Tag: Debt

Five Minutes to Midnight: Announcing the “Federal Government Debt Default Clock”

 

Beyond the troubling debt-ceiling standoffs we witness every few years looms a far more dire threat: a true US government default, which economists warn could lead to a collapse of confidence in the American economy, a run on the dollar, and perhaps even a global economic meltdown. How close are we to such a catastrophic federal default?

To answer this question, a group of private-sector economists and fiscal policy experts has formed a citizens’ committee, called the Default Clock Committee, to maintain an objective, fact-based Federal Government Default Clock. The Clock is designed to help the public to see and track the nearness of the danger.

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“Personal Responsibility” Means Nothing Anymore

 

Today Walter Williams in his syndicated column reminded me (like I needed to be reminded) that people simply don’t care about personal responsibility anymore. He gives a number examples of how the culture has changed, and writes about companies that advertise the ways people can get out of their debt. They promote steps people can take to “quickly be debt free.” Essentially, because someone carelessly and thoughtlessly used a credit card to satisfy their materialistic needs, the companies are paying for it. Even Dave Ramsey, a financial expert and person of high moral values whom I greatly admire, encourages people to negotiate with companies to lower their debt, and for a fraction of what they owe.

Then we have the Federal Student Aid program, which provides a means for students to have their loans forgiven, canceled, or discharged. At first, when looking at the requirements, I thought that the criteria made sense; then I realized how any creative person could play with those guidelines:

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Teddy Kupfer of National Review and Greg Corombos of Radio America cheer President Trump’s selection of John Bolton as National Security Adviser and look forward to his tough stance on North Korean nukes and the Iran nuclear deal while liberals fear that Bolton will start bombing everyone. They also unload on the bloated $1.3 trillion omnibus that the majority of Republican representatives and senators approved, much to the delight of Democrats and the fury of fiscal conservatives. Teddy and Greg understand the desire of Republicans to rebuild the military but find the reckless spending in other areas unacceptable. They scratch their heads trying to figure out why more than half of millennials actually enjoy doing their taxes. And they offer a champagne toast to the late Democratic Georgia Gov. and Sen. Zell Miller and reflect upon his memorable keynote address at the Republican convention in 2004.

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A Less Cynical View on Why the GOP Now Seems Fine with Big Deficits

 

Since late December, Republicans in Washington have signed onto tax cuts and spending increases that could, over a decade, add several trillion dollars to the national debt and some 20 percentage points to the federal debt-GDP ratio. As such, this Bloomberg Businessweek headline seems warranted: “Doesn’t Anyone Care About Deficits Anymore?”

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The Potential Downside and Upside in Washington’s New Stimulus Experiment

 

So are we really going to do this? Is the United States, the world’s most important economy, really going to thoughtlessly stumble into a novel experiment in fiscal policy? Massive fiscal stimulus at this point in the business cycle?

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GOP Fiscally Responsible Only with a Democrat in the White House

 

Budget 2018Republicans 2010: Elect us! We are the only true advocates of reducing federal spending and not raising the federal borrowing limit.

Republicans 2014: Elect us! The Republican-led House will enforce austerity measures against this free-spending President!

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The Budget Compromise: Good, Bad, or Meh?

 

As people should know the government is on the verge of shutting down again for a long weekend. The continuing resolution that ended the last shut down is due to expire at midnight tonight if I am not mistaken. Have no fear though Republicans and Democrats have come together to craft a compromise that will […]

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David French of National Review and Greg Corombos of Radio America pause to cheer the Falcon Heavy rocket launch by Space X this week and David hopes it sparks more aspirational innovation that our nation so sorely needs. They also grimace as Republican majorities are preparing to jack up spending significantly over the next couple of years, even though some positive elements are included in the budget bill. And they sigh as Nancy Pelosi uses part of her marathon floor speech on immigration policy to say her young grandson blew out his birthday candles and wished he could look like his friend from Guatemala.

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It’s a tradition dating back to the Founding Fathers: the American government financing safeguards, be it retirement (Social Security), health benefits (Medicare), or rewards for military service in the form of federal entitlements. In an age of debt and deficits, when will lawmakers address entitlement reform? John Cogan, Hoover’s Leonard and Shirley Ely Senior Fellow and author of a new book on the long history of federal entitlements, assesses where the Trump administration goes from here.

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Congress Should Support the Trump Administration’s Balanced Budget … and Sustain It

 

The Trump Administration released its first full budget proposal on Tuesday. It is a good proposal. First, it balances the federal budget by the end of the 10-year budget period. Second, its gets a handle on the federal government’s accelerating debt and interest costs. Finally, it is pro-growth. This final point is critical because achieving the goal of the restoration of a responsible federal fiscal policy will be a practical impossibility in the midst of a stagnant economy.

The immediate task for Congress is to adopt a budget that matches the general parameters of the Trump Administration’s proposal. This is to say, the budget Congress adopts should include the same numbers for the total outlays, the total revenues, deficits, debt, and interest costs (both on debt held by the public and debt held by other government accounts) in each fiscal year. On the other hand, it is appropriate for Congress to modify the budget proposed by the Administration in terms of the individual accounts under these general numbers. The Trump Administration cannot expect to get everything it wants. Most important for President Trump is that he limit himself to issuing veto threats against any appropriations bill and reconciliation bill that follows from such a budget to very few matters—those that are at the very top of his policy priorities.

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Progressively Bankrupt

 

A recent story in the Wall Street Journal foretells a grim financial future for Connecticut, the wealthiest state in the union by per capita income. Its great wealth, however, does not translate into financial stability. For this coming year, the state expects a $400 million shortfall in tax collections that will only compound its looming budget deficit of some $5.1 billion, attributable to the usual suspects: service on existing debt, a lowered credit rating, surging pension obligations, runaway health care expenditures, and a declining population. In both 2011 and 2015, Connecticut Governor Dannel Malloy sought to fill the fiscal gap by engineering two tax increases on the state’s wealthiest citizens, so that today the state’s highest tax bracket is 6.99 percent. Under the state’s tax pyramid, about one-third of the state’s $7-billion budget is paid by the several thousand people earning over $1 million per year.

But reality has finally set in. Kevin Sullivan, head of Connecticut’s tax commission, has conceded that “you can’t go back to that well again.” Determined progressives may claim the path to prosperity remains blue. But sooner or later, the bubble has to burst. Even the well-heeled individuals willing to pay high taxes for superior services will cut back their business activities or flee when fleeced. Massive government wealth transfers cannot succeed if those whose wealth is to be transferred end up leaving the state altogether. Indeed, in some cases, the departure of just one billionaire can lead to a hole in the budget, as with David Tepper’s departure from New Jersey.

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The Problem No One in DC Wants to Talk About

 

While the Beltway class hyperventilates over the latest political gaffe and jockeys for position in the 2018 midterms, there’s one subject they studiously avoid: our nearly $20 trillion debt. I wrote about it for USA Today, but my chart above shows the facts better than any op-ed can.

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Why Brent Berarducci Cancelled The Wall Street Journal

 

Our favorite Navy Fighter Pilot, @BrentB67 (let’s get him back on Rico!) joins this week’s Whiskey Politics podcast to discuss the current economy. Brent Berarducci of BlackLion Capital Management shares his unique and timely perspective as we talk about the trend towards populism, the U.S. debt, trade protectionism, and just what the heck is happening in Saudi […]

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Senator James Lankford (R- OK) has issued an urgent plea to the Trump administration: start taking the national deficit seriously or else the nation could slip into irrevocable fiscal failure down the line.

In a revealing conversation on this week’s OppCast, Lankford lamented that the national debt was almost entirely absent as a talking point during the whole of the presidential campaign.

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This Chart Shows Just How Hard a Balanced Budget Will Be

 

As a candidate, Donald Trump said he favored a balanced budget “relatively soon.” Then again, he also said, “I love debt. I love playing with it.” Just how much Trump loves or hates federal debt will be revealed in the coming months. Congress, too. Congressional Republicans have typically offered annual budget resolutions that would eliminate the budget deficit within a decade by reducing spending growth.

The same this time around? Goldman Sachs raises some issues:

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Democrats Push $1 Trillion Infrastructure Plan As Deficits Are Rising

 

ABC News:

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Millenial grads have it better than they want to admit.

 

The standard line is that the rising cost of post-secondary education is saddling millenial grads with unmanageable mountains of debt. Now, while it’s true that the cost of post-secondary education has risen way faster than the rate of inflation, and that students are taking on debt to pay for it all, it’s also true that […]

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Debt Is Headed Up Under Hillarynomics, Even Higher Under Trumponomics

 

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The Committee for a Responsible Federal Budget has updated its (non-dynamic) budget scoring of the presidential economic plans. Context: The federal debt-GDP ratio was 35% in 2007, which is more or less the postwar average. I would love see the number on a medium-term glide-path back to that level, though there is certainly no need to expedite things as Libertarian presidential candidate Gary Johnson would do.

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Turning the Tables on Sen. Warren

 

sen warrenSen. Elizabeth Warren grilled Wells Fargo’s CEO when he appeared before Congress Tuesday. The bank’s head, John Stumpf, came to Washington to answer for Wells Fargo employees who created millions of unauthorized bank and credit card accounts in the past five years. This earned the bank extra fees, of which the customers were unaware, while making Wells Fargo look like a great investment to Wall Street.

Warren thinks that the bank firing the 5,300 employees responsible is just window dressing. “You should resign,” Warren told Stumpf. “You should be criminally investigated.” A video of the exchange captivated struggling Americans angry at the elites who keep getting richer while they’re looking for change in their sofa to keep the lights on.

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Illinois on the Fiscal Brink

 

shutterstock_203635339Illinois — a state that has long embraced progressive fiscal policies — has moved one step closer to the financial abyss. Last week, Moody’s Investors Service issued the jarring announcement that it was downgrading Illinois’s general obligations bonds to Baa2 from Baa1, which is just two levels above junk bond status. The next day, Standard & Poor’s followed suit by lowering its rating to BBB+, or three levels above junk bond status. In one important sense, this is really not news at all, since Illinois had 13 bond downgrades under its previous governor, Patrick Quinn, even though it passed a temporary tax increase that collected an additional $31 billion in revenues between 2011 and 2015, 90 percent of which was funneled into pension payments for public employees.

The reason Illinois’s credit ratings have declined is that the state has been unable to live within its means. Even with its tax increases, Illinois has not had a balanced budget since 2001, though one is required under its Constitution. The latest credit downgrade stemmed from the inability of key players in the state to agree on any budget at all for the coming year. It is therefore no surprise that Moody’s observes: “The rating downgrade reflects continuing budget imbalance due to political gridlock that for more than a year has kept Illinois from addressing revenue lost due to income tax cuts that took effect in January 2015.” This remark reflects the bias of rating agencies to worry more about the condition of government balance sheets than the overall health of the state economy. Reduced expenditures are another, superior way to bring a budget into balance, which is necessary, for — as Moody’s ruefully notes — Illinois is running a structural budget gap of about 15 percent of its general fund expenditures.

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