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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Archive for October 28th, 2010

claims

Posted by WARREN MOSLER on 28th October 2010


Karim writes:

Initial claims fell 21k to a 3mth low of 434k, but the Labor Dept attributed this to a missed seasonal adjustment factor due to the Columbus Day holiday

Unadjusted claims rose by 3%, or 11k; the seasonal adjustment factor was looking for a 7.8% rise. Thus, the seasonally adjusted number fell by 21k.

The spike to 475k the week before the holiday likely reflects the flipside of this.

After also adjusting for the spike that followed benefit extension in late July, claims have really been very stable in the 440-460k range for the past 6mths.

Posted in Employment | No Comments »

Living with a deficit terrorist majority

Posted by WARREN MOSLER on 28th October 2010

>   
>   (email exchange)
>   
>   On Wed, Oct 27, 2010 at 8:11 PM, wrote
>   
>   This kind of talk is not bullish.
>   
>   If they try to do things too quickly all bets are off.
>   

Right. That’s what I see as our biggest risk, though 100 billion isn’t all that much, and it likely be out of future spending.

All these republicans you’ve been cheering on are heck bent on total destruction of our economy via deficit reduction as they’ll have enough votes for a balanced budget amendment. And a lot of democrats as well.

Tea Party leaders Michael Johns and Michael Patrick Leahy do know how it works, and to their credit haven’t been cheer leading balancing the budget, just lower taxes. But now seems they need to take a much more active role in working to keep taxes a lot lower than spending, which means opposing the balanced budget amendment move.

The mess we are in now can be traced to the tax hikes in the early Clinton years that were allowed to persist and drive the budget into surplus in the late 90′s, which reduced the financial equity that supports the credit structure by maybe a trillion, back when that was a lot of money. And, of course, when it collapsed the next year no one understood the obvious move was the likes of a payroll tax holiday to sustain demand from income, rather than wait for private sector credit expansion.

Bush finally did that in 03 shortly after Elizabeth and I met with Andrew Card at the white house pointing this out. His then famous statement when asked about the deficit ‘i don’t look at numbers on a piece of paper, i look at jobs’ followed shortly after our meeting. But that’s another story…

Republicans Plan Budget Cuts as Early Act If They Take Power

By Patrick O’Connor

October 27 (Bloomberg) — U.S. House Republicans plan to try to slash $100 billion from the federal budget as early as January if they wrest power from Democrats in this year’s midterm elections, setting up possible early showdowns with President Barack Obama on taxes and spending.

A Republican House takeover would thrust new committee heads, such as Representative Dave Camp on the Ways and Means panel, into the spotlight within weeks — or days — of seizing their gavels in early January. They would confront quick political tests that could alienate independent voters and Tea Party activists alike, analysts said.

“The major issues are going to be fiscal, and fiscal issues are always contentious,” said Jack Pitney, a political science professor at Claremont McKenna College in Claremont, California.

Carrying out spending cuts that Republicans have pledged to seek — which would amount to 21 percent of the government’s so-called discretionary money pot — could prove politically difficult. Reducing funds for programs such as college loans for low-income students or medical research at the National Institutes of Health is harder than promising to do that on the campaign trail.

‘Political Repercussions’

Republicans “will quickly find out that across-the-board cuts have political repercussions,” Pitney said.

A lame-duck session of Congress convening two weeks after the Nov. 2 elections will try to fund the government next year and deal with Bush-era tax cuts expiring Dec. 31. Prospective Republican House control could be an obstacle to Democrats in finishing that work before adjourning. Camp and other Republicans would then need to grapple with those tasks as they take over, even as they push their promised budget cuts.

The backdrop is a federal deficit that the Congressional Budget Office said totaled $1.29 trillion in the fiscal year that ended Sept. 30. At 8.9 percent of the nation’s gross domestic product, it was the second-biggest shortfall since 1945.

The following reviews the battle lines likely to be drawn in top House committees under Republican rule, and looks at the potential panel leaders who would preside over the fights:

Appropriations

If Democrats fail to fund the government through September 2011, the end of the federal fiscal year, this committee would be the stage for that fight in the new Congress. And settling on the panel’s chairman would be one of the initial tasks facing Republicans.

House Republican leader John Boehner of Ohio, his party’s speaker-in-waiting, called for the $100 billion budget cut on Sept. 23 as part of a governing agenda aimed at wooing voters. The cuts, which weren’t specified, would come from the $477 billion Congress allocated in 2010 for non-defense domestic discretionary programs. Social Security and Medicare are among the programs excluded from the proposed 21 percent reductions in discretionary spending.

Obama’s request for $73.4 billion for the Department of Education in the 2011 budget, including $23 billion for Pell Grants to help low-income students afford college, offers one example of the tough choices the Republicans would face. A 21 percent cut across-the-board would take about $15 billion from education. A 21 percent cut in Pell Grants would subtract almost $5 billion from the program.

HHS Budget

Obama asked Congress for $76.4 billion for the Department of Health and Human Services. Almost half that — $32 billion – -is for NIH, which includes the National Cancer Institute and other research facilities. A 21 percent cut would slash NIH funding by more $6 billion.

The question of which Republican would lead the Appropriations panel is complicated by the six-year limit the party placed on how long a lawmaker could serve as its leading member on a committee.

Representative Jerry Lewis, a California Republican, reaches that limit at year’s end. He has said he will seek a waiver to allow him to take the committee’s helm.

Lewis, 76, initially balked when Boehner pushed House Republicans to embrace a moratorium on lawmaker-sponsored projects, known as earmarks. Lewis reversed his position last year, gaining favor with Boehner.

Representative Hal Rogers, a Kentucky Republican, would be the likely committee head if Lewis fails in his bid. Rogers, 72, is known for steering funding for road improvements and other projects to his state and district. The Lexington, Kentucky, Herald Leader once dubbed him the “Prince of Pork.”

Posted in Government Spending | 26 Comments »