Archive for Friday, February 27, 2009

Obama budget record-breaking

February 27, 2009

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— Trillion is the new billion.

No longer is it a billion here and a billion there that add up to real money. Swap a “t” for the “b” if you want a measure of what’s at stake under President Barack Obama’s first spending plan.

Obama charted a dramatic new course for the nation Thursday with a bold but contentious budget proposing higher taxes for the wealthy and the first steps toward guaranteed health care for all — accompanied by an astonishing $1.75 trillion federal deficit that would be nearly four times the highest in history.

Denouncing what he called the “dishonest accounting” of recent federal budgets, Obama unveiled his own $3.6 trillion blueprint for next year, a bold proposal that would transfer wealth from rich taxpayers to the middle class and the poor.

Congressional approval without major change is anything but sure. The plan is filled with political land mines including an initiative to combat global warming that would hit consumers with considerably higher utility bills. Other proposals would take on entrenched interests such as big farming, insurance companies and drug makers.

Obama blamed the expected federal deficit explosion on a “deep and destructive” recession and recent efforts to battle it including the Wall Street bailout and the just-passed $787 billion stimulus plan. The $1.75 trillion deficit estimate for this year is $250 billion more than projected just days ago because of proposed new spending for a fresh bailout for banks and other financial institutions.

As the nation digs out of the most serious economic crisis in decades, Obama said, “We will, each and every one of us, have to compromise on certain things we care about but which we simply cannot afford right now.”

Signaling budget battles to come, Republicans were skeptical Obama was doing without much at all.

“We can’t tax and spend our way to prosperity,” said House GOP leader John Boehner of Ohio. “The era of big government is back, and Democrats are asking you to pay for it.”

Obama plans to move aggressively toward rebalancing the tax system, extending a $400 tax credit for most workers — $800 for couples — while letting expire President George W. Bush’s tax cuts for couples making more than $250,000 a year. That would raise the top income tax bracket from 35 percent to 39.6 percent for those taxpayers and raise their capital gains rate from 15 percent to 20 percent as well.

Thursday’s 134-page budget submission, a nonbinding recommendation to Congress, says the plan would close the deficit to a a more reasonable — but still eye-popping — $533 billion after five years. That would still be higher than last year’s record $455 billion deficit.

And the national debt would more than double by the end of the upcoming decade, raising worries that so much federal borrowing could drive up interest rates and erode the value of the dollar.

Also, to narrow the budget gap, Obama relies on rosier predictions of economic growth — including a 3.2 percent boost in the economy next year — than most private sector economists foresee.

Comments

Satirical 6 years, 5 months ago

We are in a hole and Obama solution is to keep digging.

America living beyond its means, spending on unecessary items and borrowing to make up the difference, is what got us in this mess in the first place. Obama's solution is for the Federal Government to make the same mistake the American people made which got us in this mess. Who am I kidding, Big Government is the solution to all of life's problems. After all, it worked so well under FDR...

jonas_opines 6 years, 5 months ago

Sigh. . . . wish we could have had a more even legislature with him in the President spot.

fuel_for_the_fire 6 years, 5 months ago

You've never heard the idiom "skin in the game" before? You need to read more. It means to invest your own money in a company that you are running.

Alyosha 6 years, 5 months ago

Easy there, barrypenders (that is, unless you're being sarcastic). You've never heard that phrase?

And its coinage is credited to that master of capitalism Warren Buffet.

"A term coined by renowned investor Warren Buffett referring to a situation in which high-ranking insiders use their own money to buy stock in the company they are running."

See http://www.answers.com/topic/skin-in-the-game Or http://www.usingenglish.com/reference/idioms/skin+in+the+game.html

One should always be careful not to let preconceived notions and emotions / issues prevent one from seeing reality, and more importantly from imagining horrors that live nowhere but in one's own fears.

Alyosha 6 years, 5 months ago

I find it quite easy to understand Obama. Likely that's because I'm listening, reading the source documents of bills, reading what he really says instead of what cable entertainment personalities claim he says.

If I don't understand something, I don't presume someone else is lying. I try harder to make sure my own prejudices are not preventing me from seeing reality.

Alyosha 6 years, 5 months ago

Neither the fantasies of "socialism" nor "bankruptcy" have anything to do with the reality here.

They're just emotional buzzwords that have little to do with actual, serious analysis and understanding.

Feels good to amp up one's outrage, but it really doesn't help solve serious problems.

jonas_opines 6 years, 5 months ago

"If I don't understand something, I don't presume someone else is lying. I try harder to make sure my own prejudices are not preventing me from seeing reality."

You might not belong here then. Certainly, some like barrypenders will never understand you at all. Bias is all some of them have to hold onto.

Flap Doodle 6 years, 5 months ago

Those unicorns are costing a lot more than everybody thought.

feeble 6 years, 5 months ago

Obama's proposed budget makes the Bush 2001 and 2003 tax cuts permanent for earners making less that $250,000. It allows the cuts to expire for citizens making more than $250,000

The 2001 tax cut was the largest, at the time, since 1981. The cumulative affect of the 2001 and 2003 cuts was to reduce idividual income tax rates from 15, 28, 31, 36, and 39.6 percent to 10, 15, 25, 28, 33, and 35 percent.

The changes mean that the top tax rate for income between $250,000 and about $370,000 would climb from 33 percent to 36 percent, while the rate for income above $370,000 would climb from 35 percent to 39.6 percent. People at upper-income levels would also lose the 2003 Bush tax cuts for income from capital gains, and they would gradually lose the ability to take the personal tax exemptions.

This represents a tax increase on the most affluent 2% of Americans.

jaywalker 6 years, 5 months ago

'No earmarks' my Aunt's fanny. Disappointed and frustrated. Again.

The more things change the more they stay the same. Ladies and Gentleman, from one humble investor to anyone concerned: I'm waiting for the next bear uptick in the market, probably this spring, and then I'm liquidating my portfolio, probably into a cash position, maybe gold. I sincerely believe the market is going to lose at least 50% more of its share before we hit bottom. And I'm converting my existing 401k's to money market ASAP. We haven't even seen 'bad' yet, I'm totally convinced. This is about to be a depression and Obama's plan is to mirror FDR's failed attempt to "arrest this downward spiral". Many of you have espoused the 'need to do something'. I couldn't disagree more. It's impossible to 'arrest' something you never had control of in the first place, it's like trying to push back a tidal wave with your hands.
Be afraid. Be very afraid.

Satirical 6 years, 5 months ago

Time to get ready for hyper-inflation.

Godot 6 years, 5 months ago

jaywalker, I'm right there with you, except I'm in treasuries, cash and gold. Caution on the money market funds unless they are solely invested in short term treasuries. It was a $550,000,000,000 electronic run on the money market funds, with the threat of more massive withdrawals, that was used to blackmail Congress into passing the TARP in September. I wouldn't trust a money market that holds any CDS, MBS, CDO's, bonds of companies that are near bankruptcy, or high yield certificates of deposit (think Madoff and Stanford). At this point, I wouldn't even trust municipal bond funds.

Godot 6 years, 5 months ago

Obama's motto: eat the goose that lays the golden eggs.

Satirical 6 years, 5 months ago

"Obama's motto: eat the goose that lays the golden eggs." - Godot

ROTFL It's funny because its true.

Godot 6 years, 5 months ago

Considering the massive tax increases that are sure to come in the next few years, I am considering cashing in my tax deferred accounts now and taking the penalty. I think it will be less than the future tax burden. I also do not put it beyond the realm of possiblity that Obama, Pelosi and Reid will confiscate such retirement accounts and redistribute them, "for the common good."

JohnBrown 6 years, 5 months ago

Godot said: Obama's motto: eat the goose that lays the golden eggs.

Actually, it was Bush and the Spend and Spend Republicans that killed that goose: bankrupt economy, military stretched too thin, and a $5 Trillion debt. Thanks to YOU O'Bama needs to clean up that mess.

Just remember, the Republicans BROKE this country by putting something other than the Country First.

Republicans now have NO credibility.

jafs 6 years, 5 months ago

jaywalker,

If everyone feels as you do and acts similarly, then the economy will certainly continue to decline.

Panic is generally not the best motivator for good, intelligent action.

jafs 6 years, 5 months ago

Bowhunter,

I am also a bit upset about the deficit spending.

At least he has some sort of plan to increase revenues at some point.

Godot 6 years, 5 months ago

Obama has already increased the deficit for 2009 by 75% in just one month. His so-called transparent budget does not include the government guarantees of Freddie Mac and Fannie Mae, the billions in Citi debt that was just absorbed, or the billions in swap lines the Fed is using. And it does not take into account the reduction in tax collection due to massive unemployment.

The deficit in 2010 will easily top $3 trillion.

Godot 6 years, 5 months ago

"At least he has some sort of plan to increase revenues at some point"

There isn't enough money in the entire economy to pay off Obama's planned debt. $1.75 trillion this year, plus $2 to 3 trillion next year, and on and on, all multiplied by the cost of servicing the debt. The more Obama spends, the higher that cost will become.

Confrontation 6 years, 5 months ago

It takes a lot of money to clean up the disaster that was created by Dubya.

Godot 6 years, 5 months ago

GDP in 2008: $14.2 trillion. GDP is contracting at an unknown, but accelerated, rate. Down 6.2% in January, alone. Obama's deficit (projected, not actual), $1.75 Trillion.

Even if the GDP does not contract at all between now and the end of the year, Obama's deficit to GDP ratio is over 13%.

Unsustainable.

jaywalker 6 years, 5 months ago

Godot:

Appreciate the info, treasuries is what I had in mind but I'll re-think the money market.

jafs:

Doesn't matter what I think, nor will it matter how many act. The economy WILL continue to decline, I have absolutely no doubt. It's human nature to deny, deny, deny.....until you can't do anything but come to grips with the truth. The average home price in Detroit right now is 18k. The average home price in the country two years ago was more than 200k. Take a look at the housing industry and it's effect on national economy for the last 100 years. Then factor in the exceptional credit bust that's a deciding factor on this 'market correction'.
I'm not trying to be Chicken Little. I saw a good portion of this coming three years ago and made preparations then. But it's obvious to me now I underestimated the enormity of this bursting bubble. The market will correct and stabilize eventually. But anyone with a significant portfolio whose money manager has been telling them to ride it out without making any changes should be fired for incompetence. People here like to hate the rich, but stores like Nieman Marcus and Saks are reporting losses. This 'thing' has already got considerable momentum rolling downhill. It is an unstoppable force. 700,000 new filers for unemployment benefits last week alone? Do what you will, I'm preparing for an avalanche the likes of which none of us has ever seen before.

Godot 6 years, 5 months ago

Add this to the pot:

"Facing a cascade of bank failures depleting the deposit insurance fund, federal regulators on Friday raised the fees paid by U.S. financial institutions and levied an emergency premium in a bid to collect $27 billion this year.

The Federal Deposit Insurance Corp. now expects that bank failures will cost the insurance fund around $65 billion through 2013, up from an earlier estimate of $40 billion. The bank failures, 14 already this year following 25 last year, reflect the ravages of rising unemployment and falling home prices that have sent loan defaults soaring.

The FDIC said the economic crisis, which has caused the insurance fund to drop to its lowest level in nearly a quarter-century, also warranted extending the plan to rebuild the insurance fund from five years to seven. "

http://www.cnbc.com/id/29428548

TacoBob 6 years, 5 months ago

Not funding Freddie Mac and Fannie Mae implies that they will be profitable going forward. Didn't they just announce a $25B loss for Q4?

How intelligent is not funding this as part of the budget?

Godot 6 years, 5 months ago

tacobob, of course they are funding Fannie Mae and Freddie, they just aren't including it in the budget. Just like Bush did with the war. Bush tried to cover up the cost of the war on terror, Obama covers up the cost of the war on capitalism.

imastinker 6 years, 5 months ago

Farfle = it's not 2.3% OF gdp. GDP is aobut 14 trillion. Expected deficit is 1.75 trillion. Check your facts. The last time we saw a deficit this high is WWII.

Satirical 6 years, 5 months ago

XD40....

My favorite sign read "Chains We Can Believe In"

Satirical 6 years, 5 months ago

Actually I think Obama and the Dems are really smart. If my objective were to dramatically increase the size of federal government and people’s dependency on it (knowing the ratchet affect will ensure this spending will never decline) I would come up with a scheme very similar to Obama’s. I mean we are in a perfect climate for parasites…I mean liberals to thrive in. The country is fresh off an election and most people are willing to give Obama a wide range of latitude given their disapproval of the previous administration.

Given Obama’s objective and the economic climate, he would be smart to pass massive entitlements and spend money on every favorite liberal special interest group project and label it an economic stimulus. I mean there is no way under normal circumstances all this pork would pass typical public scrutiny, but if it is packaged together at the right time and labeled a stimulus then it just might have a chance. The best part is they don’t even have to pass everything all at once. They can keep passing stimulus bills every few months while the economy keeps getting worse claiming the next one will fix all of the problems. Then once the governments owns a percentage in most large American companies, like it has done to Citi, and everyone is dependent on government, the liberals will be able to remain in power by using the fear tactic of claiming Republicans want to take away their free meal. Brilliant!

JohnBrown 6 years, 5 months ago

It is the Republicans, and especially the neocons, who have brought us this economic crisis. Funny how NOW, they have all the answers. Fact is, none of us have been here before so no one knows how, precisely, to get us out. One thing is for sure, all the Doom and Gloomers in this thread were, just a few short months ago happy as pigs in #%@& about Bush and where he was taking us. Now they have become the experts in getting us out, and I'm sure their 180 has absolutely nothing to do with who's in charge.

You are the ones who thought the fundamentals of the economy were strong last September (mostly because your ox wasn't getting gored)..now your experts once again? Phooey.

Don't blame O'Bama b/c your net worth is down; blame yourself.

Godot 6 years, 5 months ago

Larry Kudlow was a huge Obama pumper during the campaign. He finally saw the light:

"Obama Declares War on Investors, Entrepreneurs, Businesses, And More Friday, 27 Feb 2009 | 4:39 PM ET Text Size Posted By: Larry Kudlow Anchor

Let me be very clear on the economics of President Obama’s State of the Union speech and his budget.

He is declaring war on investors, entrepreneurs, small businesses, large corporations, and private-equity and venture-capital funds.

That is the meaning of his anti-growth tax-hike proposals, which make absolutely no sense at all — either for this recession or from the standpoint of expanding our economy’s long-run potential to grow.

Raising the marginal tax rate on successful earners, capital, dividends, and all the private funds is a function of Obama’s left-wing social vision, and a repudiation of his economic-recovery statements. Ditto for his sweeping government-planning-and-spending program, which will wind up raising federal outlays as a share of GDP to at least 30 percent, if not more, over the next 10 years.

This is nearly double the government-spending low-point reached during the late 1990s by the Gingrich Congress and the Clinton administration. While not quite as high as spending levels in Western Europe, we regrettably will be gaining on this statist-planning approach.

Study after study over the past several decades has shown how countries that spend more produce less, while nations that tax less produce more. Obama is doing it wrong on both counts.

And as far as middle-class tax cuts are concerned, Obama’s cap-and-trade program will be a huge across-the-board tax increase on blue-collar workers, including unionized workers. Industrial production is plunging, but new carbon taxes will prevent production from ever recovering. While the country wants more fuel and power, cap-and-trade will deliver less. "

cont.

Godot 6 years, 5 months ago

cont from Kudlow, above:

"Study after study over the past several decades has shown how countries that spend more produce less, while nations that tax less produce more. Obama is doing it wrong on both counts.

And as far as middle-class tax cuts are concerned, Obama’s cap-and-trade program will be a huge across-the-board tax increase on blue-collar workers, including unionized workers. Industrial production is plunging, but new carbon taxes will prevent production from ever recovering. While the country wants more fuel and power, cap-and-trade will deliver less.

The tax hikes will generate lower growth and fewer revenues. Yes, the economy will recover. But Obama’s rosy scenario of 4 percent recovery growth in the out years of his budget is not likely to occur. The combination of easy money from the Fed and below-potential economic growth is a prescription for stagflation. That’s one of the messages of the falling stock market.

Essentially, the Obama economic policies represent a major Democratic party relapse into Great Society social spending and taxing. It is a return to the LBJ/Nixon era, and a move away from the Reagan/Clinton period. House Republicans, fortunately, are 90 days sober, as they are putting up a valiant fight to stop the big-government onslaught and move the GOP back to first principles.

Noteworthy up here on Wall Street, a great many Obama supporters — especially hedge-fund types who voted for “change” — are becoming disillusioned with the performances of Obama and Treasury man Geithner.

There is a growing sense of buyer’s remorse.

Well then, do conservatives dare say: We told you so?

© 2009 CNBC, Inc. All Rights Reserved"

jonas_opines 6 years, 5 months ago

"House Republicans, fortunately, are 90 days sober, as they are putting up a valiant fight to stop the big-government onslaught and move the GOP back to first principles."

Oh bull$!%#. They are just feeling like it's okay to oppose it now that it's a democrat proposing it. But thanks for the reminder, never underestimate the power of denial.

Godot 6 years, 5 months ago

Me, personally, I am hoarding toilet paper. Greenpeace be damned.

Richard Heckler 6 years, 5 months ago

Voodoo economics has been a failure for nearly 30 years. Now it's taking its' toll. Reaganomic thinkers of the past 30 years have they are not the economic giants of our time. In fact they have narrow visions such as:

http://rationalrevolution0.tripod.com/war/bush_family_and_the_s.htm

http://www.commondreams.org/views04/0208-05.htm

None of their visions have provided the USA economy with substance.

The Lawrence economy is showing the same type of thinking and strains by community not leaders. Old time economic thinking being expressed = tax and user fee increases. Tax and user fee increases created by sprawl growth economics steals from local citizens badly needed expendable income. "Vote it out in April".

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