This budget covers the period 10/1/2011 through 9/30/2012. That makes this all about elections. That being the case don’t expect to see any evidence of that “fiscal responsibility” we keep hearing about.
That’s not to say that the Administration won’t make a big deal of some big cutbacks they will propose. We got a whiff of that from the Presidents budget director Jacob Lew. He listed $750mm of savings that will be proposed in a NYT OpEd piece.
The billion or so of savings will not make a dent in the growing expenditure line. Depending on where the revenue estimates are made the deficit will come in around $1.2 T (1.5T in 2011). Depending on how honest the numbers are, the media is going to have a field day, and so will the Republicans. While the notion of another mega deficit in 2012 is not a surprise on Wall Street it is not going to over so well on Main street. But what can the President do? Answer: Nothing.
One character in this drama is Alan Simpson. The former Co-head of the Deficit Commission is 80 years old and has a very bad habit of saying things that color the debate. He did it again recently. But as whacky as this guy is, he is right. There is no way the US is going to make any dent in the deficit unless Social Security, Medicare, Medicaid and the Military (“the Big Four or BF”) are put on the table and sliced up. The discretionary budget comes to only 10% of outlays. There is no room to make big changes. Simpson had this to say about cuts outside of the BF: (Bloomberg link)
Promises to cut earmarks, waste, fraud and abuse and foreign aid are a “sparrow belch in the midst of the typhoon”.
Simpson put it on the line with this comment about the need to make cuts outside of discretionary spending:
Anybody giving you anything different than that, “you want to walk out the door, stick your finger down your throat, and give them the green weenie.”
Just a question, What is a green weenie? Keep in mind that this guy is serious player in the outcome of this. It’s too bad he is such a nut. A saner elder statesman might have made a difference.
It’s possible that the US budget will be a ho-hummer for the markets. It’s hard to expect this to be one of those ‘confidence boosters’. Depending on how the foreign press handles the story it could be a source of some dollar weakness. I think the long end of the bond market might not like to be reminded how bad the supply problems really are. The question is, do we see any leakage in the short end. If two’s and fives react, the broader market will take note. The equity market is oblivious to any bad news of late. That said, You can’t ignore this elephant forever.
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Who is really the nut, or who really are the nuts, here?
ReplyDeleteTremendous deficit spending, with no hope of any surplus to begin paying it down, has been going on for decades now. Not to mention the robbing of Social Security via the build up of the 'trust fund'.
You really have to be nuts to loan the federal government money. It is only a question of how you will be robbed: by outright default, or via inflation.
I suspect the "green weenie" is displaying a vomit-covered finger... but that's only a guess.
ReplyDeleteSmall states like Wyoming can produce some really colorful Senators. ;)
Bruce,
ReplyDeleteYou are missing the point entirely. Cut Government spending and you will shrink GDP.
Social spending is a comparatively small segment of the budget as compared to Military expenditures.
Why is it always the case keeping the aged off the streets is 'too expensive' as compared to our superfluous military spending?
asphalt:
ReplyDeleteYou say social spending in the the US is small compared to military. Wrong. Social security will spend 725b this year. The military about 525b.
There are many other categories of social spending. Medicare, Medicaid, Welfare, food stamps, unemployment, Section 8 housing. blah blah blah.
Don't read this as if I am some supporter of military spending. I am not. If I were in charge that is the first place I would go with my scalpel.
The NYT recently had an article that discussed the direct costs of the Afghan war. $40-60b was the number.
Social Security spends $60 billion EVERY MONTH.Some day the Afghan war will end. Maybe another two years. A horrible cost. But SS will be spending an every increasing amount every month for the next 75 years.
bk
Bruce,
ReplyDeleteCan you hear me groaning from another time zone?
First you loosely define military spending, then you throw everything and the kitchen sink into your position that social spending is 'too expensive.'
We both agree that some aspects of military spending are senseless and some is absolutely required. But, you would be a fool to take the pre-digested numbers prepared for public consumption as an accurate portrayal of military spending. What about the black budget? What about military spending that gets approved separately? The number is much bigger than you understand. We can argue military budget numbers to infinity and both be right. Your comprehension of what part of the Federal budget is allocated to military spending is woeful.
Your simplistic argument regarding Social Spending would make a demagogue proud. How about working on developing a better understanding of the problem? Population growth rates, immigration policies, tax policies, and industrial policies can be modified to make the current Social Security model work. Or even adjust the benefits model along with other policies. But, no, that's too specific and most importantly is not approved wealthy newspeak.
The newspeak I hear from the top 10% of America is that they are where they are because they made 'good' decisions while the other 90% did not. Dumb luck and inherited privilege NEVER has anything to do with their situation. Just bootstrapping hard work. Which is why we don't need social spending. Right?
You don't understand the negative social and economic impacts of ending social spending. It won't make the working population more competitive, it won't increase the prosperity of the majority of a population. The top 10% will be better off. Maybe that's the point?