The Budget Battle

[Paciente]

Brace yourself for the budget battle of the century.

Just a few hours ago, the White House delivered its $2.5 trillion budget to Capitol Hill. And already, it seems to be mired in intense controversy.

The president's Republican base is rebelling.

The Democratic opposition is poised to launch a full-scale attack.

And today's press reports are slamming the budget with arguments eclectically drawn from both Republicans and Democrats.

Here's just a sampling of the lines of attack now in the works, all of which are validated by solid non-partisan research and data ...

Attack #1. The president proposes to cut or eliminate 150 government programs. On the surface, this sounds like a refreshing new wave of fiscal prudence. But not according to analysts on the Republican side of the aisle in Congress!

They say that, even if the Democrats allow every single penny of their favorite programs to be cut precisely as the president recommends, the most that will be saved from the sum total of all 150 measures will be a meager $15 billion.

With the government spending close to $7 billion a day, that savings will be nearly all gone in just two days during fiscal 2006.

Attack #2. In last year's proposed budget, the White House recommended cutting or eliminating 65 programs, for a total projected savings of $4.8 billion.

What actually happened? Hah! Congress wound up approving the elimination of only four of the 65 programs, while cutting spending on only 20. How much did they save? A meager $200 million, or a piddly 4 cents in actual savings for every dollar of proposed savings.

If this pattern repeats itself for the fiscal 2006 budget, the total savings from the president's proposed cutbacks will be watered down to a meager $615 million — a savings that would be gone after just two hours of normal government operations!

Attack #3. Whether they're for or against the wars in Iraq and Afghanistan, nearly all Democrats and Republicans agree that you've got to account for the $80 billion or so the administration figures the wars will cost. Yet, due to the uncertainty, the cost is not included in the official estimates of the deficit.

Where is that money going to come from? And what happens if the cost turns out to be more than $80 billion?

Attack #4. The president's budget projects declining deficits until the end of the decade. But so did nearly all previous budgets proposals!

What's the actual recent track record? Record-smashing red ink for the last three years in a row, culminating in $427 billion in red ink for fiscal 2005.

What sweeping fundamental changes do we see in the U.S. economy, world politics, or the budget process that truly reduce the deficits? None.

Attack #5. Despite a State of the Union address last week that was loud and clear regarding the president's commitment to overhaul Social Security, the budget delivered today is silent on its expected costs, estimated at $1 trillion and $2 trillion over decades.

Where is all that money going to come from?

Attack #6. The budget is equally silent regarding the cost of making last term's tax cuts permanent.

Attack #7. It's also mute when it comes to the expected cost of fixing the alternative minimum tax (AMT). The choices:


A. If the AMT is allowed to continue on its current track, millions of middle-class tax payers will have to pay more than their fair share.

B. If the AMT is fixed, as nearly everyone in Washington agrees it ought to be, the fix is going to reduce government revenues and make the deficit even larger. By how much? Probably close to a half trillion dollars over ten years!

Attack #8. Our nation's biggest budget busters — Medicare, Social Security and military spending — are largely immune from cuts. And they're expected to grow for years to come.

Attack #9. The largely untouchable, non-discretionary spending — especially for Medicare — is expected to really take off like a rocket in the years for which today's budget provides no estimates, starting around the time the next U.S. president takes office.

Wouldn't it be more prudent to start addressing that problem now rather than wait until it's way too late? Indeed, the only excuse I've heard so far for not doing so goes something like this:


"It's already too late — so why bother?"

Attack #10. With virtually no other politically acceptable way to slash the deficit, the president is counting on solid economic growth to do the job, bringing in more government revenues and helping to reduce the government's social costs.

This is not an irrational hope — economic growth DID make a huge difference in previous decades. But can we repeat that feat?

The answer:

Only if most baby-boomers stop getting older, never claim their Social Security benefits, and never get sick ...

Only if the Fed stops raising interest rates, or its interest-rate hikes have virtually no impact on GDP, job growth, the bond market, and the stock market, and ...

Only if the next 10 years bring something akin to the prosperity we experienced during the booming '90s!

Bottom line:

You may choose to disagree with the budget's priorities. But that can be handled through the normal political process.

Or you may disagree with the budget's projections, issues that are also subject to normal debate.

But what do you do when the budget has major — sometimes massive — omissions? How do you deal with issues that many of the critical players refuse to quantify or even talk about?

No answers are forthcoming from Washington ... and the silence is deafening.

[Garfield]

Bom artigo Paciente,

este artigo vai um pouco na linha daquilo que eu questionei o fisher quando ele afirmou que os mercados bolsistas estavam subvalorizados. Para podermos ter um bull de longo prazo, é necessário que haja crescimento económico sustentado. E, mais do que nunca, os EUA necessitam que este aconteça a nível mundial. Com o motôr "consumo privado" gripado neste momento, só uma política de crescimento de emprego no sector privado e uma inversão do ritmo das exportações (logo, do Trade Deficit) pode dar algum ânimo. Mas isto tem que ser sustentado de alguma forma.

Apesar de não ter havido grandes repercussões quanto aos dados e correcções dos non-farm payrolls, é consensual que para se poder mantêr a taxa de desemprego estável, é necessário que haja uma criação de 150k de empregos por mês. Assim, acho bastante significativo que nos últimos mêses, não só, se tenha ficado aquém destes valôres como até tenha havido uma diferença tão grande nos números de Janeiro: 200k previstos com "sussurros" de que poderia ir até aos 225K.

Se com o Dólar  em valôres tão baixos, como se verificou no último semestre de 2004, as exportações continuaram a diminuir, como é que uma política de dólar forte pode ajudar a inverter isto ?

E apesar do emprego ser um lagging factor, eu pergunto: qual vai ser, afinal, o motôr de crescimento dos States ?

Cumprimentos

Garfield

[Paciente]

Nem mais, Garfield!

Penso que estás a ver bem o filme.


Abraço

[New Felling]

Eheheheheheheeh....

Na "MOUCHE"

Abraço aos 2.