Economy & Budget

Nation in fiscal crisis faces only tough choices

Economist Mark Zandi offered a fairly optimistic forecast for the U.S. economy this week, predicting that growth would strengthen to 4 percent by year end. He added, however, that if Congress fails to raise the debt ceiling in a timely fashion, his forecast would be “blown out of the water.”

At the Bipartisan Policy Center, we have just released an independent analysis of the “on the ground” facts associated with a failure to raise the debt limit by August 2, the projected date after which the government will be unable to meet all of its spending obligations. We have tried not to understate or overstate the risks. We provide no rhetoric, no political advice and no instructions to participants in the discussion, but rather our analysis.

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Partisan politics are delaying job-creating trade pacts

Sen. Hatch delivered the following remarks at an American Enterprise Institute (AEI) event entitled "Are we falling behind on trade?"

For as long as I have had the privilege to serve the people of Utah in the Senate, the American Enterprise Institute has been at the forefront of our nation’s most critical policy debates.

Walter Berns and Robert Goldwin reminded Americans of our indebtedness to the Founding Fathers. Irving Kristol paved the way for intelligent conservative critiques of the Great Society.

And today a new generation of AEI scholars is at the forefront of conservative efforts to reform the tax code, bring sanity to our nation’s health care system, and address the entitlements that are set to bankrupt the country.


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21st century approach needed for NFIP reform

The recent Mississippi River flooding of communities and towns is a reminder that more than levees need reform and repair.  For a true 21st Century approach to flood safety, the National Flood Insurance Program (NFIP) also urgently needs a fix. It is imperative that Congress act immediately to reform the NFIP to better reflect the rising risks of flooding, shift more of this exposure from the public to the private sector, and explicitly seek to protect taxpayers nationwide.

The NFIP’s ability to provide flood insurance is in jeopardy – In fact, the program is in so much trouble that it cannot even cover its losses without borrowing from the U.S. Treasury and increasing the government’s debt burden. The NFIP’s growing $18 billion debt puts taxpayers across the country on the hook regardless of where they live. Moreover, experts warn that the NFIP’s rates and mapping fail to reflect the best available information and data regarding flood risk and might even be inadvertently encouraging homeowners to put their families in harm’s way.

Fortunately, Congress has taken notice. Recently, the House Financial Services Committee on a bipartisan, unanimous basis approved reform legislation offered by Rep. Judy Biggert (R-Ill.), which would begin the process of fixing the NFIP. Though the legislation is a solid first step, its reinsurance provisions must be strengthened to restore soundness and fairness to this broken program. 

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McConnell invites president to the Capitol

U.S. Senate Republican Leader Mitch McConnell made the following remarks on the Senate floor Thursday inviting the president to come to the Capitol and discuss his plans to raise hundreds of billions in job-killing tax hikes:

I'd like to say a word about the president's press conference yesterday.

What I heard him propose is that we solve the debt crisis by spending more money. And that we solve a jobs crisis by raising taxes.

I want to know: Is there a single member of Congress — Democrat or Republican — who thinks it's a good idea to raise hundreds of billions in new job-killing taxes at a time when 14 million Americans are out of work? If so, I haven't heard from any of them.

But that's what the president was trying to defend yesterday.

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Don't leave small business behind

The recent gloomy economic forecasts from the Federal Reserve and Goldman Sachs have solidified a consensus that the economy is just treading water. Goldman’s downgrade from 3 percent to 2 percent GDP growth for this quarter would nearly match last quarter’s anemic 1.8 percent growth rate if it bears out. The economy is growing at half the rate President Obama’s first budget projected it would this year. But the slowdown is not the whole story – it encompasses, to borrow a phrase, two Americas: big business which has enjoyed a legitimate recovery and small business which hasn’t had much to show for it.

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A Charlie Brown Congress?

Lucy is at it again. “I’ll hold the ball, and you come running and kick it,” Lucy tells Charlie Brown.

We all know what to expect. Charlie Brown will run to kick the football and Lucy will pull it away...again. Charlie will fall flat on his back.

This gag is playing out right now in Congress. U.S. multinational corporations (aka Lucy) are holding hundreds of billions of dollars in profits overseas to avoid paying U.S. taxes. They want Congress (aka Charlie Brown) to let them bring those dollars back to the U.S. without paying hardly any taxes (Congress committing to kick the ball) in the belief they will invest them in production and hiring here at home (the football flying through the air instead of Charlie). 

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All eyes on Panetta to cut defense spending

All eyes this week are on incoming Defense Secretary Leon Panetta, whose predecessor departed from business-as-usual to suggest the Pentagon should not be immune from budget scrutiny. Even the mere suggestion that the military should not be given carte blanche represents a colossal step forward in the country’s fiscal discussion, but Secretary Robert Gates has set the bar on the defense spending debate by suggesting the President’s plan to cut $400 billion over twelve years represents what will be a paradigm shift on military budgets. 

It should be stated that for anyone but the Pentagon this would not be considered a particularly tall order. Pentagon spending is expected to total over $6 trillion in the next ten years, and that’s assuming current policy disengaging from the Middle East.

Enjoying a 65 percent increase in its base budget over the last decade, the Department of Defense is a notorious home for political favoritism and wasteful spending. This casts downward pressure on spending on legitimate national security causes, a constraint Secretary Gates spent his last few days as the acting chief Pentagon official warning against. His departure, and Leon Panetta’s ascendance to the position, marks an opportunity to reform the taxpayer munificence bestowed upon the Pentagon at a cost of over a trillion over the last decade.

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Broke or balanced – that’s the choice

U.S. Senate Republican Leader Mitch McConnell made the following remarks on the Senate floor Wednesday in which he contrasted the Democrats’ plan to spend and tax more with  a Republican call to pass a Balanced Budget Amendment:

Over the past several days, the American people have watched a serious debate unfold in Washington about our nation’s debt and about the future of our economy. And for many, that debate has been extremely illuminating. It’s done a lot to clarify where the two major parties stand. Both sides agree that our deficits and our debt are unsustainable. But, beyond that, the differences are stark.

Republicans believe that if you increase spending to the point that you can no longer pay the bills, then you need to find a way to cut costs. Democrats seem to think that if you increase spending to the point that you can no longer pay the bills, you need to find other people to pick up the tab.

This is the fundamental difference between the two parties in this debate: Republicans think that Democrats should be held accountable for the way they’ve mismanaged the national checkbook over the past two years, and Democrats seem to think taxpayers should take the hit.

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No "plan B" to avoid Greek economic default

This week Greece faces a critical juncture. Both the future of the country and financial stability in Europe are at stake. I fully respect the prerogatives and the sovereignty of the Greek Parliament in the ongoing debate. And I trust that the Greek political leaders are fully aware of the responsibility that lies on their shoulders to avoid default.

The only way to avoid immediate default is for Parliament to endorse the revised economic programme. The programme includes both the medium-term fiscal strategy and the privatisation programme. They must be approved if the next tranche of financial assistance is to be released.

To those who speculate about other options, let me say this clearly: there is no Plan B to avoid default.

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How should government treat energy producers?

As the economy continues in its downward spiral and talks in Congress about reducing spending have only amounted to political theater, the subject of how the tax code treats energy has become a topic of controversy. Specifically, should we subsidize, enforce mandates, or give tax credits and deductions to industries like ethanol and natural gas? Having a thriving energy market domestically is a good thing and something the government should not hinder. Not only would decreasing our dependence on foreign oil simplify our foreign policy, but it would greatly enhance our anemic economy at home.

Of course, the government should neither inhibit nor subsidize any particular type of energy. While many people agree with that statement, there is much confusion over the difference between government subsidies and tax credits or deductions. The difference is night and day, yet so many times they are all lumped together as evil government handouts. 

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