Budget Fight Preview

The President's budget proposal will not be released until February 14, 2011, yet the leaks and politics are spewing into the Internet beltway.

The budget proposal will recommend ending Bush-era tax cuts for the highest earners when they are set to expire at the end of 2012, though the White House didn't include the projected revenue from this in its budget forecasts. The budget projections are based on the administration's economic forecast which shows a recovering economy, but it was made before the December tax-cut compromise which, most private forecasters say, has boosted the near-term growth outlook. Faster growth could mean higher government tax revenues and a smaller deficit.

Many of the spending cuts or reductions in the budget are already known. It would, for example, freeze levels of domestic non-defense spending for five years, something the White House believes will save $400 billion.

The White House will also propose reductions to a number of federal programs, from the U.S. Forest Service to a program that provides heating assistance for low-income families. It will adopt previously recommended reductions in military spending that would reduce costs by $78 billion over several years. The budget proposal will also recommend targeted spending increases, particularly in education and infrastructure programs.

We have a cut off for heat to the poor, charging interest on student loans while that person is still in school, a comment that maybe we should tax the rich, after just giving the rich a massive tax break.

Some details on the $155 Billion House Stimulus Bill

The House of Representatives just passed another Stimulus bill of which $75 billion from TARP will be used to pay for it's $155 billion dollar price tag.

Buy American made it into the bill with:

The 119-page measure contains proposals from lawmakers including Democratic Representative Daniel Lipinski of Illinois requiring federal agencies to publish requests for waivers on their Web sites. Waivers that are granted must contain a detailed rationale with an analysis of the impact of the waiver on U.S. factory jobs, the legislation says.

No doubt the lobbyists will be all over this one, making sure Stimulus stimulates other national economies.

Some of what's in it by AP:

Obama warns on deficit

This is pretty incredible. A very unpopular Wall Street Bail out, a defocused and ineffective Stimulus and now warns on the deficit.

US President Barack Obama warned that the US economy could head into a “double-dip recession” unless urgent steps were taken to rein in mounting public debt.

The US president’s remarks – in an interview with Fox News in Beijing on Wednesday, towards the end of his eight-day tour of Asia – marked his strongest language yet on the necessity of putting public finances back on a sound footing.

“It is important though to recognise if we keep on adding to the debt, even in the midst of this recovery, that at some point, people could lose confidence in the US economy in a double-dip recession,” said Mr Obama.

TARP funds to be used to pay down the deficit

The Obama administration has announced they plan to to Cut Deficit With TARP Cash:

The Obama administration, under pressure to show it is serious about tackling the budget deficit, is seizing on an unusual target to showcase fiscal responsibility: the $700 billion financial rescue.

The administration wants to keep some of the unspent funds available for emergencies, but is considering setting aside a chunk for debt reduction.

Ok, Wall Street Journal. Firstly, how much will they use to pay down the deficit?

Secondly the losses projected vary widely. Now the WSJ reports the total losses will be about $200 Billion, down from $341 Billion, but this is just the original $700 Billion in TARP funds.

Currently we have:

New Budget Deficit Numbers, $1.6 Trillion for 2009

From the CBO blog

Today CBO issued its annual summer update of the budget and economic outlook. CBO estimates that the federal budget deficit for 2009 will total $1.6 trillion, which, at 11.2 percent of gross domestic product (GDP), will be the highest since World War II. That deficit figure results from a combination of weak revenues and elevated spending associated with the economic downturn and financial turmoil. The deficit has been boosted by various federal policies implemented in response, including the stimulus legislation and aid for the financial, housing, and automotive sectors.

China warns on US Stimulus related Debt

China has issued a warning on U.S. debt:

"To rescue the ailing U.S. economy by increasing government borrowing will create a record-high federal deficit," said Yu Zuyao, economist with the Chinese Academy of Social Sciences, a government think tank.

"This can further lead to catastrophic consequences such as serious inflation and U.S. dollar depreciation," he said Tuesday.

"Buying U.S. government bonds amid an economic downturn, [a purchase] that is not based on the sound performance of the U.S. economy itself, indicates a huge bubble," said Zuo Xiaolei, chief economist of China Galaxy Securities.

e in the interests of the United States and other countries and would exacerbate the crisis."

Shutting off the Power and Other Bad News

Ah, utility companies are shutting off the power as more people cannot pay their bills.

In Pennsylvania, PPL Corp. increased shutoffs by 78% in the first three quarters of the year compared with the same period a year earlier
In Memphis, Tenn., the city-owned utility that supplies electricity, natural gas and water to residents cut off 38% more people in the first eight months of the year

and Bankruptcies pass 100k now equal to 2005.

Bear in mind that when the MNBA bill, oops I mean bankruptcy reform passed in 2005, this stopped many people from being able to get out of their debts.

If that's not enough:

Auto Sales worse since 1945

Tyche - We expect a Depression in the United States

This is one frightening opinion.

From CNBC:

"We expect a depression in the United States. We expect a depression, very possibly, also in Europe," Hennecke said on "Worldwide Exchange."

The estimated $300 billion cost of the Fannie/Freddie bailout will probably be considered as a loss that the government will have to take, therefore passing it on to taxpayers, he explained.

"We already have $3 trillion of debt, as far as the U.S. government is concerned. These debt figures across the U.S. economy are rising very sharply."

22 States face Budget deficits in 2009

This one sure flew on by, I noticed only while reading a stock message board!

Center of Budget and Policy Priorities states:

At least twenty-five states, including several of the nation’s largest, face budget shortfalls in fiscal year 2009. Of these 25 states, specific estimates are available for 22 states and the District of Columbia; the combined deficits of these 22 states plus the District of Columbia are expected to total at least $39 billion for fiscal 2009 — which begins July 2008 in most states. Another 3 states expect budget problems in fiscal year 2010, although some of those gaps may occur earlier than expected. Many of the other states have not yet released information about their fiscal status.

How could they allow a glorified shell game via wall street on residential properties with these kinds of implications?