

“President Obama needs to decide between his goal of higher taxes or a bipartisan plan to address our deficit,” said Senate Republican leader Mitch McConnell, R-Ky. “He can’t have both.”

As for Democratic demands for new deficit-financed “jobs” initiatives, McConnell scoffed: “What planet are they on?”

Cantor said that plenty of progress has been made in identifying trillions of dollars in potential spending cuts to accompany legislation to raise the $14.3 trillion cap on the government’s ability to borrow money. Passage of the legislation this summer is necessary to meet the government’s obligations to holders of U.S. Treasurys. The alternative is a market-shaking, first-ever default on U.S. obligations.

As reported in Huffington Post Business

Written by William Alden

NEW YORK — As politicians fight over the federal debt ceiling, Americans could start feeling the consequences of Congressional gridlock even before that limit is hit.

Moody’s Investors Service warned on Thursday that if lawmakers have not made progress in negotiations to raise the debt limit by mid-July, the ratings agency plans to reassess the nation’s sterling credit rating for a possible downgrade. The warning, coming after Standard & Poor’s lowered its outlook on U.S. debt to “negative” in April, underscores that the current political stalemate in Washington has already begun to dampen the nation’s economic prospects.

A downgrade from Moody’s on U.S. debt, or even the imminent threat of one, could itself begin to choke the economic processes that still have not fully recovered from the Great Recession. It would imply that a credit default is possible, likely causing yields on Treasury debt to rise and pushing up interest rates across the board.

“It would be an earth-shattering event,” said Scott Anderson, senior economist at Wells Fargo. “It’s taken as a given that U.S. Treasuries are a safe asset. Once you question that assumption, it shakes the foundations of global finance, and the way it’s been established over the last 50 years.”

Federal lawmakers have been locked in a debate over raising the nation’s legal borrowing limit, as the vote to allow the government to fund its existing obligations has been tied to a more controversial legislative agenda. Congressional Republicans insist they will not vote to raise the limit without also achieving measures to reduce the federal deficit, while economic officials in the Obama administration warn that procrastination on the debt ceiling vote could have disastrous consequences.

The country could be forced to default if the limit is not raised by August 2, Treasury Secretary Tim Geithner said in a letter to Congress last month.

But the economic pain could begin before that date. The risk of a default by the U.S. government has risen, Moody’s Investors Service said in a note posted to its website. Moody’s incorporates these considerations into its credit ratings, which are treated by many investors as authoritative assessments of credit quality. Investors use these ratings in their decisions to buy or sell a security.

The country will keep its top rating if the government does not default, Moody’s said. But if the agency determines there isn’t significant progress on a deal by mid-July, it will initiate the process that could lead to a downgrade, the agency said in the release.

“Although Moody’s fully expected political wrangling prior to an increase in the statutory debt limit, the degree of entrenchment into conflicting positions has exceeded expectations,” the note reads. “The heightened polarization over the debt limit has increased the odds of a short-lived default.”

Moody’s added that its long-term assessment would also depend on lawmakers’ hammering out a plan to reduce the federal deficit. S&P sounded a similar note in April, saying it could downgrade U.S. credit if lawmakers don’t settle on a plan to reduce the deficit and debt by 2013.

Investor confidence in Treasury debt began to show cracks on Thursday. Yields on U.S. debt have been low for the past several months even as politicians fight over the debt limit, suggesting that investors believe the government will not ultimately default. But yields edged up on Thursday as the value of the debt fell.

The 10-year Treasury note was yielding nearly 3.03 percent on Thursday, after closing on Wednesday at 2.95 percent. Rising interest rates suggest investors perceive the debt as risky, demanding higher payment in compensation for this lack of safety.

As congressional negotiations drag on, this trend in bond markets could continue, said Anderson, the Wells Fargo economist. Higher Treasury rates would make borrowing more expensive for businesses and individual Americans. Especially in light of Friday’s dismal jobs report, any further economic strain should be avoided, Anderson said.

“The markets would start pricing in the possibility of default even before the drop-dead deadline,” he said. “We can’t deal with another shock.”

Deficitly

May 25, 2011

With all the commotion going on around us

Osama…..tornadoes….floods

The public has been spared the talk on the debt ceiling

Did you hear the gang of six talks fell apart?

They were seen as representing the best hope

For a bipartisan deal to reduce the deficit

Senator Tom Coburn dropped out

Citing differences over entitlement spending,

Saying the 3 Republicans and 3 Democrats were

Unable to bridge differences over Medicare and Social Security

The clock is ticking,

We already exceeded the debt limit.

Now we are just shuffling payments

While waiting for a resolve.

How did we get to
this point?

There is some great information on the internet about this
subject.

Stephen Bloch did some extensive research on the deficit

And how it relates to each President

His report is titled:

US Federal Deficits, Presidents and Congress

Below are some of the facts I found interesting

  • First data he found showing
    a deficit was traced back to 1910
  • The single best predictors
    of deficits for most of the century have been war.
  • Starting in the 1970’s, it
    became harder to see a connection between war and deficits:
    • Permanent deficits became
      a way of life, regardless of whether there was a war going on.
  • The Deficit did not break
    the $1 trillion mark until 1981
  • The Deficit did not break
    the $5 trillion mark until 1995
  • During the first seven
    years of G W Bush presidency, the deficit was increased by almost twice
    the dollar amount as it had been for 32 years. (Running from JFK through
    GHW Bush).
  • When GW Bush entered
    office the deficit was $5.807 trillion
    • When GW Bush left office
      the deficit ballooned to $11,909 trillion.
    • The deficit increased
      $6,102 trillion
  • Since Obama entered office
    the deficit has grown to $14,268 trillion
    • That an additional $2,359
      trillion

Some other interesting facts:

  • Military spending has
    increased 81% since the year 2000
  • Fraud constitutes at least
    ten percent ($100 billion) of the nearly one trillion in taxpayer dollars
    that Medicare and Medicaid will spend this year.
  • The current tax system of
    the United States will collect about 18% of the GDP(Gross Domestic
    Product)
  • Spending needs are much
    higher, currently around 24% of GDP.

What makes up the 24%?

I referred to an article by Jeffrey Sachs (Economist and
Director of Earth Institute, Columbia University)

Focusing on best estimates for 2021, a decade from now

  • Social Security outlays
    will total around 5.2% of GDP
    • As Americans age and as
      health care cost have multiplied, The cost of Social Security and
      Medicare have risen from 1.7% of GDP in 1980 to 5.1% of GDP in 2011
  • Medicare will total around
    3.6% of GDP
  • Medicaid, assuming no
    drastic cuts, will total around 2.9% of GDP
  • Other mandatory programs
    for the poor, such as food stamps, will total 2.1% of GDP
  • Total defense spending is
    around 5% of GDP, most agree that defense should be cut and be around 3% of
    GDP
  • Most projections put
    interest cost on debt around 2.7% of GDP
  • Discretionary spending
    (cost used on public goods and services that cannot be provided
    efficiently by the private economy alone) will be around 4.5% of GDP

Now if you go and add up all these categories,

You will see that cost will total around 24% of GDP

In Paul Ryan’s plan, taxes would be kept at 18% of GDP and
spending would be cut to 19% of GDP.
However the deficit is still expected to grow to $16 trillion by 2021.

The Obama plan would have a slightly higher tax collection,
around 19% of GDP (by allowing Bush tax cuts expire for those making over
$250,000), while allowing the deficit to grow to $19 trillion by 2021.

Guess what!!!!!

 

They are still going
the wrong way!!!!!

Many experts feel that both of these current plans, as
presented seem practically impossible.

In several opinion surveys,

The public has spoken clearly about what to do:

  • Do not balance the budget
    by slashing Medicare, Social Security, or programs for the poor;
  • Increase spending on
    education and infrastructure;
  • Tax the rich and giant
    corporations.

This is not a practical solution either…….

It is our responsibility to stop the bleeding

Everyone will have to proportionally share in the sacrifice

Will someone step forward and have the vision and leadership,

To usher in this era……….

Will the public be accepting to the reality of their
resolution….

Or will we continue to allow our excesses to undermine us.

Let us know your thoughts…… email george@hbsadvantage.com

For Our Own Deficit

May 13, 2011

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

WASHINGTON — Congressional negotiators held what were described as “productive” talks Tuesday afternoon in an effort to pass a spending measure that would cut tens of billions of dollars from the federal budget. But with just days remaining before the federal government runs out of money, there was only muted optimism that lawmakers would be able to avert a government shutdown.

The above paragraph was ripped from the headlines on Wednesday April 6th

What do you make of all this talk?

You can turn on any cable channel and the coverage is 24/7. The American press seems to be obsessed with the moment.

Japan??? ………That happened over a month ago

Libya…….That sound bite may last 30 seconds

Now we are faced with a Government shutdown!!!!….

Is it possible?

Will it happen?

I found myself being drawn to this topic. Numbers are constantly being discussed.

What are we really dealing with?

Can we just focus on making cuts to 12% of the budget and tackle the deficit issues?

What about the sacred cows!!!!!!

Defense….Social Security….Medicare…..Medicaid

Let’s look at some numbers:

On February 14, 2011, President Obama released his 2012 Federal Budget.

The report updated the projected 2011 deficit to be $1.645 trillion.

This is based on estimated revenues of $2.173 trillion and outlays of $3.818 trillion.

Observations

The federal deficit of $1.645 trillion is for 1 year (2011)

The federal deficit of $1.645 trillion is 75.7% of the $2.173 trillion total revenue the Government brought in last year.

The US Government is currently funding only 56.9% of their current expenses ($3.818 trillion) with the total revenue they received ($2.173 trillion).

The federal deficit of $1.645 trillion helps fund 43.1% of the $3.818 trillion in expenses.

You hear Congress arguing over whether to cut $30 billion or $40 billion in expenses.

That number may seems like a large amount, but what is it in the scheme of things?

Let’s take a quick look at where we are spending this money.

The federal budget in 2011 was projected at $3.83 trillion in total spending.

Below is a breakdown of the budgeted expenses for 2011. (This budget has never been passed, yet!!!)  

Obama’s new 2012 budget calls for reducing these cost by $12 billion dollars to $3.818 trillion from the proposed 2011 figure of $3.83 trillion.

You can now……. all play along….

Where do you want to take the $12 billion from?

$787.6 billion in pensions, $898 billion in health care expenditures, $140.9 billion for education, $928.5 billion in defense spending, $464.6 billion in welfare spending, $57.3 billion in protective services such as police, fire, law courts, $104.2 billion for transportation, $29 billion in general government expenses, $151.4 billion in other spending including basic research, and          $250.7 billion on interest payments.

Let’s not get too aggressive…..

What are our options?

 

How do we reduce cost and lower the deficit?

There is some talk of cutting all the expenses, 5%  across the board.

They’ll be no discrimination, everyone will take a hit.

That would reduce overall cost by $190.9 billion.

Guess what…..

the deficit would still be $1,454.1 trillion for this year.

Now what?

…………..I’m thinking…….I’m thinking

More factors to think about

 

The overall deficit is just under $15 trillion,

Our existing $1.645 trillion deficit makes up just under 11% of the overall deficit.

Recently, Robert Gates said the Pentagon has identified $178 billion in cuts for the five years from fiscal year 2012 to 2016. The Pentagon plans to reinvest about $100 billion of that into its own services, leaving the remainder for deficit reduction.

Hmmmmm!

Gates can identify $178 billion in cuts but wants to keep 57% of it?

This week, Portugal was looking to raise money by selling 6 month T -Bills for 5.117%.

Just 60 days ago the same T Bill was selling for 2.984%.

The US is currently selling T Bills for under 0.5%.

What do you think will happen if there is a Government shutdown?

There is the looming question of raising the debt ceiling.

How long before the world loses confidence in our ability to control cost?

Somehow I think we really took our eye off the ball.

Just this morning, experts were discussing the fact that the Government is expected to run with a deficit,

But……. $4 to $5 trillion is a more acceptable number.

How do we get from $15 trillion to $5 trillion?

Let’s try cutting the deficit by $1 trillion a year.

That means ………

In 10 years we can be within the acceptable numbers.

If we have already budgeted for a deficit of $1.645 trillion; to save $1 trillion this year, we would have to cut expenses $2.645 trillion dollars.

That means, we cut expenses from $3.818 trillion to $1.173 trillion.

We would only have to cut expenses by 70%!!!!

That doesn’t sound too promising!

How about we take 20 years to get the deficit from $15 trillion to $5 trillion?

Then we would only have to cut expenses 35%.

Do I hear 30 years?

Where am I going with all this fuzzy math?

I wish I knew!!!

No one seems to want to stand up and address any of these questions?

Ask anyone, we already feel we pay our fair share of taxes.

Can the American public be asked to pay more?

If you want to get reelected,

you better not be talking about raising taxes!

Cut our taxes but don’t dare cut our programs….

Is the US Government up for the challenge?

Will they be able to make the tough choices?

Or will the push the ball forward.

At HBS we pride ourselves on providing Smart Solutions for Smart Business

I am not sure where we would place this budget category?

I am just trying to make some sense of it.

Your comments are welcomed.

You may email george@hbsadvantage.com

Visit us on the web www.hutchinsonbusinesssolutions.com

As reported by ReimagineAmerica

Congratulations to the FBI for their “take-down” of a $100M Medicare fraud ring on October 13,2010.  According to the NY Times October 14 morning addition, the “band of Armenian-American gangsters” billed Medicare for more than “$100M by inventing 118 bogus health clinics in 25 states”.  According to the paper, the gangsters made off with $35M in cash that cannot be recovered.  You will find a link to the NY Times news story at the end of this blog.

How did this happen?  It happened because Medicare is a wholly automated payment system that is notoriously porous.  If the SSN number of both patient and doctor are validated electronically, and the treatment code is separately validated electronically, an electronic payment is generated.  Only after the payment is any audit performed.   Often, but not always, the audit happens only when a recipient reviewing their own Medicare statement reports activity they know to be fraudulent, according to the CBS 60 Minutes exposé filmed in Florida, earlier this year,   I suppose that Medicare subscriber doctors, also,  report fraud when the IRS accuses them of under reporting their income?

The 2010 Health Care Reform legislation did include funding for Medicare fraud detection.  But focusing on investigation after the fraud occurs and on TV warnings to Medicare recipients urging them to “guard the card” will not solve a problem estimated to be at least $50B – billion with a B – dollars a year!  In fact, the legislation expects these efforts to save only $2B a year – 4% of the estimated reduction in benefit payments mandated by the Act.   Wow we need to do 96% better or cut seniors’ benefits, according to Congressional Budget Office estimates!

Last week Fox Business News reported, and an IBM spokesman confirmed,  that Sam Palmisano, CEO of IBM,  told Barack Obama that IBM had carefully studied the Medicare fraud issue and estimated the actual 10 year problem to be closer to $900B – that’s billion with a B — over ten years.  Mr. Palmisano believes so strongly in both IBM’s numbers and IBM’s potential solution that he offered to “build” the  solution for “free”.  Fox reported that Barack Obama turned down this offer.   Can you imagine, an American CEO of an American corporation offers a solution that could, potentially, save 90% of the projected health care reform deficit and the President of the United States turned down the offer?

I was astounded – so astounded that I knew I needed to verify the story before I gave full vent to my frustration.  So I Googled “IBM Medicare fraud”.    Turns out that it’s true!  IBM confirmed it. 

There is no mystery here.  Health care is a great business opportunity for IBM.  IBM Health Care Practice works with partners every day in both the United States and Europe to improve the use of technology to simultaneously reduce the cost of delivering health care and improve health care outcomes.  

It is important to examine my Palmisano’s language carefully.   He offered to “build” the solution for free to “prove” it worked.  He never said, IBM didn’t want to be paid if it worked.  He was willing to “share the risk”.    That has been a standard practice in business for years!  Time that we adopted these money saving practices in the government as well. 

Why would the President turned down such an offer?  Certainly he knows that all major technology initiatives in federal government are done by private contract vendors?   So what’s up?

  1. Most benignly, he does not want to appear to promote one federal vendor over others?  That can easily be dealt with in the contracting process – requiring IBM to partner with other major software and hardware vendors to develop an “open source” solution. 
  2. Can it be the President, who has no business experience,  does not understand the concept “investing in a new business opportunity”?    Mr. Palmisano is not an altruist.  Successfully ending Medicare fraud would further strengthen IBM’s “qualifications” as a global health care solutions provider.  This would be worth billions in new profits to IBM and its partners.
  3. Can it be possible that the President really has such a deep-seated distrust of business and business executives that he cannot imagine a CEO can be a patriot at the same time that he is responsible for producing share holder value? 
  4. Could the President fear that accepting this offer might be seen as a public rebuke of the team at Medicare, who are all SEIU or AFGE members?  Could he be concerned that such a perception would have political ramifications as he looks to government union support in his 2012 Presidential election?

Based on CBS and the New York Times reporting, I can think of a half dozen “quick hit” changes to the existing Medicare payment process that would produce billions in potential Medicare fraud savings.   So,  its easy for me to believe that the full force of IBM, IBM partners,  the Medicare staff, and the FBI could eliminate $900B in Medicare fraud over the next decade.

Personally, I believe that Mr. Palmisano is acting both as a patriot and a good CEO.   Mr. Obama, what do you have to lose?

Robert Reich

Fmr. Secretary of Labor; Professor at Berkeley; Author, Aftershock: ‘The Next Economy and America’s Future’

Posted: January 22, 2011 11:18 AM

Whenever you hear a business executive or politician use the term “American competitiveness,” watch your wallet. Few terms in public discourse have gone so directly from obscurity to meaninglessness without any intervening period of coherence.

President Obama just appointed Jeffry Immelt, GE’s CEO, to head his outside panel of economic advisors, replacing Paul Volcker. According to White House spokesman Robert Gibbs, Immelt has “agreed to work through what makes our country more competitive.”

In an opinion piece for the Washington Post announcing his acceptance, Immelt wrote “there is nothing inevitable about America’s declining manufacturing competitiveness if we work together to reverse it.”

But what’s American “competitiveness” and how do you measure it? Here are some different definitions:

  • It’s American exports. Okay, but the easiest way for American companies to increase their exports from the US is for their American-made products to become cheaper internationally. And for them to reduce the price of their American-made stuff they have to cut their costs of production in here. Their biggest cost is their payrolls. So it follows that the simplest way for them to become more “competitive” is to cut their payrolls — either by substituting software and automated machinery for their US workers, or getting (or forcing) their US workers to accept wage and benefit cuts.
  •  

  • It’s net exports. Another way to think about American “competitiveness” is the balance of trade — how much we import from abroad versus how much they import from us. The easiest and most direct way to improve the trade balance is to coax the value of the dollar down relative to foreign currencies (the Fed’s current strategy for flooding the economy with money could have this effect). The result is everything we make becomes cheaper to the rest of the world. But even if other nations were willing to let this happen (doubtful; we’d probably have a currency war instead as they tried to coax down the value of their currencies in response), we’d pay a high price. Everything the rest of the world makes would become more expensive for us.
  •  

  • It’s the profits of American-based companies. In case you haven’t noticed, the profits of American corporations are soaring. That’s largely because sales from their foreign-based operations are booming (especially in China, Brazil, and India). It’s also because they’ve cut their costs of production in the US (see the first item above). American-based companies have become global — making and selling all over the world — so their profitability has little or nothing to do with the number and quality of jobs here in the US. In fact, it may be inversely related.
  •  

  • It’s the number and quality of American jobs. This is my preferred definition, but on this measure we’re doing terribly badly. Most Americans are imprisoned in a terrible trade-off — they can get a job, but only one that pays considerably less than the one they used to have, or they can face unemployment or insecure contract work. The only sure way to improve the quality of jobs over the long term is to build the productivity of American workers and the US overall, which means major investments in education, infrastructure, and basic R&D. But it’s far from clear American corporations and their executives will pay the taxes needed to make these investments. And the only sure way to improve the number of jobs is to give the vast middle and working classes of America sufficient purchasing power to get the economy going again. But here again, it’s far from clear American corporations and their executives will be willing to push for a more progressive tax code, along with wage subsidies, that would put more money into average workers’ pockets.
  •  

 

It’s politically important for President Obama, as for any president, to be available to American business, and to avoid the moniker of being “anti-business.” But the president must not be seduced into believing — and must not allow the public to be similarly seduced into thinking — that the well-being of American business is synonymous with the well-being of Americans.

Hu Jintao State Dinner

CHRISTOPHER BODEEN   01/16/11 08:24 PM   AP

BEIJING — Chinese leader Hu Jintao is being feted in Washington this week with a lavish state banquet at the White House and other pomp usually reserved for close friends and allies – all intended to improve the tone of relations between a risen, more assertive and prosperous China and a U.S. superpower in a tenuous economic recovery.

The shaky trust between the United States and China has been eroding recently because of an array of issues – currency policies and trade barriers, nuclear proliferation and North Korea – and both sides seem to recognize the need to recalibrate relations.

The U.S. is one of China’s biggest markets, with $380 billion in annual trade largely in Beijing’s favor. Washington increasingly needs Beijing’s help in managing world troubles, from piracy off Africa to Iran’s nuclear program and reinvigorating the world economy.

Hu sounded a conciliatory tone in a rare interview with U.S. newspapers ahead of his visit, saying the two countries could mutually benefit by finding “common ground” on issues ranging from combatting terrorism and nuclear proliferation to clean energy and infrastructure initiatives.

“There is no denying that there are some differences and sensitive issues between us,” Hu said in written answers to questions submitted by The Washington Post and The Wall Street Journal that were published over the weekend. “We both stand to gain from a sound China-U.S. relationship, and lose from confrontation.”

Hu called for more dialogues and exchanges to enhance “practical cooperation,” stressing the need to “abandon the zero-sum Cold War mentality” in U.S.-China relations.

Center for Strategic and International Studies scholar Charles Freeman, a former trade negotiator in the George W. Bush administration, said, “It is absolutely critical for the two sides to be setting a tone that says ‘hang on a second, we are committed to an effective, positive relationship.'”

The state banquet President Barack Obama is hosting will be Hu’s first. In the days before his visit, senior officials from both countries have spoken publicly in favor of better ties.

Secretary of State Hillary Rodham Clinton said in a speech Friday that the countries needed to manage their conflicts but their shared interests were so entwined as to constitute entanglement.

“History teaches us that the rise of new powers often ushers in periods of conflict and uncertainty,” Clinton said. “Indeed, on both sides of the Pacific, we do see trepidation about the rise of China and the future of the U.S.-China relationship. We both have much more to gain from cooperation than from conflict.”

Chinese officials have emphasized what they see as common concerns while acknowledging the complexity of the relationship.

“When the relationship is strained we need to bear in mind the larger picture and not allow any individual issue to disrupt our overall cooperation,” Vice Foreign Minister Cui Tiankai said in a speech Friday.

Such maxims, however, don’t apply to issues China defines as its “core interests,” including Taiwan, Tibet and the overarching authority of the Communist Party. That’s a condition Hu’s visit won’t change.

In his interview for the U.S. newspapers, Hu said the two countries should “respect each other’s choice of development path,” an implicit rejection of U.S. criticism of China’s human rights record and other internal affairs.

Hu, whose four-day trip starts Tuesday, is expected to talk up China’s intended peaceful rise in a speech to business leaders and opinion-makers in Washington on Thursday and to highlight the benefits of China’s market and investment when visiting Chicago.

Aware of China’s plummeting image in American opinion, Chinese Foreign Ministry functionaries have in recent weeks been looking for ways to make the usually stiff Hu, and China as a country, appear more human, something akin to reformist patriarch Deng Xiaoping’s donning a 10-gallon hat in Houston in 1979 just after the opening of diplomatic relations.

For the protocol-obsessed Chinese leadership, a highlight of the visit will be Wednesday’s state banquet – an honor denied Hu on his last trip to the White House in 2006. President George W. Bush thought state banquets should be reserved for allies and like-minded powers and instead gave Hu a lunch. Even worse, a member of Falun Gong, the spiritual movement banned by China, disrupted Hu and Bush’s joint appearance, and an announcer incorrectly called China “The Republic of China,” the formal name of democratically ruled Taiwan.

In this visit, no major agreements are expected. Talks over a joint statement ran aground until last-minute negotiations in Beijing last week. But the shared recognition to put things right and the bumpy relations of the last year augur for a better outcome.

The U.S. wants Beijing to move toward faster appreciation of its currency to boost U.S. exports and reduce unemployment. But in his written answers to the U.S. newspapers, Hu did not signal any significant changes in China’s currency policy.

China now holds the world’s largest foreign currency reserves at $2.85 trillion and a major chunk of U.S. government debt. At current rates, economists estimate China will overtake the U.S. as the world’s largest economy within 20 years, possibly by the end of this decade.

Hu said “the current international currency system is the product of the past,” but he did not dispute the U.S. dollar’s role as the global reserve currency. He said it “will be a fairly long process” before the Chinese renminbi can become an international reserve currency.

Beijing has largely rebuffed U.S. appeals for help in reining in bellicose North Korea, curbing Iran’s nuclear program and dismantling of trade barriers. Chinese officials and the nationalistic state-run media have criticized Washington’s renewed attention to Japan, South Korea and Southeast Asia, its arms sales to Taiwan and its continued naval patrols in the Yellow and South China seas as attempts to constrain China’s influence in its backyard.