Bankrupting America’s Spending Daily

| April 3 2013

Spending Daily | April 3, 2013

Obama Budget Won’t Be Balanced

The Washington Times reports, “President Obama will not propose a balanced budget in the new fiscal 2014 spending plan that he’ll submit to Congress next week, a White House official said Wednesday. White House senior adviser Dan Pfeiffer said the budget will reduce deficits by an unspecified amount, but it won’t achieve balance like the spending plan that has been approved by House Republicans. ‘You don’t want to balance the budget for the purposes of simply balancing the budget, by slashing everything it does to create economic growth, to create jobs,’ Mr. Pfeiffer said at a breakfast event hosted by Politico. … Mr. Pfeiffer acknowledged that Mr. Obama’s new budget, which will be submitted nine weeks late, doesn’t achieve balance by its 10th year.”

“Carney: White House ‘absolutely’ didn’t deceive over impact of sequester”

The Hill reports, “White House press secretary Jay Carney said Tuesday that administration officials did ‘absolutely not’ mislead the public over the impact of the sequester, despite the Department of Homeland Security saying Monday that threatened furloughs to border patrol agents would not go forward. In a tense exchange with Fox News White House correspondent Ed Henry, Carney defended claims by Homeland Security Secretary Janet Napolitano that the sequester would lead to furloughs of border patrol agents, and, by extension, a greater security risk. On Tuesday, Homeland Security said the cuts would be delayed ‘pending re-examination.’ … The press secretary went on to say that there “are reductions’ to the Homeland Security budget, ‘whether it’s those border control’ agents or another area. He added that while the ‘impacts of the sequester would not all be immediate,’ that they would nevertheless be felt. ‘There is no question that when you have these across-the-board budget cuts … the impacts are real and they affect real people,’ Carney continued. Henry pressed on, pointing out that Napolitano had warned specifically of ‘a real impact’ from reduced hours for border patrol agents.”

“About Those Tax Breaks for Big Oil . . .”

Merrill Matthews writes in The Wall Street Journal, “President Obama has been telling America for months that special tax breaks for the oil and gas industry must come to an end. The presidential demand always prompts puzzled gazes among tax and energy-industry experts, who ask: What special tax breaks? Thanks in part to a bill sponsored by Rep. Chris Van Hollen, a Democrat from Maryland and ranking member on the House Budget Committee, it’s all much clearer now. The congressman has inadvertently called attention to the fact that those special tax breaks just for the oil and gas industry don’t exist. Mr. Van Hollen proposes to create some very special punishments instead. Regardless of the bill’s fortunes on Capitol Hill, it has already performed a public service by illuminating the fallacy behind assaults on the industry. … The oil and gas industry, especially in its extracting and refining, is heavily involved in U.S. manufacturing. Congress already penalizes the industry by only giving it a 6% deduction, rather than the 9% that other industries receive. … Ironically, USA Today just published the top-10 list of companies that paid the highest U.S. income taxes as of 2012, and oil industry companies took three of the slots.”

Obama Administration Sowing the Seeds of Another Housing Disaster?

The Washington Post reports, “The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit, an effort that officials say will help power the economic recovery but that skeptics say could open the door to the risky lending that caused the housing crash in the first place. President Obama’s economic advisers and outside experts say the nation’s much-celebrated housing rebound is leaving too many people behind, including young people looking to buy their first homes and individuals with credit records weakened by the recession. In response, administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default. Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default. … Obama pledged in his State of the Union address to do more to make sure more Americans can enjoy the benefits of the housing recovery, but critics say encouraging banks to lend as broadly as the administration hopes will sow the seeds of another housing disaster and endanger taxpayer dollars.”

Fed Moves From Subprime House Loans to Subprime Auto Loans

Reuters reports, “Thanks largely to the U.S. Federal Reserve, Jeffrey Nelson was able to put up a shotgun as down payment on a car. Money was tight last year for the school-bus driver and neighborhood constable in Jasper, Alabama, a beaten-down town of 14,000 people. One car had already been repossessed. Medical bills were piling up. …All the Nelsons had to do was cover the $1,000 down payment. For most of that amount, Maloy accepted Jeffrey’s 12-gauge Mossberg & Sons shotgun, valued at about $700 online. … It’s the Federal Reserve that’s made it all possible. In its efforts to jumpstart the economy, the U.S. central bank has undertaken since November 2008 three rounds of bond-buying and cut short-term interest rates effectively to zero. The purchases of mostly Treasury and mortgage securities – known as quantitative easing and nicknamed QE1, QE2 and QE3 – have injected trillions of dollars into the financial system.”

“Few senators sacrifice pay amid budget cuts”

The Hill reports, “Only a few senators are planning to forfeit a portion of their salaries to charity or the U.S. Treasury while sequestration is in effect, according to a survey conducted by The Hill. The Senate last month passed a measure urging members of the upper chamber to forgo 20 percent of their salary during sequestration. Most senators, however, are keeping quiet on whether they will follow through. During a marathon session of budget votes, the Senate approved by voice vote an amendment from Sen. Lindsey Graham (R-S.C.) calling on lawmakers to donate 20 percent of their pay to charity or return it to the U.S. Treasury. In his floor speech, Graham noted that about 500,000 to 600,000 federal employees will be furloughed because of sequestration and that senators should ‘feel what other people are feeling.’ Yet in a survey of Senate offices by The Hill, only Graham and Sens. Mark Begich (D-Alaska), Mike Lee (R-Utah) and Jay Rockefeller (D-W.Va.) have indicated they would give up some of their take-home pay.”

Citing Sequester, Pentagon Officials Returning Portion of Salaries

The New York Times reports, “In an unusual act of solidarity with the Pentagon’s civilian workforce, Defense Secretary Chuck Hagel and the department’s deputy secretary, Ashton B. Carter, will return a share of their salaries to the federal Treasury for the same number of days that employees are docked because of furloughs. As a result of across-the-board budget cuts known as the sequester, several hundred thousand Defense Department civilian employees are expected to be furloughed for 14 days before the fiscal year ends on Sept. 30. That is down from 21 days because of a compromise spending bill negotiated between President Obama and members of Congress.”

“Goldman Says Sequester Has ‘Little Impact So Far’”

Bloomberg reports, “A little more than a month into the nation’s experiment with across-the-board budget cutting, economists at Goldman Sachs said today that the impact has been limited. That’s partly because congressional action eliminated some of the worst pinch points. Goldman still expects sequestration to reduce the economy’s growth rate by 0.6 percentage point this year, going from the last quarter of 2012 to the last quarter of 2013. The sequestration of $85 billion in spending authority had the potential to be more disruptive than a typical budget cut of the same magnitude because it didn’t spare any government functions, even ones such as food inspection, border patrol, and air traffic control that could slow commerce.”

Defense Contractors’ Stocks Rise in Wake of Sequester

The Hill reports, “The biggest defense companies’ share value has soared faster than the stock market since sequester spending cuts began on March 1.  While the S&P is up 3.7 percent and the Dow Jones industrial average has risen 4.3 percent, Boeing has jumped 9.6 percent, Lockheed Martin is up 8.3 percent. Northrop Grumman has climbed 6.1 percent and Raytheon is up 6 percent.  The jump in contractors’ shares prices is seen as a relief rally after the protracted uncertainties of the sequester debate, but the longer term impact of the cuts is still controversial. No major defense layoffs tied to the sequester have been announced under the Worker Adjustment and Retraining Notification (WARN) Act, despite predictions during the heat of the 2012 presidential campaign when companies pressed Congress to turn off the automatic cuts.  ‘There was a great deal of fear about sequestration, and some of that is proving a bit overdone,’ said Richard Aboulafia, a defense analyst at the Teal Group. ‘While it’s a softer budget outlook, it’s still a very big market. It’s not as though we’re experiencing the same kind of drawdown we saw after the Cold War.’”

New Healthcare Law Could Result in Surprise Tax for Some

The Associated Press reports, “Millions of people who take advantage of government subsidies to help buy health insurance next year could get stung by surprise tax bills if they don’t accurately project their income. President Barack Obama’s new health care law will offer subsidies to help people buy private health insurance on state-based exchanges, if they don’t already get coverage through their employers. The subsidies are based on income. The lower your income, the bigger the subsidy. … What happens if you or your spouse gets a raise and your family income goes up in 2014? You could end up with a bigger subsidy than you are entitled to. If that happens, the law says you have to pay back at least part of the money when you file your tax return in the spring of 2015.”

IRS Considers Change to New Healthcare Law Investment Tax

Reuters reports, “Businesses and wealthy owners of estates and trusts asked the IRS on Tuesday for changes to a part of President Barack Obama’s 2010 healthcare law that has received comparatively little attention: a 3.8 percent tax on investment income intended to provide the bulk of the law’s funding. The tax kicks in this year, with U.S. taxpayers accounting for it for the first time in their tax returns for 2013. It is projected to raise more than $100 billion over a decade to help pay for health insurance for millions of Americans who lack it. The Internal Revenue Service in December issued proposed regulations to implement the tax. On Tuesday, lawyers for various small and big businesses and owners of estates and trusts urged the agency during a public hearing over the IRS’s proposed rules to clarify gray areas before they become final.”

“Comparative Dis-Advantage”

The Wall Street Journal editorializes, “The political options under ObamaCare usually come down to change for the worse or change for the much worse, so be thankful for small mercies. On Monday the Health and Human Services Department reversed some of the cuts it planned to impose on Medicare Advantage, even if HHS’s vendetta against the program endures. Under the new final rules, the subsidies that allow seniors to choose private insurance options will fall by about 4.7% to 5.6%, not the 6.9% to 7.8% that HHS proposed in February. The original cuts were mandated by the Affordable Care Act. The 2.2-percentage-point reprieve is the result of HHS’s decision to base Medicare Advantage payments on the law rather than a political gimmick to favor traditional fee-for-service Medicare. For 11 years Congress has always overridden the automatic 25% cuts to physician reimbursements known as the sustainable growth rate, and for 11 years HHS has always assumed that Congress would pass this ‘doc fix.’ This year HHS, for no reason other than its own political convenience, assumed that Congress wouldn’t—a contrivance that artificially depresses Medicare Advantage payments.”

“Pushing for a Peek at Pensions’ Secrets”

The Wall Street Journal reports, “When Utah State Auditor John Dougall started looking into the investment assumptions of his state’s $20 billion pension fund, he was surprised by what he found. The pension fund bars the public from attending its meetings and doesn’t disclose many of the hedge funds in which the retirement system for public employees invests. … Utah pension officials say the state’s open-meeting and -record laws don’t apply to the retirement system. In fact, it was a big selling point with some hedge funds that agreed to manage money for the Utah Retirement Systems, said executive director Robert Newman.”

Obama Launches 2014 Midterm Elections Fund-Raising Drive

Reuters reports, “President Barack Obama will launch a fund-raising drive for the 2014 U.S. mid-term elections on Wednesday with addresses to deep-pocketed donors in California, hoping the Democratic Party can defy the odds and gain congressional seats in the polls. The party in power in the White House usually loses seats in election years in which the presidency is not up for grabs. This means Democrats have their work cut out for them in trying to win a majority in the Republican-controlled House of Representatives and add to their majority in the Senate. … The president has an interest in making the effort, because without a significant change in the make-up of Congress, he faces possible paralysis for many of the initiatives laid out in his inaugural address and State of the Union speech.”

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