Federal spending cuts come at a great cost

According to the article, the federal government has proposed $2.5 billion in federal spending cuts for the Low Income Home Energy Assistance Program (LIHEAP). The author briefly describes the effects that this cut would have on citizens of Maryland, and she promotes the Fuel Fund of Maryland which is a state program that will try to make up for the loss of the federal spending from the LIHEAP. Considering our country's massive amount of debt, it's easy to say that the government needs to make drastic cuts in federal spending; however, an article like this brings to light a different perspective which shows how much of an impact these spending cuts will have on the citizens of the United States. Most Americans would agree that federal spending cuts must be made; but, these cuts will surely come at a cost. How do you think our government can make the most amount of cuts with the least amount of damage to the citizens of our country?

How can we reduce the federal budget deficit?

Over the next decade, United States Federal budget Deficits will total $7 trillion if the governmental laws and policies that are currently in place do not change (see here). According to the article, if the federal debt continues to grow at a rate faster than the economy (which it has done since 2007) the growth of people's income will slow down, the amount of federal spending needed to pay interest on the debt (the third largest portion of gov't spending already) will continue to increase, and the risk of a fiscal crisis will increase. The report offers 105 options that would reduce projected budget deficits, and you can take a look into options for reducing mandatory spending, for reducing discretionary spending, and for increasing revenues. After looking at this report, what ideas do you have for digging our country out of this record-setting hole?

Eliminate $1 bills to save the country billions?

This article suggests that the United States could save $5.5 billion during the next 30 years if we switched from $1 bills to $1 coins. The US Government Accountability Office estimates that this change in phasing out the $1 bill would require a four year transition period, but after that, the government would save approximately $522 million each year from this change. This doesn't seem like a lot of money considering our trillion dollar deficits, but it would definitely help at least a little bit to balance the budget. Personally, I used the 1 and 2 Euro coins all the time when I was studying in Spain, and they didn't really bother me at all. What are your thoughts on this proposal? Would you be willing to switch from the $1 bill to the $1 coin to help improve the country's budget?

One step closer to a government shutdown...

Yesterday, the Senate voted down both Republican and Democratic bills that would fund the government for the next six months (see here). This vote brings our country one step closer to a government shutdown, as the government's authority to spend money expires on March 18. According to the article, some Senators question why both parties put forth bills that were unlikely to pass; West Virginia Democrat Joe Manchin said, "Why are we engaging in this political theater? Why are we voting on partisan proposals that we know will fail? That we know don’t balance our nation’s priorities with the need to get our fiscal house in order?" He raises some good questions; what do you think are some answers for this? An interesting article titled, "Would anyone 'win' in federal government shutdown?" addresses some of these issues. In the article, Republicans were quoted as saying things such as "we are seeking spending reductions, not a government shutdown" and that Senate Democrats facing re-election would be the ones to have to explain why they can't trim federal spending, and that they also "stand to lose politically - significantly." Could the House Republicans, knowing that most Americans favor federal spending cuts, be creating bills with an unrealistic amount of spending cuts just to make the Democrats (who vote down said bills) look bad so that the Republicans will have an upper hand in the next election?

Federal debt and deficits

U.S. Federal Reserve Chairman Ben Bernanke believes that Congress should start focusing on ways to lower the debt to GDP ratio in the U.S. in an effort to tackle deficit problems and increase confidence in the government and its fiscal policies (see here). According to the article, the White House's latest proposed budget will stabilize the debt to GDP ratio over the next several years. However, according to Hennessey's Chart of percent of the deficit to GDP (see here), Obama's proposed budget path actually suggests long term budget problems. This article also touches on several points about federal debt and deficits that we have discussed in class. Both articles explain how the U.S. needs to get on a sustainable path or else we'll have to face harsh interest rates from foreign creditors. Some economists argue that federal budget deficits are meaningless because the government issues US dollars, and some believe that deficits are even beneficial. Do you agree with this? If not, why do you think deficits may be detrimental to our country? What are some ways that the US could decrease the deficit and make it more sustainable?

The battle continues...

http://www.voanews.com/english/news/usa/Partisan-Divide-Continues-on-US-Federal-Budget-117489133.html

Last week, Congress avoided a government shutdown by implementing a stop-gap spending measure that will fund federal agencies for two weeks. But, as Congress is quickly approaching another potential funding expiration, there seems to be little sign of compromise between the two political parties. The proposed funding levels between the Republicans and the Democrats differ by tens of billions of dollars, and neither party seems to be willing to budge anytime soon. What do you think it will take for the two parties to reach a compromise?

Banks, Merchants, & ATM fees

http://www.nytimes.com/2011/03/08/business/08debit.html?_r=1&ref=business

The second of today's double-feature, and it's an all out war.
The Federal Reserve recently passed an amendment that lowers the "swipe fee" that banks get from retailers every time a debit transaction occurs. The proposed cut will make the transaction 12 cents per transaction from an average of 44 cents. Many banks claim they will be "unable to afford to issue debit cards to customers or will force them to raise other consumer banking charges to cover the costs.
They also claim retailers will reap unfair profits." Retailers paid about $20.5 billion last year in transaction fees. "Banks and credit card companies contend that the fee cap will create a windfall for giant retailers like Home Depot and Wal-Mart, which they say generate the bulk of debit card transactions, while doing little for small retailers."

Lots of finger-pointing and howling going on about this one, who does this help and who does this hurt in your opinion? Other comments?

UK green training

http://www.bbc.co.uk/news/uk-politics-12671361

This article shows Britain's commitment to a greener country. Apprentices for the installation programs are generally in the 16-18 year old age range. Not only is this helping their environment and lowering heating costs, it's also is creating jobs. By selecting younger people to be the technicians, they're giving them tools for the future. My concern however, is that these aren't going to be the types of skills that will sustain them for their futures. The project is aiming to sustain 100,00 jobs over the next 5 years, but that should be about the time these kids should be in college. Is it better to teach these skills to the older, unemployed generation? Other thoughts?

High-Speed Rail in America?

http://www.time.com/time/politics/article/0,8599,2047110,00.html

President Obama's proposed 2012 budget includes bringing access to high-speed rail to 80 percent of Americans within 25 years. US passenger trains are currently considered a "global laughingstock" considering most of America's trains travel at speeds that were common a century ago. A high-speed rail system would "help create jobs, reduce dependence on foreign oil and relieve congestion in highways and airports, while upgrading the long-term efficiency and productivity of the U.S. economy." However, high-speed rail, one of Obama's signature initiatives, has surely gotten its fair share of criticism as you can see in the article. In fact, just recently, Florida's Gov. Rick Scott rejected any plans for federal high-speed rail systems within his state because he was fearful that overruns could cost Florida over $3 billion (http://www.huffingtonpost.com/2011/03/04/rick-scott-florida-high-speed-rail_n_831305.html). This brings us to an important point: funding. In theory, the idea of a high-speed rail system throughout America sounds great; but, how will our country pay for such an expensive investment during a time where we are supposed to be making huge spending cuts? Do you think a high-speed rail system is worth the hefty price? Will the benefits of massive job creation and long-term efficiency outweigh the further increase in the deficit? What are your thoughts on the issue?

Spending cuts a PR Move?

Got caught up a little this weekend, so I'm double posting both today and tomorrow to make up for it. Sorry to inconvenience anyone.

http://money.cnn.com/2011/03/03/news/economy/federal_budget_dean_baker/index.htm

The article is kind of a long read, but the main point the article seems to make is that both Obama and Republican leadership don't have consumers' best interest at heart. The articles blames a lack of demand, coupled with 25 million unemployed, underemployed, or discouraged workers for the state of the economy. The housing bubble drove the markit until 2007, and since then the dropoff in consumption in consumption has led to a 1.2 trillion (10%) drop. Businesses won't hire because government cuts spending- we need more spending to create jobs.

Do you agree or disagree with the article's p.o.v.?

Bankers with brains?

http://www.bbc.co.uk/news/business-12649269

So Oswald Gruebel is thought to be the only CEO of a banking firm to forgo his bonus this year. Oswald is the chief executive of UBS, a Swiss banking firm. Although UBS shares fell, they outperformed the Stoxx European Banks index' falls of 11.6%. The reason I chose this article is to ask you, if CEO's/upper level management of foreign banks can make such an intelligent sacrifice, why can't ours? Do you think we'll see something like this happen anytime to help alleviate our banking problems?

Losing the information war

If a tree falls in the forest and no one is there, does it make a sound?  Think about the commercials I showed yesterday--blame was assigned to the right or the left.  But no one gave good information about the whats and the whys and the choices.  It used to be that the media would do it.  But I agree with Hilary Clinton:  the US media is falling down on the job.  See here. Contrast your favorite news network (CNN, MNBC, Fox or whatever) with this Al Jazeera broadcast.  

Electric cars not accessible 'in next five years'

http://www.bbc.co.uk/news/business-12124895

This isn't the longest article, but it should bring up some great conversation topics. One of Obama's chief concerns of America thinking long-term is alternative energy. Without subsidies electric vehicles still look to be unaffordable for the general public. Reducing carbon emissions and dependency on foreign oil is crucial, but the only way these vehicles will have a significant impact is with a pretty substantial amount of Americans being able to afford one. Opinions?

Always two sides to every story...

One of my favorite conservative bloggers wrote a piece that seems to equate unionism to slavery and hits on a few other similar themes.  See here.  There is a lot of truth and a lot of misinformation in what he says.  How do we pick through to see reality?

Midwest, going red?

http://www.csmonitor.com/USA/Politics/2011/0218/Wisconsin-protests-why-week-of-rage-matters-to-rest-of-America

Aside from the labor unrest in Wisconsin, analysts are now speculating that there could be further spread from the issue. Analysts are concerned whether or not attacks on unions' ability to collectively bargain (the manner in which they secure their wages and benefits) could be in jeopardy. They fear this could spread to other states, but from the article it seems this fear is based primarily on the large Republican leadership change in Midwestern states, due to coming redistricting in the coming year. Is their fear rationally founded?

Gov Rick Snyder's plan to tackle the MI budget

http://www.mlive.com/politics/index.ssf/2011/02/gov_rick_snyders_budget_reveal.html

Governor Rick Snyder plans to cut MI revenue sharing by 40% in his latest proposal for the MI budget. His plan seems to avoid class favoritism- which is great except for the impact it will have in some instances. Snyder does plan on cutting on the earned income tax credit for low income families. Yet he also plans to restrict high income earners from claiming personal exemptions. These struck me as dicey but also important moves, as, "Eliminating the exemption entirely would bring in nearly three quarters of a billion dollars."

Opinions on these two moves? Or others from the article?