Entries in Deficit Reduction (4)


Hoyer Calls on Congress to Replace Mandatory Cuts with ‘Big Deal’

US House of Representatives(WASHINGTON) -- House Minority Whip Steny Hoyer of Maryland Monday morning called on Congress to replace $1.2 trillion in automatic spending cuts mandated by law at the end of the year with a balanced package of deficit reduction akin to the grand bargain President Obama and House Speaker John Boehner negotiated unsuccessfully last summer.

Hoyer, the number-two ranked Democrat in the lower chamber, said the country’s “deficits and debt present us with a clear and present challenge.”  He encouraged Congress to strike a deal before the November elections on a new structure of deficit reduction to replace cuts scheduled to take effect in the next decade, split evenly between defense and nondefense discretionary spending, as ordered by the Budget Control Act.

“Simply walking away from sequestration would be waving the white flag in the face of [the Congressional Budget Office's] projection of a dismal fiscal future.  However, sequestration remains an irrational response.  It was the blunt instrument established to force both sides to the table and keep them there," Hoyer told the think tank Third Way during an address on Capitol Hill Monday morning.

“It is not a solution in itself,” he continued.  “It should be replaced, but replaced only by the kind of big, balanced solution the Joint Select Committee was supposed to have produced.”

Hoyer was part of about 100 lawmakers who signed onto a letter in the fall encouraging the Joint Select Committee on Deficit Reduction, also known as the “supercommittee,” to enact deficit reduction through tax and entitlement overhaul.  Hoyer said the same discussion continues to play out with many other congressmen who share that approach.

When the supercommittee failed to strike a deal, that triggered the mandatory sequestration cuts as a Plan B, but Congress wrote a cushion into the law, providing more than a year’s time before the cuts are set to be implemented, and at the same time creating an opportunity to tweak the law.

“Revenue must be part, though not all, of a balanced solution to our debt,” Hoyer, a 16-term representative, said.  “A willingness to reach a comprehensive deficit reduction solution will also mean taking a serious look at the sustainability of our entitlements while ensuring that the most vulnerable among us are protected.”

Democrats prefer to let tax cuts expire for individuals earning more than $250,000, and also support the “Buffet Rule,” which would raise taxes on individuals making more than $1 million per year.

“All options must remain on the table,” Hoyer urged.  “There is no alternative, and we must do what’s right for our country, even when it requires hard choices.  We have a constitutional duty and a moral duty to the American people not to walk away.”

Copyright 2012 ABC News Radio


Deal or No Deal, Downgrade from Moody’s Unlikely

Hemera/Thinkstock(WASHINGTON) -- With the members of the congressional supercommittee teetering on the cusp of failure, many are worried about the potential for a U.S. credit downgrade, but one Moody’s economist says that his firm is not likely to downgrade U.S. debt because it expected Congress to fail from the start.

“You know, it’s all relative to expectations and investor expectations with regard to the committee I think are -- have been and are still very, very low,” Moody’s economist Mark Zandi said on Fox News Sunday.

The committee has until Wednesday to complete and score a final deal, but last minute political posturing and blame games have led many to believe that Congress won’t meet the Thanksgiving deadline.  If that happens, Congress will have one year before supercommittee provisions kick in with $600 billion in automatic cuts from the Pentagon budget and 2 percent across-the-board cuts to Medicare providers’ payments.

Cuts of that magnitude would, in theory, calm the markets enough to prevent financial calamity.

“So this shouldn’t foster a downgrade or a run on the market or anything like that.  The $1.2 trillion in savings occurs one way or the other,” Republican Sen. Jon Kyl said on Meet the Press.

But Zandi also pointed to other looming Congressional deadlines, including an extension to unemployment benefits, a Medicare doctor payment fix, a patch to the alternative minimum tax and an extension to the payroll holiday, all of which would have a significant effect on the economy if Congress failed to act by the end of the year.

Copyright 2011 ABC News Radio


Starbucks CEO Urges Companies to Forgo Political Contributions

Spencer Platt/Getty Images(SEATTLE) -- The head of Starbucks says that U.S. corporations shouldn't donate a "grande" or anything for that matter to political campaigns.

Starbucks CEO Howard Schultz is appealing to his counterparts to forgo any contributions to the president and Washington lawmakers until they sit down and figure out how to shrink the budget deficit.

In an email sent to business leaders, Schultz wrote that President Obama and Congress need to "deliver a fiscally disciplined long-term debt and deficit plan to the American people."

Until then, the 58-year-old chief of the nation's largest coffee shop operation says that politicians shouldn't count on corporate donations.

Meanwhile, Schultz is also encouraging other CEOs to accelerate hiring to help revive the foundering economy.

Copyright 2011 ABC News Radio


Government Benefits Account for $2 of Every $10 Americans Receive

Hemera Technologies/Thinkstock(WASHINGTON) -- Open your wallet. If you have a $10 bill inside it, you can thank the government for two of those dollars.

Government benefits like Social Security, Medicaid, and unemployment insurance accounted for nearly 20 percent of Americans’ income in the first quarter of 2011, according to Moody’s analysis of the Bureau of Economic Analysis’ statistics.

Some of the money from those benefits, though, will soon dry up as the stimulus funds that were pumped into federal and state programs in 2009 start to expire and deficit-reduction measures begin going into effect.

 “Things like the Recovery Act and employment benefits are having huge beneficial impacts that a lot of people don’t realize,” said Ethan Pollack, a senior policy analyst at the Economic Policy Institute. “When those programs end people will realize just how dependent they were on them.”

Pollack said the unemployment rate will likely spike in response to the reduced government funding because it will take money out of people’s pockets, causing a drop in spending and forcing more layoffs.

With the latest figures showing 9.2 percent unemployment, an uptick in the number of people out of work could mean bad news for the economy and for President Obama’s re-election.

But Brad Kemp, the director of economic research at Beacon Economics, argues the month-to-month rates are not as important as the overall trend.

“A single month‘s number does not a trend make,” Kemp said. “And that trend is going to continue to fall, but it is not going to be a smooth ride.”

Kemp pointed out that having 20 percent of disposable income coming from government benefits is still a small segment and while losing some of that money because of dried up stimulus funds would be detrimental in the short term, it would not have severe widespread consequences in the long term.

Since the recession began in 2008 government spending on social benefits programs has increased by $581 billion, according to BEA statistics. At the end of 2007, before the recession started, only $1.60 of your $10 bill would have been from the government.

Kemp said when stimulus money expires or debt-reduction measures go into effect there will “devastation to the individual, not to the society.”

“These are the people who want jobs that don’t have them and to those individuals it will be crushing,” Kemp said. “But does that mean the majority of society is going to fail? Does it mean it could slow an already slowly recovering economy? No.”

For example, the Supplemental Nutrition Assistance Program, or food stamps, used American Recovery and Reinvestment Act funds in April 2009 to increase benefits for a family of four by $80 per month. When the stimulus money runs out in October of 2013, families will see their benefits instantly decrease by $61.

Pollack said the stimulus money should continue until the economy has fully recovered, which will not be until at least 2016.

“I think the economy is far from having been recovered enough,” Pollack said. “We think there should be six months of six percent unemployment. Then we should start deficit reduction.”

Pollack said it will be a “very huge hit to economic growth” if many of the proposed budget cuts took effect immediately.

 “If you were to design a perfect plan it would reduce the deficit over the next 10 to 20 years but would invest over the next two to three,” Pollack said.

Copyright 2011 ABC News Radio

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