The Congressional Budget Office is contributing to this political drama by declaring this week that the "federal budget is on an unsustainable path." Of course, but why? The biggest reason is that Medicare and Medicaid keep rising at two to three times the rate of everything else in the economy and, as CBO explains, will eventually take up every dollar of tax revenues raised, leaving no money for anything else, including national defense.
This we have shown is wrong. The biggest eater of dollars by far is Homeland Security. If all else fails look at the facts. And there is no explanation.
Then one of the comments states:
I was surprised to read that "White House economists believe that taxes have little effect on growth." Just a few days ago I received the June 2010 issue of the American Economic Review, the flagship journal of academic economics. The current issue contains an article by CEA Chair Christina Romer and her husband David Romer on the macroeconomic effects of tax changes. Their paper examines "all major postwar tax policy actions" and concludes that "tax increases are highly contractionary." For emphasis, the authors add that this finding is both "strongly significant" and "highly robust."
Could it be that the White House economic team is suffering a bit of cognitive dissonance?
No, it is Ms Romer. She went into the office having been on record with her husband that if the multiplier existed it was higher in the private sector than the public, then she changed that position and put out a benchmark for the Stimulus, then she denied she did that and in her "chuckles" like manner tells the Senate she never did it, she never set a benchmark, when it is in writing and we have been following her monthly, then we get this. Cognitive Dissonance, not quite, it is Washington and the inability to deal with the truth or even find it.
A telling statement from, in my opinion based upon my observations, the left leaning Quinnipiac University Poll in today's WSJ states:
The U.S. economy has continued to flounder, and surely that is part of the reason for the president’s decreased standing. But the disillusionment with the president’s handling of the economy stems from the same public skepticism about the role of government in economic policy as in health care.
If Quinnipiac says this then the reality may possibly be even stronger. When talking with people on the street, especially those who voted for the Administration last time, they are in near total revolt, two issues, health care and economy. We cannot have the US lose as much as the Harvard endowment ... perhaps we need a change of a few staff ...
When the CBO states the following:
The federal government incurred a deficit of just over $1.0 trillion for the first nine months of fiscal year 2010, CBO estimates, $81 billion less than the roughly $1.1 trillion deficit incurred through June 2009. Revenues so far this year are slightly higher than they were last year at this time; outlays are about 3 percent lower.
And where is the money going? Well CBO states:
Outlays were $11 billion higher in June than in the same month last year, CBO estimates. Outlays for the Troubled Asset Relief Program (TARP) and Fannie Mae and Freddie Mac were, in total, about $19 billion lower this June than in June 2009—but other spending was up by about $30 billion. Outlays increased by $5 billion for the Federal Deposit Insurance Corporation and by $3 billion each for defense and for health programs. Spending for Social Security benefits and veterans’ programs increased by $2 billion each. In addition, the National Railroad Retirement Investment Trust lost more than $1 billion on its investment portfolio in June 2010; a year ago, it earned about $1 billion....
Spending for unemployment benefits increased by almost 50 percent, or $41 billion. Outlays for Medicaid and Medicare rose by $17 billion (or 9 percent) and $14 billion (or 4 percent), respectively. Payments for Social Security benefits increased by $30 billion (or 6 percent). Defense spending also was up by about 6 percent—$27 billion.
Why the 9% Medicare change? I can see the 6% SS due to population changes and the same would apply to Medicare, but is it a 3% inflation plus a 6% annual population growth... It seems that the press focuses on the total and not on the separate elements.
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