Senator Tom Coburn’s office provides a few facts about the budget the Obama administration has submitted to Congress. Budget buster would most likely be a better description:
Total spending under this budget is $3.9 trillion in 2009, or 28% of GDP, the highest level as a share of GDP since World War II.
This budget provides $1.2 trillion in discretionary budget authority for FY 2010 and increases discretionary spending by $490 billion over 5 years. Total spending in 2009 is 28 percent of GDP.
The Democrat budget includes $2.2 trillion in mandatory spending for FY 2010, which includes Social Security, Medicare and Medicaid spending.
So there are the basics. And remember the pledge that by 2012 the deficit will be cut in half. Well, with this budget, that doesn’t mean a whole bunch in terms of what’s left in the deficit. It will still most certainly be higher than any deficit prior to this one.
Deficit is one thing, debt is another. Politicians like to use smoke and mirrors with deficit and debt, preferring to ignore debt and talk about how they’re dealing with debt. Well let’s get serious about this – the debt is what we owe, the deficit is just how much more we’re piling up.
Total National Debt Today:
Under the Democrat Budget:
FY 2010: $12.2 trillion
FY 2011: $14.3 trillion
FY 2012: $15.3 trillion
FY 2013: $16.1 trillion
FY 2014: $17.0 trillion
So now we see the bottom line. In FY 2011, we will have more debt than GDP (the US GDP is 13.84 Trillion). And, in all honesty, we don’t have to be – unless we pass this budget. You cannot spend yourself out of debt. And you cannot cure a credit problem by extending more credit.
This budget adds $4.96 trillion to the public debt by 2014. Debt will be about two-thirds of GDP for the entire budget window, and deficits will be at least $500 billion in each year of the budget window.
The Democrat Budget sets total outlays in FY 2010 at $3.53 trillion and total revenues at $2.29 trillion, for a deficit of $1.24 trillion.
This is truly the beginning of the end. And without cap and trade involved, without universal health care is factored in, just to pay for this mess, taxes are going to go up. The question is how high. And as you’ll see, it’ll be higher than the spin is spinning:
Against a baseline that assumes current law tax policy is extended, S. Con. Res. 13 raises taxes by $361 billion and allows for $1.3 trillion in additional tax increases. In addition their budget paves the way for additional tax increases from a proposed cap-and-trade tax in reconciliation.
If you’re wondering where the additional $1.3 trillion in taxation might (will?) come from, Coburn provides a little behind the scenes look at how the Democrats procedurally set up phantom funds that they can initiate through a majority vote anytime they wish to fund favored initiatives:
Deficit Neutral Reserve Funds:
The Democrat budget includes 15 “reserve funds,” which essentially “phantom spending” policy statements that allow the majority to say that they would like to fund a certain initiative. The deficit neutral requirement associated with the reserve funds typically require that taxes be raised in order to pay for the new policy initiative. If all reserve funds were to be fully enacted, total spending would increase by $1.3 trillion, financed by tax increases or spending decreases.
Welcome to “hope and change”. More debt, more spending, bigger deficit, and no end in sight.
Someone will end up paying for all of this mess, and my guess is it will be all of us – for generations.
If you’ve not kept up or been unable to keep up (that’s why we’re here), you’ve probably wondered about the references to the “underpants gnomes” when discussing the banking and auto industry situations.
Naturally we have precisely the information you need to be in the know. Just remember, as our own underpants gnomes are discovering, the tricky part is “Phase II”.
I‘m sure some will find this surprising. Others will say, “yeah, baby!” It certainly is the logical extension of what happened to GM’s CEO. I, for one, still find it to be very disturbing:
On the heels of the resignation of General Motors CEO Rick Wagoner, the Service Employees International Union is urging President Barack Obama to oust Bank of America CEO Ken Lewis.
“It defies logic, common-sense, and responsible governance to punish the auto industry while letting financial institutions off the hook,” SEIU President Andy Stern said, announcing his call for Lewis’s job Tuesday.
The same could be said for letting the union leadership off the hook.
Aren’t they responsible for declining membership? Aren’t they as much a part of the problem as the management of the auto industry? Why isn’t the SEIU calling for union heads as well?
Of course I ask that facetiously. Obviously we’re now going to hear every whiner and complainer in the world will demand the government fire their boss. Hey, the precedent has been set with one of the worst decisions I’ve seen in a while. Now we begin to see the results of such a blatantly dumb move.
You remember TARP. The “Troubled Asset Rescue Plan”? The plan which the Obama administration and the Treasury Department said they were monitoring closely? In fact, they even put a “watchdog” in charge of its oversight.
Transparency. Oversight. Hope and Change.
And any other buzzword promise that was thrown out there to describe how this administration would be so different from the last.
But apparently all the oversight promised depends heavily on cooperation, not stonewalling, by the Department administering TARP. That would be Treasury:
“We do not seem to be a priority for the Treasury Department,” the Congressional Oversight Panel’s Elizabeth Warren told a Senate Finance Committee hearing today.
“We have sent letters. We have requested that there be someone named so that we can get technical information. And so far, we have not been a first priority,” Warren said. “We use what you give us, and we will exercise the leverage given to us by Congress. In part, that’s why I’m here today. I’m here to talk to you about what’s happened so far, what we have discovered so far, the inquiries that we have in mid-stream and for which we continue to await responses.”
Warren, visibly frustrated with a lack of cooperation from the administration, emphasized, “This problem starts with Treasury.”
Now part of the problem, obviously, is that several key positions in Treasury have yet to be filled, over 60 days into the new administration and in the midst of a financial crisis. Apparently that’s not a priority either.
Oh, and you’ll love this:
Neil Barofsky, Special Inspector General for the Troubled Asset Relief Program, voiced similar concerns.
He noted that his office just conducted a survey of all 364 TARP recipients on their use of government funds, something they had requested Treasury do, only for the Department to decline to do so except in the cases of Citigroup and Bank of America.
“One thing is clear: complaints that it was impractical, impossible, or a waste of time to require banks to detail how they used TARP funds were unfounded,” Barofsky said.
I continue to be unimpressed with Tim Geithner and his management and leadership style. What you’re reading here is totally unacceptable. For once, Sen. Chuck Grassley (R-IA) said the right thing:
“Unfortunately, despite saying all the right things about open government, the new administration has not made any major changes aimed at making TARP more transparent,” he said. “Moreover, I have heard about potential problems with access to information from all three of the oversight bodies testifying.”
Hope and Change.
The person to whom the Navy recently bestowed the formerly prestigious Distingusihed Public Service Award had this to say:
“If I’m corrupt, it’s because I take care of my district,” Mr. Murtha said.
Because, you know, there’s obviously no other way to do that than be corrupt.
Shades of Georgia’s Eugene Talmadge:
“Sure, I stole. But I stole for you,”
My latest Examiner column. With housing values tanking, taxes based on that value ought to be going down as well, right?
A study just completed in Spain finds that the creation of so-called “green jobs” doesn’t at all seem to be the employment panacea promised by their advocates. As you recall, President Obama pointed to Spain as the reference point for the establishment of government aid to renewable energy. As the study points out, “No other country has given such broad support to the construction and production of electricity through renewable sources.” But the results are not at all what you might expect given the hype. In fact, they’ve been quite the opposite:
Optimistically treating European Commission partially funded data, we find that for every renewable energy job that the State manages to finance, Spain’s experience cited by President Obama as a model reveals with high confidence, by two different methods, that the U.S. should expect a loss of at least 2.2 jobs on average, or about 9 jobs lost for every 4 created, to which we have to add those jobs that non-subsidized investments with the same resources would have created.
Be sure you read that last part of the sentence carefully as well – those jobs would have been created by “non-subsidizsed investments” with the “same resources” – or said another way, they’d have been created in the private sector without government picking winners and losers and spending billions in taxpayer money.
Between 2000 and 2008, Spain was very aggressive in pursuing alternative energy and green jobs. But its results were less than stellar:
Despite its hyper-aggressive (expensive and extensive) “green jobs” policies it appears that Spain likely has created a surprisingly low number of jobs, two-thirds of which came in construction, fabrication and installation, one quarter in administrative positions, marketing and projects engineering, and just one out of ten jobs has been created at the more permanent level of actual operation and maintenance of the renewable sources of electricity.
So 9 out of 10 were temporary jobs, while only 1 in 10 became permanent. And the cost?
The cost to create a “green job”:
The study calculates that since 2000 Spain spent €571,138 to create each “green job”, including subsidies of more than €1 million per wind industry job.
The cost in jobs lost:
Each “green” megawatt installed destroys 5.28 jobs on average elsewhere in the economy: 8.99 by photovoltaics, 4.27 by wind energy, 5.05 by mini-hydro.
And the eventual cost to consumers:
The price of a comprehensive energy rate (paid by the end consumer) in Spain would have to be increased 31% to being to repay the historic debt generated by this rate deficit mainly produced by the subsidies to renewables, according to Spain’s energy regulator.
Spanish citizens must therefore cope with either an increase of electricity rates or increased taxes (and public deficit), as will the U.S. if it follows Spain’s model
Previous studies have concluded that such increases would impact the poorest quintile the most:
• Reducing emissions, a major rationale for “green jobs” or renewables regimes, hits the poorest hardest. According to the recent report by the Congressional Budget Office, a cap-and-trade system aimed at reducing greenhouse gas emissions by just 15% will cost the poorest quintile 3% of their annual household income, while benefiting the richest quintile (“Trade-Offs in Allocating Allowances for CO2 Emissions”, U.S. Congressional Budget Office, Economic and Budget Issue Brief, April 25, 2007).
• Raising energy costs loses jobs. According to a Penn State University study, replacing two-thirds of U.S. coal-based energy with higher-priced energy such as renewables, if possible, would cost almost 3 million jobs, and perhaps more than 4 million (Rose, A.Z., and Wei, D., “The Economic Impact of Coal Utilization and Displacement in the Continental United States, 2015,” Pennsylvania State University, July 2006)
So to recap, we have a scheme which would see a net reduction in jobs by its implementation, create jobs of which only 10% were permanent, Cost anywhere from a half a million to a million dollars per job, increase energy costs tremendously and hit the poor the hardest.
Sounds like a winner, doesn’t it?
Will anyone pay attention to the actual experiment conducted by Spain and its results? Or are the blinders firmly in place?
While this scheme would be important to contest at any time, it is critically important to do so now, given the economic situation. One thing that must be avoided is government killing jobs as fast as the private sector creates them. This is truly a time when government should do all it can to enable the private sector to create jobs (tax cuts, etc.) and step back and allow that process to work. What it shouldn’t be doing is picking winners and losers and enacting a scheme which, in Spain at least, has proven to do all the things necessary to kill or at least cripple any economic recovery.
If you’re going to hand out big bucks, you need to do it in a politically correct manner.
Members of the Congressional Black Caucus on Monday criticized the lack of minority participation in the government’s financial bailouts and suggested that President Barack Obama isn’t doing much better than his predecessor to ensure diversity.
These particular vultures are feeling a bit peevish. They’re just not seeing the flow of money to their favored constituencies that they expect – especially with a brother in the Oval Office. I mean, come on – we are talking trillions here, right?
I‘m still in rather stunned disbelief about the White House ousting GM’s CEO.
It’s not about how good a CEO he was or whether I agreed with his plan, his leadership style or his results. It’s about the White House going so far as to ask him to step aside. And, according to Obama’s own statement today, his “team” will “working closely with GM to produce a better business plan”.
Why, that sounds like something we’ve seen pass this way before and firmly rejected:
Italian Fascism often involved corporatism, a political system in which economy is collectively managed by employers, workers and state officials by formal mechanisms at national level.
Now I’m sure there are those out there who will argue that this is hardly a “formal mechanism”. But of course that’s simply not true. It is formal enough that a CEO is gone. Someone believes it is a mechanism of some formality for that to happen. And, if you think about it, it is just one more mechanism among many that have been put forward lately. Timothy Geithner’s plan to have the government take over financial institutions and hedge funds if the government deems them a threat to the economy’s well-being, for instance.
After all the caterwauling by the left about “unprecedented executive branch power expansion” during the Bush years, they’re rather quiet about these. The market, however, has cast it’s vote. Down about 300 at 4pm.
And this is all based in a false premise – something I’ve noticed that Obama uses quite effectively:
“We cannot, we must not, and we will not let our auto industry simply vanish,” President Obama said at the White House.
Anyone – who would expect the domestic auto industry to ‘simply vanish’ if the companies were left to go the traditional route of bankruptcy?
Since when does bankruptcy equal “vanish”? Delta airlines seems to have survived it quite well, thank you very much. Their bankruptcy or the bankruptcy of other domestic airlines hasn’t seen the domestic airline industry “vanish”. Why would anyone believe it would happen if GM or Chrysler went bankrupt?
And that said, what did he suggest in his speech today?
The administration says a “surgical” structured bankruptcy may be the only way forward for GM and Chrysler, and President Obama held out that prospect Monday.
“I know that when people even hear the word ‘bankruptcy,’ it can be a bit unsettling, so let me explain what I mean,” he said. “What I am talking about is using our existing legal structure as a tool that, with the backing of the U.S. government, can make it easier for General Motors and Chrysler to quickly clear away old debts that are weighing them down so they can get back on their feet and onto a path to success; a tool that we can use, even as workers are staying on the job building cars that are being sold.”
Seems like that is precisely what all of us were telling them to do before they started throwing bucketfuls of imaginary dollars at the two companies, wasn’t it? And you can call it “surgical”, “structured” or whatever you want in an attempt to spin this as something other than fairly ordinary bankruptcy procedures, but that’s what they’re talking about.
One of the primary reasons they’ve attempted to keep these companies out of bankruptcy court can be described in three letters: UAW.
Their problem isn’t just “old debts” which need to be cleared away. Instead it is what is euphemistically called “legacy costs” which would go as well. And those “legacy costs” include the gold plated benefits the UAW now enjoys and doesn’t want to give up.
Administration officials on Sunday made it clear that an expedited and heavily supervised bankruptcy reorganization was still very much a possibility for both companies. One official, speaking of GM, compared such a proceeding with a “quick rinse” that could rid the company of much of its debt and contractual obligations.
The thing to watch out for is whether or not this “quick rinse” in a “heavily supervised bankruptcy reorganization” included “contractual obligations” to unions. If not, it will be a “quick rinse” of taxpayer’s wallets.
Among challenges the administration faced leading up to this weekend’s decision, foremost were the efforts to draw steep concessions from the United Auto Workers union and from the bondholders.
Attempts to solidify deals with the UAW and bondholders were slowed by disagreements by both parties over how exactly the other party needed to budge. The UAW, for instance, insists it already made health-care concessions in 2005 and 2007, and argues that the bondholders have never been asked to concede anything.
“I don’t see how the UAW will do anything until they see what the bondholders will give up,” one person involved in the negotiations on behalf of the UAW said Sunday.
Progress? Apparently both GM and Chrysler have been negotiating with both the bondholders and the UAW. But there’s not much to report there:
Both GM and Chrysler are negotiating with the UAW to accept a range of cost-cutting measures, including greatly reduced work forces, lower wages and a revamped health-care fund for retirees.
GM and representatives for its bondholders remained in talks over the weekend about a deal that would force these investors to turn in at least two-thirds of the value of the debt they hold in exchange for equity and new debt.
This arrangement would force GM to issue significantly more stock than what is currently being traded in the market. In addition, the government is being asked to guarantee the new debt with federal default insurance in order to entice bondholders who otherwise wouldn’t be interested in participating in the swap.
If GM can’t eventually forge a deal with the ad hoc committee representing the bondholders, the company may be forced to issue a debt-for-equity swap without the blessing of some of its biggest and most influential unsecured investors. This would heighten the possibility of the company eventually needing to file for Chapter 11 bankruptcy protection.
Or said another way, they’ll end up doing what we said they should have done in December, less umpteen billions of taxpayer money poured down a rathole. Of course, had they reorganized under Chapter 11 as we all said they should, the Obama administration wouldn’t have been able to make this unprecedented power grab, would it?
Jason Pye and I have – unbeknownst to the other, which we each found hilarious – applied for and become “Examiners” for the Atlanta Examiner. What that essentially means is we write for an online publication (Examiner.com) and actually get paid to do so.
However, and this is the part I actually love – it really brings the libertarian out in me – we get paid for the number of page views we generate. So our pay is based on how many eyes we bring to the articles we write.
As you might imagine, they’re more locally focused and pertain to topics we may or may not cover here at QandO. However, being the “Atlanta Libertarian Examiner” and Jason being the “Georgia Libertarian Examiner” we pretty much have the freedom to write about what we want to. What I’m trying to do, as is Jason, is keep it pertinent to the location but still spread the libertarian message.
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