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Posts Tagged ‘Deficit

Inconvenient Truths About The Debt Ceiling: None of US debt has been repaid for 51 years

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“Not one penny of US debt has been repaid for 51 years: the last time US government funded debt actually decreased on a year-over-year basis was 1960″

Zero Hedge    by Tyler Durden on 07/10/2011

Bill Buckler presents an amusing compendium of facts, let us call them inconvenient truths, in the latest edition of his newsletter, some of which would make for entertaining anecdotes if presented at the Biden “deficit cutting” talks, which also, and very paradoxically, aim to cut US debt by increasing it.

  • Not one penny of US debt has been repaid for 51 years: the last time US government funded debt actually decreased on a year-over-year basis was 1960
  • 97% of today’s funded debt has been accumulated since August 1971 – the end of the Bretton Woods era by Nixon, and the terminal delinking of all fiat currencies from any and all hard assets, ushered in the era of modern-day hyper-debt insolvency
  • Obama projects 2.5% Fed Funds rate in budget calculations through 2020. Average Fed Funds rate since 1980: 5.7%; Since 2008: 0.00%, If average 5.7% rate was used, projected US deficit would increase by another $4.9 trillion by 2020
  • Obama projects 4.2% growth rate over next 3 years. If a normal growth rate of 2.5% is used, deficits would increase by another $4 trillion by 2020
  • The US government borrows 40-50 cents for every dollar it spends. A balanced budget would mean cutting government spending in half.
  • Implementing a balanced budget would not reduce current debt outstanding. It would merely stop it from growing.
  • Over the past three fiscal years US debt grew by over $1.5 trillion per year: this is more than three times the record annual debt increase in any previous year in US history
  • Last night deficit reduction targets were cut from $4 trillion to $2 trillion over the next decade, in exchange for a $2.4 trillion debt ceiling hike, which will last the Treasury until the next presidential election. Said otherwise, the Treasury needs to fund a $2.4 trillion hold over the next 15 months. Over a decade this come to $20 trillion: ten times more than the proposed deficit reduction.

And the most inconvenient truth of all:

The Global Financial Crisis (GFC) is said to have been precipitated by the Lehman failure in 2008 which froze inter-bank lending on a global basis and almost brought down the system. It is said to have been prevented by a massive and global increase in new money creation. In reality, had economic nature been left alone to take its course, there is a good chance that the world would be fast emerging from its financial black hole by now. At a minimum, most of the malinvestments would have been discounted to the point where they would no longer act as a dead weight on future savings and investment.

Economic “miracles” (so-called) have happened before. The US emerged from a deep recession in 1920-21 because the government and the central bank did NOT interfere. Germany emerged from the actual physical rubble of WW II for exactly the same reason. So, to a lesser extent, did Japan. In all these cases, debts which could not be repaid were not held on life support by central banks, they were written off. In all these cases, creditors took very severe “haircuts” indeed while many debtors literally had to start again from scratch. In all these cases, the LACK of government impediments or government largesse meant that a recovery took place in a much shorter time frame than would otherwise have been the case.

Economic distortions today are HUGELY bigger than they were then. That means that the recession will be deeper and the recovery phase possibly longer. But until it is allowed to begin, there is no way out.

None of the above will be noted anywhere by the great diversionary media spin machine over the next two weeks, since July 22 is the date by which Congress says it needs to pass the debt ceiling legislation so it can get it to Obama’s desk for his signature by August 2.

See also:

Why QE2 Failed: The Money All Went Overseas:

On June 30, QE2 ended with a whimper. The Fed’s second round of “quantitative easing” involved $600 billion created with a computer keystroke for the purchase of long-term government bonds. But the government never actually got the money, which went straight into the reserve accounts of banks, where it still sits today.

 

Ten Years of the Bush Tax Cuts Benefiting the Rich

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June 6, 2011  OurFuture.org   

On June 7, 2001, President George W. Bush signed into law the Economic Growth and Tax Relief Reconciliation Act, the first of two “Bush tax cuts.” That measure reduced the top income tax rate from 39.6 percent to 35 percent, and reduced capital gains and estate taxes. In the 10 years since the first Bush tax cut went into effect:

The richest Americans received the most benefit from the Bush tax cuts.

  • $520,000: The average tax cut received by the top 0.1 percent of Americans, those making more than $3 million a year. That is over 450 times the tax cut received by an average middle-class family.
  • The middle 20 percent of wage earners (making between $40,000 and $70,000) received less than 11 percent of the total Bush -era tax cuts.
  • The bottom 20 percent (making less than $20,000) received only a 1 percent share of the Bush tax cuts; 75 percent of  these low-income families saw no tax benefit at all.
  • The average middle-class family received one-eighth of the tax breaks that a family in the top 20 percent of income earners received while the average working-class family reaped less than one-hundredth of the average tax cut received by a family in the top fifth of earnings.

Source: Economic Policy Institute

The middle class has fallen behind as wealth has been transferred to those at the very top.

  • The top one percent of the population enjoyed 65 percent of the income growth between 2002 and 2007.
  • Median household income in 2009, $49,777, was 5 percent below what it was in 2009, adjusted for inflation.
  • By contrast, the nation’s top 400 taxpayers reported an average adjusted income of $108 million in 2008, 56 percent higher in real terms than in 2009.
  • In 2000, 11.3 percent of the population was in poverty. By 2009, that percentage had increased to 14.3 percent.
  • In 2000, 33.7 percent of the population earned less than $35,000 a year (in 1999 dollars). In 2009, that percentage was up to 36 percent.

Source: U.S. Census Bureau; Internal Revenue Service, Emmanuel Saez, “Striking It Richer: The Evolution of Top Incomes in the United States”

The Bush tax cuts did not create a jobs bonanza for middle-class workers.

  • Job growth between 2000 and 2007 was the weakest in any business cycle since the 1950s; job growth was only one-third of the rate seen between 1989 and 2000.
  • One in three manufacturing jobs has been lost (from 17.3 million to 12 million) between 2000 and 2008; one in four goods-producing jobs have been lost (from 24.6 million to 18.9 million), and 900,000 construction jobs have been lost since 2001.
  • 8 million: The number of jobs lost during the recession that started in 2008.
  • Three years is the minimum time it is projected to take to gain back the jobs lost in the recession, if the economy grows at a rate of 300,000 new jobs added a month.

Source: Bureau of Labor Statistics, Economic Policy Institute

The Bush tax cuts is at the root of today’s deficit problem.

  • The surplus in the fiscal 2001 federal budget was $127 billion. The 2010 budget had a budget deficit of $1.3 trillion. The long-term national debt more than doubled from $5.6 trillion in 2000 to  $13.6 trillion in 2010, mostly under Bush’s watch.
  • Federal tax receipts in 2010 were 14.9 percent of gross domestic product . In 2000 it was as high as 20 percent.

Source: Department of the Treasury, usgovernmentrevenue.com

Corporations have escaped paying their fair share as a result of the Bush tax cuts and other tax policies.

  • Twelve top corporations paid no taxes or actually received money from the IRS between 2008 and 2010. The list includes Boeing, Verizon, Dupont, Yahoo, IBM, Wells Fargo, American Electric Power, Exxon Mobil, FedEx, General Electric, Honeywell International, and United Technologies.
  • $62.4 billion was reaped in subsidies by these twelve companies over the three-year period, even as they paid no taxes on $171 billion in profits.

Source: Citizens for Tax Justice

What “Free Trade” Has Cost The World- globalization makes peons of us all

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March 14, 2011      OurFuture.org By Dave Johnson

If you take a job away from someone who is paid a reasonable wage because they enjoy the protections and prosperity of democratic government, move it across a border, and give it to someone living under a thugocracy, forced to work for pennies with no protections whatsoever, it should be just plain obvious that the worker on our side of the border and the worker on the other side of the border are not going to be better off. And when you do this on a massive scale it just stands to reason that most people on both sides of the border are going to be worse off.

But propaganda being what it is we were somehow convinced to try a worldwide experiment in taking good jobs from democracies and turning them into bad jobs in thugocracies. Now, of course, the experiment has run its course and we can see the results.

Worker Against Worker

Setting worker against worker enabled a few people to get really, really really wealthy and powerful and use that wealth to become even more wealthy and powerful. Our country is in decline, burdened by massive trade deficits because the ones with vested interests in cheap labor won’t let us won’t take on the mercantilists, burdened by budget deficits because those vested interests have bought low taxes and government subsidies, our infrastructure crumbles because multinational business leaders refuse to invest here, with no more need of us as workers, and the resulting hollowed-out middle class can’t consume anymore. Other countries also suffer from similar stresses.

Out of this situation a new global elite has emerged, contemptuous of democracy and government and any power but the power of their own money. In country after country, these top few won’t share the proceeds with their own, either, while they keep the world from approaching solutions.

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Ron Paul & Ralph Nader: A Libertarian-Progressive Alliance?

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01/19/2011

Ron Paul and Ralph Nader joined Judge Andrew Napolitano on Freedom Watch to discuss the possibility of fighting the establishment through a libertarian-progressive alliance.

Economic Know-Nothingism: Punish the Poor, Protect the Wealthy

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Their wars and tax cuts created the deficit. Now they want to profit from it and make scapesgoats of the poor.

Steve Benen 7/14/10 Washington Monthy

THE POLITICAL CONSEQUENCES OF ECONOMIC KNOW-NOTHINGISM…. Four months before the midterm elections, “virtually every Republican” in Congress agrees that the country can’t afford $30 billion in extended unemployment benefits, but it can afford $678 billion in tax cuts for the wealthy. Rep. Joe Barton’s (R-Texas) apology to BP instantly became a key moment in this cycle, as did Rep. John Boehner’s (R-Ohio) dismissal of the importance of the crash of 2008.

But this new issue is a development to build an entire campaign around.

This week, the Senate Republican leadership made one of the single dumbest policy arguments imaginable: policymakers shouldn’t even try to pay for massive tax cuts for the wealthy, because they pay for themselves. GOP officials see the overwhelming evidence that Bush’s tax policies helped produce a massive deficit, but they reject it, preferring to believe a ridiculous fantasy.

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Cut Military Spending Say Ron Paul and Barney Frank: Save $1Trillion

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Reps. Ron Paul and Barney Frank discuss military spending and the war in Afghanistan with CNN’s Wolf Blitzer. They want to save $1Trillion by withdrawing troops from Afghanistan and Iraq.

Deficit Cutters – Here’s Your First Trillion

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By Dave Johnson June 14, 2010  OurFuture.org *** Updated below

Today the country is looking for ways to cut spending and borrowing. Yet military spending, the biggest spending item in the budget, is barely part of the discussion — obviously because of the amount of campaign and lobbying dollars it generates.

The corrupting influence of lobbying money is clear: the fact that the Soviet Union collapsed in 1991 has not yet penetrated the bubble around the country’s capital. In fact, military spending has soared in recent years:

Military_spending_chart
(Source http://www.usgovernmentspending.com/ Includes DOD, Veterans, Foreign military aid, Foreign economic aid. Does not include military share of debt interest.)

Because of this application of lobbying dollars our military spending vastly surpasses the amount spent by the rest of the world, and dominates our country’s budget:

Military_spending_chart
(Source http://www.dailykos.com/story/2008/4/6/175138/6287/942/491304)

Now a bipartisan commission is willing to take this on. Commission outlines ways to cut defense spending by $1T over the next decade,

The Sustainable Defense Task Force, a commission of scholars from a broad ideological spectrum appointed by Frank, the House Financial Services Committee chairman, laid out options the government could take that could save as much as $960 billion between 2011 and 2020.

Task force sees Pentagon cuts key to US budget fix,

U.S. lawmakers and watchdog groups on Friday called for a dramatic revamp of the defense budget to reverse widening U.S. deficits, including termination of the $382 billion Lockheed Martin Corp (LMT.N) F-35 fighter.

This should be a litmus test to determine the seriousness and honesty of any deficit cutters. Do they take on the big lobbying interests, or do they take it out on the poor and elderly. We’ll see. The record so far is not good.

***  See also:

The U.S. War Addiction: Funding Enemies to Maintain Trillion Dollar Racket

Four ways to see the true drivers of current wars around the world.

Hawks eyeing wrong prey

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Boston Globe

By Robert Kuttner March 12, 2010

PRESIDENT OBAMA has bowed to pressure from deficit hawks in Congress and on Wall Street by agreeing to their longtime pet project, a commission charged with reining in the federal budget.

The concept behind the creation of the National Commission on Fiscal Responsibility and Reform was invented on Wall Street. For more than two decades, private-equity billionaire Peter G. Peterson and an array of Peterson-affiliated groups such as the Concord Coalition and the Committee for a Responsible Federal Budget have been warning that deficits and “unfunded liabilities’’ would crash the economy. Funny thing, though, when the actual crash came it had nothing to do with projected public deficits and everything to do with excesses in private financial markets.

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Wall Street Took Your House and Your Retirement, Now They’re After Your Social Security

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AFL-CIO / Creative Commons
Photo Credit: Flickr Creative Commons

AlterNet

Wall Street tycoon Pete Peterson wants to bring IMF-style economic insanity to the U.S. The scary part? He might get away with it.

March 5, 2010 |   By Ellen Hodgson Brown

In addition to mandatory private health insurance premiums, we may soon be hit with a “mandatory savings” tax and other belt-tightening measures urged by the president’s new budget task force. These radical austerity measures are not only unnecessary, but will actually make matters worse. The push for “fiscal responsibility” is based on bad economics.

When billionaires pledge a billion dollars to educate people to the evils of something, it is always good to peer closely at what they are up to. Hedge fund magnate Peter G. Peterson was formerly chairman of the Council on Foreign Relations and head of the New York Federal Reserve. He is now senior chairman of Blackstone Group, which is in charge of dispersing government funds in the controversial AIG bailout, widely criticized as a government giveaway to banks. Peterson is also founder of the Peter Peterson Foundation, which has adopted the cause of imposing “fiscal responsibility” on Congress. He hired David M. Walker, former head of the Government Accounting Office, to spearhead a massive campaign to reduce the runaway federal debt, which the Peterson/Walker team blames on reckless government and consumer spending. The Foundation funded the movie “I.O.USA.” to amass popular support for their cause, which largely revolves around dismantling Social Security and Medicare benefits as a way to cut costs and return to “fiscal responsibility.”

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Juan Cole: Gates wants Europe to beggar itself on War Expenditures the Way the US Has

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February 24, 2010         

Informed Comment

US Secretary of Defense Robert Gates decries Europe for general anti-war sentiment, unwillingness to beggar itself with expenditures on war.

But as far as I can tell, Europe is the world’s largest economy and got there without any recent substantial wars except those the US dragged it into. Moreover, the fastest-growing economy for the past nearly 30 years has been China, which spends a fraction on their military of what the US spends on its, and, aside from a skirmish with Vietnam in the early 1980s, has been at peace. Apparently massive war expenditures are unrelated to economic growth or prosperity.

In contrast, the US has been at war for 19 of the last 47 years (not counting US-backed insurgencies such as 1980s Afghanistan, on which we spent billions) but has not grown faster than the other two economically. Moreover, the increasingly unwieldy US national debt, deriving from the US government spending more than it took in in recent decades, would not exist if the US military budget had been the same as that of the European Union since 1980. The US overspent on its military because Washington mistakenly thought the Soviet economy was twice as big as it actually was, and vastly over-estimated Soviet military capabilities. The bloated military budgets continue now, apparently because of a couple thousand al-Qaeda operatives hiding out in caves in the Hadhramawt and Waziristan.

Some statistics to ponder:

US Military Budget 2009: $711 billion
European Union Military Budget 2009: $289 billion
China Military Budget 2009: $122 billion.

US GDP 2009: $14.4 trillion
European Union GDP 2009: $16.5 trillion (PPP)
China GDP 2009: $8.8 trillion (PPP)

US economic growth 2009: 0.2%
European Union economic growth 2009: -4%
China economic growth 2009: 8.7 %

The real military-related expenditures of the US are closer to $1 trillion. If the US cut those back to the level of the European Union and spent the money on promoting solar energy and making it inexpensive, America would have a chance of remaining a great power in the 21st century. If it goes on rampaging around the world bankrupting itself by invading and occupying other countries, the Chinese will laugh at us all the way to world dominance.

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