Entries in Federal Deficit (18)


New Wrinkle in Looming Debt Ceiling Battle

Stephen Chernin/Getty Images(WASHINGTON) -- The fight over whether to raise the debt ceiling, which is already on the fast track, may have to get on a faster track.

An analysis by the Bipartisan Policy Center now predicts that the government won't be able to pay its bills by as soon as Feb. 15.

That's two weeks earlier than originally projected and the White House has warned GOP lawmakers that if the debt ceiling isn't lifted above the $16.4 trillion statutory limit, the government will default on its debt.

Republicans say that any increase will have to be matched with equal spending cuts -- a position President Obama finds untenable.

The Bipartisan Policy Center says that since Dec. 31, when the statutory limit was reached, the Treasury Department has used "extraordinary measures" to postpone default.

Copyright 2013 ABC News Radio


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


Obama to Request Another Debt Ceiling Hike

Stephen Chernin/Getty Images(WASHINGTON) -- With the federal government now coming within $100 billion of the current $15.2 trillion ceiling, President Obama is expected to request an increase this week as he wraps up his family vacation in Hawaii.

Before he returns to Washington next week to face a grueling re-election campaign, Obama will ask Congress to raise the debt ceiling by $1.2 trillion to $16.4 trillion.

The latest hike request comes after a heated debate in Washington this past summer over the same topic.  Lawmakers eventually came to an agreement to increase the debt ceiling in August but the back-and-forth led Standard & Poor's to downgrade the nation's credit rating from AAA to AA+

This time around, it would take both the House and the Senate to oppose raising the borrowing ceiling, but that probably won't happen given that it's an election year and the public is discontent with Congress.

Copyright 2011 ABC News Radio


US Deficit Could Come in Under $1 Trillion for Fiscal Year 2012

Stephen Chernin/Getty Images(WASHINGTON) -- Now is not the time to break out the champagne but at least some economic indicators seem to be headed in the right direction.

According to Treasury Department figures released Monday, the federal deficit during the first two months of the 2012 fiscal year that began on Oct. 1 shows the government shortfall running at about $236 billion.

Again, don't pop the cork just yet because that's merely $55 billion less than in October and November 2010.

Still, if this pattern continues over the next 10 months, the Congressional Budget Office predicts that the 2012 federal deficit will come in at around $973 billion by the time Sept. 30, 2012 rolls around.  That would mean a federal deficit of under $1 trillion for the first time in four years.  This year it was $1.4 trillion.

However, if Congress gets around to extending the Social Security payroll tax cuts and unemployment benefits, chances are the deficit will wind up over $1 trillion anyway.

Copyright 2011 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


Supercommittee Deadline: Seniors Spared from Bulk of Automatic Cuts

Ingram Publishing/Thinkstock(WASHINGTON) -- With less than three days before its midnight deadline, the 12-member Congressional supercommittee is expected to announce on Monday that they did not reach a deal to cut $1.2 trillion from the federal budget over the next 10 years.

While Congressional aides stress a last-minute Hail Mary pass is still possible, deep divides over taxes are still shaking the foundations of any prospective -- and as of now unlikely -- deal.

This race-the-clock game has already played out twice this year, but this time there is no looming government shutdown or imminent debt default.  Instead, there are $1.2 trillion in automatic, across-the-board budget cuts split evenly between defense and domestic spending that will take effect in 2013 in the absence of a deal.

Defense Secretary Leon Panetta explained on Capitol Hill last week that the cuts will be "devastating" to the U.S. military.

The automatic cuts may not be so devastating on the non-defense spending side of the equation, however. Both Medicaid and Social Security are spared from the funding reductions and Medicare cuts are limited to 2 percent of the entitlement program’s budget.

Budget hawks looking for significant spending reductions herald the automatic cuts as real deficit-reduction.  And entitlement program defenders claim the limited cuts -- which include exceptions for the poor and disabled -- are less damaging than any that are likely to come out of a supercommittee deal.

“I think failure is a success,” said Michael Tanner, a senior fellow at the conservative CATO Institute.  “I think that a supercommittee that does not come to an agreement is more likely to achieve real cuts than one that does.”

Under the automatic cuts, or sequestration, Medicare will lose about $123 billion between 2013 and 2021.  But that entire amount will come out of the pockets of doctors and hospitals, not senior citizens.

That doesn’t mean the many-billion-dollar cuts will be painless.

Tanner said that slashing the amount the federal government reimburses health care providers who care for Medicare enrollees could make it more difficult for senior citizens to find doctors that will care for them.

“About 12 percent of physicians already will not accept Medicare patients and a larger number are not accepting new patients,” Tanner said.  “If you further reduce reimbursements, you’re liable to find additional physicians saying it’s just not worth it.”

Copyright 2011 ABC News Radio


CBO Calls for Major Steps to Slash Federal Deficit

Stephen Chernin/Getty Images(WASHINGTON) -- The U.S. is running a deficit this year of $1.3 trillion, the third largest on record.  But, as the nonpartisan Congressional Budget Office said Wednesday, things could get markedly better if those much-disputed 2001 Bush-era tax cuts are allowed to expire.

According to the CBO, the tax breaks should end along with the payroll tax reduction, federal emergency unemployment benefits and reduced Medicare payment rates to physicians.

If that all happens, the CBO says projected deficits would be trimmed by $3.3 trillion over the next decade, provided that the debt-reduction agreement signed earlier this month also comes into play.

All this is a best-case scenario.  While President Obama wants tax breaks for the rich and corporations to expire by the end of 2012, Republicans are fighting him at every turn, charging him with hurting the job creators and fueling class warfare.

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


Debt Crisis Survival Guide for Investors

Comstock/Thinkstock(WASHINGTON) -- As the Treasury Department's Aug. 2 deadline to raise the debt ceiling draws near, the fear is that if a deal is not struck in the next few days, the U.S. could default on its debt.

But even if a compromise is reached, many analysts believe that credit agencies could still downgrade the country's AAA rating.

A short-term solution would likely result in a downgrade, according to Citibank, which warned its customers that "the kick the can down the road path ... would not impress the ratings agencies."

If a downgrade occurs, it could cost more to borrow, and there could be a negative effect on the markets.  Analysts forecast up to a 10 percent drop in the stock market as a result of a downgrade.

How does this translate?  An average 401(k) of $140,000 would lose $9,000.  Mortgage rates would likely rise at least a half point.  The average home loan of $172,000 would see a hike of $19,000.

ABC News spoke with four financial experts, and here are their recommendations on how to survive the debt crisis:

What advice do you have for investors?

"Investors should stay the course and not let their emotions get the better of them.  Keep saving, pouring money into your IRAs and 401(k)s, and stay invested in stocks.  Invest for the long-term, not the next week," said Joe Magyer, senior analyst at the Motley Fool.

"You have to give some emphasis for being prepared for difficulty.  That means diversification.  You shouldn't bet heavily on one scenario.  Don't invest heavily in situations where it's a coin toss of win or loss, big winner or big loser.  Rather, invest in things that will do OK in a variety of scenarios," said Howard Marks, chairman of Oaktree Capital Management.  "Invest in companies that are not highly cyclical or highly levered.  Food/beverage/drugs, for instance, are inherently noncyclical industries.  Auto/heavy manufacturing/paper/steel, for example, are highly cyclical industries with their fates tied to the economy."

"Nobody has a crystal ball and can predict market movements with precision.  We are encouraging investors to maintain a balanced, diversified portfolio and keep a long-term perspective," advises Vanguard, America's largest 401(k) manager.

What advice do you have for investors who can't take a 10 percent hit?

"Investors can always go to cash if they're looking to avoid taking a big hit.  And if you think you can't sustain more than a 10 percent loss with your assets, then you probably shouldn't be in anything where that can happen, namely the stock market," said Magyer.  "I think selling now is reasonable if you can't sustain more than a 10 percent loss in the market. ... I understand why some people are concerned, the threat of a downgrade let alone a default is real and the impact will be painful, but I don't think the best play is to go completely conservative. ... I do think that blue chip stocks are the best play over the long-term for patient investors, particularly for retirees. ... The last place I'd want to be right now is a lot of the high-flying IPOs that have been out, so LinkedIn, Pandora, Zillow, each of those are ridiculously priced."

"If you are a small investor, there is absolutely nothing wrong with moving to the sidelines on a short-term basis to wait till the dust settles," said Hugh Johnson, chief economist at Johnson Advisors.

"We believe that market movements should not dictate your investment strategy.  If you are nervous about the stock market and are unable to withstand a severe decline, consider selling down to your sleeping point.  In other words, adjust your stock position to a level that enables you to sleep at night, but it should be a modest (not dramatic) adjustment.  But to re-emphasize, most investors should stay the course," said Vanguard.

Copyright 2011 ABC News Radio


US Dollar Hits Three-Month Low in Asian Markets -- In a sign of growing concerns over the U.S. debt crisis, the U.S. dollar index fell to a three-month low Wednesday in Asian markets.

The dollar fell to a four-month low against the Japanese yen, while marking a record low against the Australian dollar.

A board member for the Bank of Japan said failed talks in D.C. could have serious effects on Japan's financial system.  He added that he expects the finance ministry to look at whether to intervene.

The U.S. government is projected to default unless a deal is reached before next Tuesday's deadline

Copyright 2011 ABC News Radio

ABC News Radio