Since the recession ended four years ago, the federal budget deficit has topped $1 trillion every year. But now the government’s annual deficit is shrinking far faster than anyone in Washington expected, and perhaps even faster than many economists think is advisable for the health of the economy.
That is the thrust of a new report released Tuesday by the nonpartisan Congressional Budget Office, estimating that the deficit for this fiscal year, which ends on Sept. 30, will fall to about $642 billion, or 4 percent of the nation’s annual economic output, about $200 billion lower than the agency estimated just three months ago.
The agency forecast that the deficit, which topped 10 percent of gross domestic product in 2009, could shrink to as little as 2.1 percent of gross domestic product by 2015 — a level that most analysts say would be easily sustainable over the long run — before beginning to climb gradually through the rest of the decade.
The BBC reports on downward mobility in the US, with a focus on the higher education sector. This will not be news to people who pay attention to such things - education and achievement in the US are largely determined by who your parents happen to be.
As the article says, it’s a tough reality to accept in a country which is typically characterized by ideas/ideals of optimism and meritocracy.
Over the last 15 years most investors have refused to contemplate that events in the West are playing out in a similar fashion to Japan in the 1990s. But the latest inflation data out of both the US and eurozone should ram home the fact that we are now only one short recession away from Japanese-style outright deflation. Similarly, investors refuse to believe that equities can fall in an environment of rampant QE. They are wrong.
Basically, we’re so close to deflation, that all it will take is another downturn, and we’ll be toast.
In their effort to deny Obama any political vistories, as witnessed by Senator Pat Toomey’s admission that that was one of the biggest reasons the latest attempt to close the loopholes in the law requiring background checks failed in the US Senate, the Republicans have prevented the “re-inflation” of the US Economy after the Financial meltdown in the last decade. The stimulus of US Federal Government spending that was present for the last 3 big recessions, Bush-Bush-Reagan, is widely known to, not only be absent after this the “Great Recession” but the Republicans have used their control of the House to impose austerity. Even though, austerity has been debunked on both theoretical and as well as empirical grounds.
Here is Paul Ryan’s path to a balanced budget in three sentences: He cuts deep into spending on health care for the poor and some combination of education, infrastructure, research, public-safety, and low-income programs. The Affordable Care Act’s Medicare cuts remain, but the military is spared, as is Social Security. There’s a vague individual tax reform plan that leaves only two tax brackets — 10 percent and 25 percent — and will require either huge, deficit-busting tax cuts or increasing taxes on poor and middle-class households, as well as a vague corporate tax reform plan that lowers the rate from 35 percent to 25 percent.
But the real point of Ryan’s budget is its ambitious reforms, not its savings. It turns Medicare into a voucher program, turns Medicaid, food stamps, and a host of other programs for the poor into block grants managed by the states, shrinks the federal role on priorities like infrastructure and education to a tiny fraction of its current level, and envisions an entirely new tax code that will do much less to encourage home buying and health insurance.
Ryan’s budget is intended to do nothing less than fundamentally transform the relationship between Americans and their government. That, and not deficit reduction, is its real point, as it has been Ryan’s real point throughout his career.
Sequestration is at hand. The infamous provision that Congress enacted as part of the Budget Control Act of 2011 so as to get the debt ceiling lifted and to force Democrats and Republicans to negotiate and make concessions failed to do its job, so across the board cuts will begin to be made.
Agencies and Departments will have some latitude on how to implement the reductions. The IRS has reported that it wont furlough its tax processors until after tax season, for instance. Other agencies are already preparing for the cuts. The cuts will not come all at once, but will have a cumulative effect of $85 billion in the current fiscal year. Furloughs wont happen right away either. That will start within the next 30-60 days.
Small businesses that have contracts with federal, state, and local agencies will be hit sooner than larger businesses because they don’t have the financial means to endure prolonged holds on business. It’s also likely to increase the unemployment rates that have struggled to come down since the recession (and despite the fact that Wall Street has surged in recent years to its pre recession highs and profits are booming).
But all eyes fall on Congress on what the next step is. Both sides have been posturing for weeks about the ramifications of the cuts and who is to blame even though it was the failure of Republicans to budge from a no-tax pledge that forced the issue.
The President is meeting with Congressional leaders today, but no deal or breakthrough is expected.
Democrats and Republicans are in a standoff over how to replace the cuts totaling $1.2 trillion over nine years, $85 billion of which would occur in the remaining seven months of this fiscal year. Republicans reject Democrats’ call for higher taxes on top earners to replace part of the spending reductions.
“Middle-class families can’t keep paying the price for dysfunction in Washington,” Obama said in a statement yesterday. The president has until 11:59 p.m. to issue the order officially putting the cuts into effect.
“How much more money do we want to steal from the American people to fund more government?” Boehner said at a news conference in Washington yesterday. “I’m for no more.”
The White House meeting follows the Senate’s rejection yesterday of a pair of partisan proposals to replace the spending reductions. No additional congressional action is planned before the start of the cuts, to be split between defense and non-defense spending.
Yesterday, a Senate GOP proposal failed to make the cut (losing 38-62); it would have ceded appropriations control that is constitutionally provided to Congress to the President. In other words, that plan would have blunted effects of the sequester to make it more palatable, not correcting the deficiencies in the sequester’s overreaching and unyielding impact.
The Democrat plan (S. 388), which failed by a 51-49 vote (60 required to pass), would have replaced some of the defense cuts with a tax hike on top earners. That plan had the President’s support.
But the rest of Congress has skipped town knowing that nothing is getting done this weekend.
Republicans have been simultaneously blaming the President for the sequester and claiming that the cuts wont be nearly as bad as Democrats claim (but that some cuts are too bad to be made - as in the Defense budget). Majority Leader Eric Cantor has repeatedly made the bogus claim that Republicans have had a sequester alternative for months but Democrats have failed to act. I have previously fisked that approach, but the fact is that the GOP doesn’t have a sequester alternative in hand in the 113th Congress and that the prior GOP plan would have eliminated funding for Obamacare programs to offset cuts.
Democrats have all but warned that the sky will fall and that the cuts will have dire consequences and blamed Republicans for the failure to produce a balanced plan to replace the sequester with a combination of tax changes and spending cuts.
The danger for Democrats is that the budget cuts wont have the dire impact that they claim it would have and that most Americans will get the level of services they are used to and that will inure a benefit to the GOP longstanding argument that government is simply too big and that serious cuts need to be made.
Both sides of the aisle in Congress have known that they couldn’t have made cuts in the levels and scope of those that are part of the sequester. It gives them a chance to hack away at the discretionary budget in a way that hasn’t been done before. In other words, there are some on Capitol Hill who are welcoming the sequester and embrace its outcome.
One dirty little secret about sequester: cap hill veterans of BOTH parties admit they’d never be able to cut this much if left on their own
— Chuck Todd (@chucktodd) February 28, 2013
So, we get to a pivot point. If the cuts truly are as bad as the President warns and the American people see the impact of these cuts, it will put additional pressure on the Republicans to acquiesce on their stubborn refusal to balance cuts with tax hikes or eliminating loopholes in the tax code. The Republican effort to blame the President for the cuts has largely failed according to the polls, and that dynamic hasn’t changed - and likely wont change.
However, if the cuts aren’t as bad as the President has warned, that might give Republicans a renewed effort to push for still more cuts - arguing that there is much more to cut and that the fat needs to be trimmed from the non-discretionary budget as well. Republicans might lose the argument on who would take credit for the cuts (seeing how they currently blame the President for the sequester in the first place - #Obamaquester). Yet, these same Republicans would have no problem using the cuts to their advantage in demanding more. They’ll crow to their supporters that they held the line on cuts and did what they set out to do without compromising on their no tax pledge to Grover Norquist.
Folks like Larry Kudlow are carrying the Republican argument, claiming that the cuts are pro-growth by claiming that the cuts are only blunting a rise in the annual budget (which can be dismissed by looking at the fact that the annual budget as a percentage of GDP has shrunk during the president’s first term in office and is projected to further decline against GDP and that the total spending is still expected to increase due to entitlements not governed by the sequester).
The experts who study these things do expect that the cuts will have a significant effect on the economy by reducing the expected growth over the next year, including the IMF. Sequester cuts will slow not only domestic growth from 2% to 1.5% for 2013, but global economic growth. After all, the sequester is austerity by another name. And, we’ve already seen how austerity has slammed the economies of places like Spain, Ireland, and Greece where austerity was imposed to bring debt levels down.
I take this as more evidence the economy is still growing. Think of this as an indicator of consumer confidence from the middle class up. Where I work we see indications of a continuing trend of more manufacturing here. Less offshore.
By Ken Gassman
Feb 4, 2013
New York—Fine jewelry and watch sales were an estimated $71.3 billion in 2012, a record level for the U.S. market, based on preliminary data from the U.S. Department of Commerce. Jewelry and watch sales in 2012 were 5.9 percent higher than the prior record year of 2011, when the industry posted revenues of $67.3 billion.
This is the first time in history that the American jewelry industry generated sales greater than $70 billion. Jewelers indicated that, while the average ticket was flattish, they sold more units and their customer base expanded.
While the sales gain was much smaller than the 10.7 percent gain in 2011, the 2012 revenue increase was driven mostly by unit sales gains rather than inflation. In 2011, inflationary pricing related to precious metals and polished diamonds accounted for most of the sales increase.
For the full year, fine jewelry sales were an estimated $61.9 billion in the U.S. market, up 6.0 percent, based on preliminary data. Fine jewelry represented 86.8 percent of the industry’s total sales; the balance is generated by fine watch sales. This 87/13 percent split is in line with historic levels.
General Motors plans to make several announcements in the next few weeks about adding shifts and hourly jobs at U.S. plants, company and UAW officials said Tuesday.
UAW President Bob King, while touring the North American International Auto Show floor at Cobo Center, said he expects GM will soon surpass 20,000 jobs added since the bankruptcy restructuring of 2009.
He noted that Joe Ashton, vice president in charge of the union’s GM department, spoke Monday to the company’s board of directors, and King said Ashton “expects some more announcements very shortly.”
A GM spokesman said the automaker has thus far added 18,000 hourly jobs since the bankruptcy and confirmed that it’s looking to add capacity and shifts as it rolls out a wave of new product launches this year and next. Neither company nor UAW officials would reveal specifics about which plants will be next to get new work.
Federal Reserve officials in August 2007 saw the beginnings of the crisis in subprime mortgages and concluded that the U.S. economy would be able to withstand it, even as some Fed members warned that it could trigger a downturn, transcripts from their 2007 meetings show.
“Well-capitalized banks and opportunistic investors will come in and fill the gap, restoring credit flows to nonfinancial businesses and to the vast majority of households that can service their debts,” Donald Kohn, then vice chairman of the board, said in Aug. 2007 according to transcripts of the Federal Open Market Committee meetings released today in Washington.
The transcripts show the committee’s slow grasp of the enormity of contagion that was to spread throughout global markets as a result of billions of dollars in low-quality housing assets that had been securitized into bonds and sold to banks and investors worldwide. Several FOMC participants such as then-San Francisco Fed President Janet Yellen sounded alarms in the first half of 2007. Still, the FOMC focused on the economy’s performance and showed reluctance to alter policy until August.
“The odds are that the market will stabilize,” Bernanke told the committee in Aug. 2007, according to the transcripts from that year. “This restrictive effect could come in various magnitudes. It could be moderate, or it could be more severe, and we are just going to have to monitor how it adjusts over time.”
The transcripts mention the word “recession” four times in January, three times in June, once in August, and 27 times in December.
As the US continues its march towards restoring Dickensian working conditions, community college instructors in Kalamazoo, Michigan, are depending on donations to make it through January, due to a “miscommunication” over pay schedules.
Some highlights from the article. Serious medical condition? Good luck with that:
When the drive began last week, they first distributed aid to employees who had the greatest needs. “There was someone who has diabetes and won’t get through the month without insulin,” she said. “She got a gift card.”
Speak out about your atrocious living conditions? Careful now - wouldn’t want things to get any worse, would we?
“I have no discretionary money to put aside for this,” said one part-time Kalamazoo Valley instructor, who asked to remain anonymous for fear of losing her job.
And my favorite: the luxurious lifestyle of the idle college professor - tinned food and all:
The anonymous instructor said she had received two gift cards and a small check, plus two cans of food—one of apricots and one of corn.
“The full-time teachers have stepped up for us,” she said. “I am not out of the woods yet, but I probably won’t go hungry.”
The 57-year-old man who set himself on fire in Málaga Thursday died of his injuries at Carlos Haya hospital, health officials said Friday. He had third-degree burns on 80 percent of his body and suffered a multi-organ failure.
The victim, thought to be of Moroccan origin, had worked in construction for years but was out of a job now, said people who knew him. In the last few months he had been scraping a living with the small change he made guiding cars into parking spaces near the hospital, an illegal practice that is usually overlooked by authorities.
The police, who have not yet located his relatives, are not ruling out the possibility of an accident just as the man was lighting up a cigarette. Just two minutes before the event, he bought a pack of cigarettes from a local newsstand whose owner asked him how he was doing.
“I don’t even have enough money for food,” he replied. The man is thought to have been homeless at the present time, and seemed even more depressed than on other occasions, said the stand owner.
Several taxi drivers came to the rescue with their vehicles’ fire extinguishers when they saw the man go up in flames on a side street from the hospital. A few hours after being admitted into the emergency room there, he was transferred to a specialized burn unit in Seville, where doctors were unable to save his life.