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Thread: What the Stimulus Package will be spent on...

  1. #61
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  2. #62
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    To underline the importance of reducing our spending in an economic downturn (the opposite of what the current human being holding the highest office in the land is doing), let me offer some more numbers. This should trouble anyone who is not concerned about blatant partisan politics in regards to how we are dealing with the economy. Obama's projections that he based his record breaking 3.6 trillion dollar budget on are nearly 60% ABOVE (economy moving in the positive direction) the projections of economists not in his inner circle. I don't care if he gives a rosy picture when he talks to the public about the economy, but I would hope he is not venturing so far from realism in all of his policies the way this budget seems to. Politics

    Obama’s Deficit Plans May Use Optimistic Forecasts (Update1)
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    By Ryan J. Donmoyer and Roger Runningen

    Feb. 27 (Bloomberg) -- President Barack Obama’s promise to slash a record deficit may rely on economic-growth projections for the coming years that are too optimistic.

    The $3.55 trillion budget proposal for 2010 the president unveiled yesterday projects 3.2 percent economic growth next year, thanks to a $787 billion fiscal-stimulus measure he signed into law earlier this month that is aimed at creating jobs and consumer demand.

    That is twice the 1.5 percent growth projected by the Congressional Budget Office before the stimulus bill was enacted and higher than the 2.1 percent consensus growth estimate by analysts in the Blue Chip Economic Indicators survey. Even those projections may be too optimistic: Federal Reserve Chairman Ben S. Bernanke said this week the U.S. is suffering a “severe” contraction, and a government report today showed the economy shrank at a 6.2 percent annual rate in the fourth quarter, more than forecast.

    “One glaring, central risk to the budget’s projections is the economic outlook,” said Joseph Minarik, a senior vice president at the Committee for Economic Development, a Washington-based public policy institution. The budget assumes “the economy is going to turn around more rapidly,” said Minarik, a former associate director at the Office of Management and Budget under President Bill Clinton.

    Tax Increases

    Obama’s blueprint pledged to trim a $1.75 trillion deficit projected for the current fiscal year ending Sept. 30 to $1.17 trillion next year. The budget assumes economic growth will be sustained even after 2011, when Obama plans to ask Congress to enact tax increases that would cost top-earners, Wall Street executives and multinational corporations almost $1 trillion in higher taxes.

    “We are economists and not soothsayers, and all forecasts are subject to a substantial margin of error,” Christina Romer, head of the White House Council of Economic Advisers, said at a press conference yesterday in Washington. In a downturn as severe as this recession, “usual patterns surely provide less guidance than in more ordinary times,” she said.

    Bush Policies

    The plan would reverse eight years of policies under President George W. Bush that reduced taxes on the wealthy. It would do so by reinstating top tax rates and other measures that were put in place to reduce deficits during Clinton’s administration, when economic growth averaged 4 percent a year.

    The difference is Obama inherits an economy at far greater risk because of unemployment and a credit crunch than the one Clinton was given when he took office in 1993, experts said.

    Figures yesterday showed orders for durable goods fell 5.2 percent in January, twice as much as forecast, and the number of Americans filing initial applications for jobless benefits soared to 667,000 last week. Deutsche Bank AG chief U.S. economist Joseph LaVorgna said it’s “conceivable” the economy will shrink as much as 10 percent in the first quarter.

    Gross domestic product data for the quarter from October through December released today by the Commerce Department in Washington showed the biggest contraction since 1982. Consumer spending, which comprises about 70 percent of the economy, declined at the fastest pace in almost three decades.

    Health-Care Overhaul

    Still, Obama is counting on the economy roaring back to produce higher tax revenue to help pay for projects such as an additional $750 billion in new aid for the financial industry and an overhaul of the health-care system he estimates will cost $635 billion. He also wants to increase defense spending to send additional troops to Afghanistan.

    After $338 billion in tax collections this year, White House economists predict an additional $195 billion will come into the Treasury in 2010, and forecast $332 billion more revenue in 2011.

    “You can’t spur economic growth on your left hand in this economic environment while on your right hand you’re raising taxes,” said Tim Speiss, a partner in charge of the personal wealth group at Eisner LLP, a New York-based accounting and advisory firm.

    The budget also assumes the government will reap almost $646 billion over 10 years, beginning in 2012, from the so-called cap- and-trade system of government-issued permits to pollute; and $175 billion over 10 years by forcing insurance companies to compete for Medicare insurance business under the Medicare Advantage insurance program.

    Subsidy Cuts

    At the same time, the budget contains savings from a reduction in farm subsidies; forcing the wealthy to pay higher premiums for Medicare prescription drugs; reducing Defense Department procurement programs, and anticipated decreases in the costs of the wars in Afghanistan and Iraq, down about $10 billion to $130 billion in 2010.

    Obama, 47, wants to end the $4 billion in annual federal subsidies for student-loan providers such as Sallie Mae and Citigroup Inc., leaving the government as the sole provider of federally backed college lending. The government currently offers direct loans through colleges, as well as guarantees for loans made by private lenders such as New York-based Citigroup and Reston, Virginia-based Sallie Mae, officially SLM Corp.

    The bulk of the additional revenue would come from the approximately 2.6 million Americans who currently pay in the top two income tax brackets, which take effect at $164,550 of taxable income for single taxpayers and $200,300 of taxable income for married couples who file joint returns.

    Deduction Cap

    Obama’s proposal would cap the value of deductions for items such as charitable donations, mortgage interest and investment expenses at 28 percent for people in the top brackets, or 30 percent less than they would otherwise receive.

    And it would force executives at private-equity firms, venture-capital firms, some hedge funds and other partnerships that receive a 20 percent so-called carried interest in the firm’s profit to pay rates as high as 39.6 percent, up from the capital-gains rate of 15 percent they currently owe.

    The budget also proposes $353.5 billion in higher taxes on corporations over the next decade, the bulk of which would come from changing rules that allow U.S.-based multinational corporations such as General Electric Co. to defer U.S. tax on profits they earn overseas. The budget also targets a widely used accounting method known as “last-in, first-out” for a tax increase and would repeal several benefits for oil and gas companies.

    Tax Cuts

    Obama’s budget would keep in place Bush’s tax cuts that benefit lower- and middle-income earners, and it preserves at least one policy that benefits the more affluent: a preferential tax rate on corporate dividends.

    Before Bush, dividends were taxed as ordinary income, at rates as high as 39.6 percent in the 1990s. Obama would increase the tax rate on most capital gains to 20 percent, the level set by Clinton in 1997.

    At the same time, Obama’s budget would make permanent the tax reductions for low- and middle-income earners that were included on a temporary basis in his stimulus package. That includes a payroll tax credit worth up to $800 per family and increases take-home pay by an estimated $67 a month.

    Other policies would extend tax subsidies for the working poor, such as a more generous child tax credit for larger families.

    Rosy economic predictions underlie Obama's budget - Kansas City Star

    Rosy economic predictions underlie Obama's budget
    McClatchy Newspapers

    President Barack Obama's proposed $3.55 trillion budget contains many proposed changes, but one staple of federal budgets didn't change, as he offered rosier economic projections than those envisioned by private analysts.

    Buried in the innards of the hefty budget are comparative economic assumptions. The administration spells out the economic basis for its budget projections, then compares them against the forecasts of the non-partisan Congressional Budget Office and a consensus of private-sector forecasters.

    Obama projects that the economy will contract by just 1.2 percent this year, swinging to a rapid expansion next year with a growth rate of 3.2 percent. That's quite rosy.

    "I'm marveling that somehow they think the recession is over," said David Wyss, the chief economist for New York rating agency Standard & Poor's. "To me, this (budget) is extremely optimistic."

    While the recent track record of most private forecasters leaves much to be desired, the February Blue Chip Consensus forecast predicts a deeper contraction this year - minus 1.9 percent - and a slower growth rate next year of 2.1 percent.

    CBO offers the steepest contraction projection this year, minus 2.2 percent, and the slowest return to growth next year, an anemic 1.5 percent.

    The gap widens in subsequent years. In 2011 and 2012, the White House sees explosive growth of 4 percent and 4.6 percent, while the private sector economists see a more sluggish 2.9 percent for each of those years. CBO is closer to the White House in the out years, seeing growth of 4.2 percent in 2011 and 4.4 percent in 2012.

    "Even to the 2012 numbers, this looks highly optimistic," said Wyss, who projects 3 percent growth that year.

    If Obama's right, it'll make his job of halving the deficit to $533 billion by the end of his first term easier, since more growth means more tax revenues. If Wyss is right, Obama's promises to reduce the deficit won't be met.

    The White House and private sector also part ways on inflation expectations, especially in the years beyond the current fiscal year. The administration expects headline inflation - the rise in consumer prices across the economy - to remain at a pleasant 1.8 percent in 2011. Private-sector forecasters see it at 2.4 percent in 2011 and 2.5 percent in 2012, which is still relatively mild, but significantly higher.

    This gap in projections is important because economic activity spurs inflation, as businesses gain pricing power and charge consumers more. The Obama budget envisions strong growth and tame inflation, a somewhat unusual but not unheard-of phenomenon - it happened in the late 1990s.

    Obama's budget also would allow some temporary tax cuts for the wealthiest Americans to expire, effectively raising taxes on the rich. While these tax rates were in place during the 1990s and the economy boomed, it did so largely because of a rapid increase in productivity driven by spreading computer technology.

    Returning tax rates on the rich to 1990s levels without the accompanying gains in productivity, in an effort to redistribute wealth, could result in a drag on the economy.

    "He's going to need a growing economy ... and tax measures that are aimed specifically at the productive part of the economy I don't think helps," Martin Regalia, the chief economist for the U.S. Chamber of Commerce, said on Thursday.


    -Obama's budget: Office of Management and Budget

    -The underlying economic assumptions:
    To summarize:

    Budget projections - Economists' projections

    2009 economic contraction: 1.2% - 1.9%(February Blue Chip Consensus)~2.2%(CBO)

    2010 economic growth rate: 3.2% - 2.1%(February Blue Chip Consensus)~1.5%(CBO)

    2011 economic growth rate: 4% - 2.9%(Private sector economists)~4.2%(CBO)

    2012 economic growth rate: 4.6% - 2.9%(Private sector economists)~4.4%(CBO)

    Rise in consumer prices 2011: 1.8% - 2.4%(Private sector economists)

    Rise in consumer prices 2012: 1.8% - 2.5%(Private sector economists)

  3. #63
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    The A.I.G. bailouts fail the basic test of transparency: Who ends up with the money? Major financial institutions are not innocent victims of A.I.G.’s demise. They are sophisticated investors, and they should have known the risks being taken — and who profited mightily from the relationship before it all came crashing down.

    Whomever the recipients are, they should be investigated for their roles in the crash and, to the extent possible, be made to pay for the bailouts.

    The serial A.I.G. bailouts are especially problematic for their connection to the Wall Street bank Goldman Sachs. At the time of the first A.I.G. rescue last fall, it was reported by Gretchen Morgenson in The Times that Goldman was A.I.G.’s largest trading partner, with some $20 billion of business tied into the insurer. Goldman has said that its exposure to risk from A.I.G. was offset, or hedged, by other investments.

    "They the type of cats who pollute the whole shoreline. Have it purified. Sell it for a $1.25"

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