Entries in Deficit (19)


White House Projects $1.2 Trillion Deficit This Year

Comstock/Thinkstock(WASHINGTON) -- The Obama administration has lowered its projection of the size of this year’s budget deficit by $116 billion, the Office of Management and Budget announced in its Mid-Session Review to Congress.
“This reflects lower-than-expected spending, partially offset by lower-than-expected receipts,” Acting OMB Director Jeffrey Zients writes in a White House blog.
The administration now projects the deficit for this year to be $1.211 trillion, down from the $1.327 trillion deficit it projected in February. Zients reported the 2012 deficit is now estimated to be 7.8 percent of the gross domestic product, down from the 8.5 percent projected in February.

Read the full text of the blog here.

Copyright 2012 ABC News Radio


Facing $16B Deficit, Calif. Governor Proposes New Cost-Cutting Measures

Office of California Gov. Jerry Brown(LOS ANGELES) -- In a state where jobs have been reduced, pensions whittled away, and offices closed to save money, California Governor Jerry Brown says it's still not enough.

Facing a $16 billion deficit, Brown is now proposing that all public employees take a 5-percent pay cut and that voters approve higher taxes.

“We have a more difficult problem.  We're going to have to cut deeper,” Brown said Monday, proposing $8 billion in cuts from just about every part of government -- with big cuts to health care and social services.

“It's taken a long time....More than a decade to get into this mess,” Brown said.

Schools, he says, will be unaffected by his proposed cuts.

Copyright 2012 ABC News Radio


Merrill Lynch Warns of Another US Debt Downgrade

Jin Lee/Bloomberg via Getty Images(NEW YORK) -- The United States is in for another credit downgrade by year’s end if Congress fails to agree on a long-term plan to tame the nation’s $14.8 trillion deficit, Merrill Lynch warned.

In a research note, the Bank of America unit predicts that either Moody’s or Fitch will move to downgrade the U.S. AAA rating. Standard & Poor’s cut the nation’s bond rating in August, causing the stock and bond markets to tumble, after months of bickering by Congress on how to best reduce spending and cut the deficit. The United States spends about 40 percent more annually than it collects in taxes.

Instead of agreeing on spending cuts or new taxes, Congress and the president appointed a bipartisan “super committee” to reach a deal to reduce the U.S. deficit by at least $1.2 trillion by Nov. 23. If there’s no deal, automatic across-the-board cuts mostly in discretionary spending would occur.  Congress would be free to stop any or all of those reductions, if it chooses and the president agrees.

Moody’s Investors Service hasn’t said what it will do if there’s no deal, but it has placed U.S. credit under review for a possible downgrade.

Copyright 2011 ABC News Radio


US Postal Service Nears Default

PAUL J. RICHARDS/AFP/Getty Images(WASHINGTON) -- As the U.S. Postal Service begins shuttering offices across the country to stem their ever-growing $9.2 billion deficit, the entire agency now faces default and could shut down next summer, Dave Partenheimer USPS spokesman told ABC News on Monday.

"Right now, we think we can make it through until next summer most likely but then some hard choices will have to be made," he said. "That's why it's such an urgent crisis."

USPS owes $5.5 billion to fund future retirees' health benefits, and next year it may not have money to pay its 170,000 employees. Partenheimer said that by Sept. 30, the end of the USPS fiscal year, the agency will have reached its borrowing limit of $15 billion.

The Senate Homeland Security and Governmental Affairs Committee will hold a hearing on Tuesday on the situation.

According to The New York Times, the USPS is considering several revenue-boosting measures including gaining the right to deliver wine and beer, placing commercial advertisements on postal trucks and in post offices, and offering more hand-delivery services.

The USPS wants Congress to restructure its health care and retirement systems, to make them independent from the federal government. In addition, the agency would move to five-day delivery, Partenheimer said, but can't do so without Congressional action.

"That would save us $3.1 billion," Partenheimer said.

In the meantime, USPS continues to cut costs.

"We've reduced costs by more than $12 billion in the last four years and cut our career workforce by 110,000 in past four years," Partenheimer said.

In July, when news about the office closures made headlines, Postmaster General Pat Donahoe told ABC News, "We do not want taxpayer money. We want to be self-sufficient."

Rep. Darrell Issa, R-Calif., the chairman of the House Oversight Committee, which oversees the Postal Service, has proposed a bill that would allow Congress to appoint a committee to take control of USPS until it's financially stable.

That bill has been referred to the Subcommittee on Federal Workforce, U.S. Postal Service, and Labor Policy.

The USPS responded to Issa's proposal saying, "We strongly oppose a provision in the bill that provides for an additional $10 billion in borrowing authority from the U.S. Treasury. The Postal Service does not need to incur additional debt."

In 2010 alone, the Postal Service experienced its largest one-year net loss of $8.5 billion.

Copyright 2011 ABC News Radio


One Man's Bailout Plan for His Oregon Town

George Custer of Oakride, Ore. (ABC News)(OAKRIDGE, Ore.) -- The city of Oakridge, Ore., faced a serious shortfall of $420,000 of its $3 million budget. In a city of 3,221 people, several Oakridge employees were laid off and the city was looking to secure loans for its deficit.

"No one knows at this time what happened" to the money, said resident George Custer of the town's debt.

Call it Custer's Last Stand against debt: he launched a one-man bailout plan -- an attempt to raise the deficit himself as a concerned citizen.

He began soliciting private loans from citizens to cover the shortfall. He called individuals, some who were willing to lend to the city and referred Custer to more people to call. Within days, the city of Oakridge secured a $500,000 bank loan and there was no need to use Custer's citizen loans.

"When people grumble about the government this and the government that, I tell them 'look, we are the government,'" said Custer. "Each and every individual in this country is the government. You may not like, necessarily, the current administration but you are either part of the problem or part of the solution."

Copyright 2011 ABC News Radio


Gold Rises, Stocks Fall over US Debt Impasse

Medioimages/Photodisc(NEW YORK) -- Gold and the Swiss franc appeared the only winners Monday, as Washington's ongoing impasse over the U.S. debt ceiling continued to depress markets.

At midday, stock markets in the U.S., Asia and Europe were all down -- the S&P 500 by 0.47 percent, the Nikkei by 0.81 percent. Gold, however, rose 0.81 percent, and futures for the precious metal hit a new record of $1,624.30 an ounce. The Swiss franc gained 2.1 percent against the dollar.

U.S. Treasuries showed surprising resiliency, with the yield on 10-year Treasuries rising to 2.98 percent. Some observers took that as a sign that fears of financial catastrophe had been exaggerated. Guy Lebas, a fixed income strategist at Janney Montgomery Scott in Philadelphia, told Bloomberg he'd expect to see a bigger move if something "truly catastrophic" was on the horizon.

Meantime, a gridlocked U.S. capitol entered its last full week of negotiations before the Aug. 2 deadline for raising the nation's debt ceiling. Earlier in the day, Secretary of State Hillary Clinton, in Hong Kong, sought to reassure Asian nations of the U.S. economy's health, reminding them that the country has recovered from such instability in the past. Clinton predicted that a debt ceiling deal would be reached before the Aug. 2 deadline to avoid an unprecedented default.

It is feared that if an agreement is not reached, the United States could lose its triple-A credit rating.

Copyright 2011 ABC News Radio


Asian Markets Sluggish on Debt Deal Uncertainty

Comstock Images/Thinkstock(WASHINGTON) -- Asian markets fell Monday as worry widened over the inability of U.S. political leaders to reach an agreement over raising the debt limit and avoiding an impending default as the Aug. 2 deadline draws near.

The debt dilemma has led oil prices to dive below $99 a barrel amid belief that the demand for crude oil will be reduced.

In Hong Kong, Secretary of State Hillary Clinton appealed to Asian nations that they should hold their faith in the U.S. economy, reminding them that the county has recovered from such instability in the past. Clinton predicted that a debt ceiling deal would be reached before the Aug. 2 deadline to avoid an unprecedented default.

It is feared that if an agreement is not reached, the United States could lose its triple-A credit rating.

"The political wrangling in Washington is intense right now," Clinton said. "But these kinds of debates have been a constant in our political life throughout the history of our republic. And sometimes, they are messy.

"I am confident that Congress will do the right thing and secure a deal on the debt ceiling, and work with President Obama to take the steps necessary to improve our long-term fiscal outlook."

Democrats are currently ironing out a deal that would have $2.7 trillion in cuts over the next 10 years, no tax increases and a debt ceiling increase (of $2.4 billion) that would last until 2013.

The Republican two step plan would see $1.2 trillion in cuts now, and a debt ceiling increase of about $1 trillion, or enough to last until February 2012. For the second step, a bipartisan committee would be created to identify another $1.8 trillion in cuts. After these cuts are approved, the debt ceiling would then be extended until 2013.

Ongoing bipartisan talks over the debt ceiling broke down over the weekend. Senate Majority Leader Harry Reid stated in a letter Sunday that the talks ended "over Republicans' continued insistence on a short-term raise of the debt ceiling."

As negotiations continue on Capitol Hill, gold is now trading at a record price ($1,613 per troy ounce) and the dollar is dropping against other currencies.

Copyright 2011 ABC News Radio


Judd Gregg on Debt Ceiling Drama: 50-50 Chance of 'Disruption'

Former Senator Gregg (US Senate)(WASHINGTON) -- Former Sen. Judd Gregg, R-N.H., now with Goldman Sachs, was a budget hawk during his long Capitol Hill career and, along with Sen. Kent Conrad, D-N.D., was instrumental in pushing for the president’s deficit commission.

On a Goldman Sachs conference call Wednesday, Gregg pegged the possibility of a government default at 50-50 and suggested that only a government shutdown would bring House Republicans around to increasing the debt ceiling.

According to a Business Insider live blog of the call, Gregg predicts a “50-50 chance that we go into a few days of disruption,” or at least a “weekend of drama.”

He does not hold out hope that the “Gang of 6” -- led by his former colleague Conrad and formed to help usher in the suggestions of the fiscal commission on which he sat -- can accomplish anything before the election.

On the ratings agencies threatening the U.S. AAA bond rating status, Gregg called them “stupid and naïve” for not being more cognizant of political realities.

“We'll straighten it out but our process doesn't allow it to do it overnight,” he said, according to Business Insider.

Copyright 2011 ABC News Radio


The American Debt: Moody's Cites US Debt Limit as a Credit Risk

Medioimages/Photodisc(NEW YORK) -- Moody’s, in its weekly publication on credit and ratings, published a piece Monday suggesting that the statue creating a U.S. debt limit is actually a negative for the nation’s credit rating.

"We think that the way the US government handles the limit, particularly in times of divided government, is credit negative for the US," writes Steven Hess, the VP in charge of U.S. sovereign credit ratings.

“The US statutory debt limit is an uncommon attribute not shared by most sovereign debt issuers in that it is not tied to the budgetary process. As a result, when the government adopts a budget, the financing of the expenditures authorized is not automatically assured.”

Hess points out that Congress has already approved the spending when they voted on continuing resolutions in April -- and knew at the time that 40 percent of the spending would have to be financed through borrowing.

Why do they need to vote on it again? They’ve already said they approve of the spending.

“In the US, the debt limit has not effectively constrained the rise in government debt because Congress regularly raises the debt limit and because the debt limit is not related to the level of expenditures approved by Congress,” writes Hess in the Moody’s note. “However, the legislative process of raising the debt limit creates periodic uncertainty over the government’s ability to meet its obligations. We would reduce our assessment of event risk if the government changed its framework for managing government debt to lessen or eliminate this uncertainty.”

Copyright 2011 ABC News Radio


US Mint: Wasting Money by Making Money

DC Productions/Thinkstock(BALTIMORE) -- The U.S. Mint in Philadelphia is a big, noisy, busy operation, capable of minting nearly 2 million presidential dollar coins daily. But most of those coins go into storage, never seeing the light of day. Costing 32 cents apiece to produce, these manganese brass dollars have proven unpopular with a public that prefers paper.

ABC News went to one such storage facility, the Federal Reserve in Baltimore, where the coins are in plastics bags and cardboard boxes, stacked one on top of another, creating several aisles of presidential coinage worth millions of dollars.

In their most recent annual report to Congress, the Federal Reserve says the coins are piling up so quickly they will need to spend $650,000 to build a new vault in Dallas to hold them. Shipping the coins to the new secure facility will cost an additional $3 million.

Passed by Congress in 2005, the Presidential $1 Coin Act ordered the mint to make millions of coins to honor every dead president, but not even Sen. Jack Reed, D-R.I., one of the co-sponsors of the original bill, uses the legal tender.

"Do you use these things? Do you have any of these things in your pocket?" Reed was asked by ABC News' Jonathan Karl while holding the dollar coins. "I don't I tell you, but I like everyone else repeatedly use nickels, dimes, quarters. In fact I have a little jar in my car for the traffic meters."

Reed and other senators sent a letter this week to Fed Chairman Ben Bernanke and Mint Acting Director Richard Peterson asking for help in improving the program while eliminating waste of taxpayer resources.

Meanwhile, the coins keep coming off the production lines, already more than a billion made and counting. The Fed's report estimates that they could have more than $2 billion in excess $1 coins by the time the program is expected to end five years from now.

Copyright 2011 ABC News Radio

ABC News Radio