Read Between the Lines: The Feds Are Bankrupting Social Security So They Can Justify Stealing Your Private Retirement Money

Senate Democrats Seek New Economic Stimulus

June 22, 2011

Reuters - Democrats in the Senate on Wednesday called on Vice President Joe Biden to include new economic stimulus spending in deficit-reduction talks as a way of lowering the 9.1 percent jobless rate that is hobbling the economic recovery.

Senate Majority Leader Harry Reid made the proposal to the White House, Richard Durbin, the No. 2 Democratic senator, told reporters.

"The Republicans are fixating on the budget deficit and it's a serious problem," Durbin said.

But citing the conclusions of a presidential deficit-cutting commission that he served on last year, Durbin added,

"Get the recovery right before you get in this deficit cutting mode ... get people back to work. Let's start moving in that direction."

A senior Democratic aide said the job-creation idea Senate Democrats are now pursuing represented a pivot in the deficit-reduction negotiations.

He said the idea presented to the White House has three components to help create jobs: new infrastructure spending, a payroll tax cut and support for clean energy jobs.

He did not say how large the infrastructure spending proposal would be. In 2009, President Barack Obama won enactment of an $814 billion economic stimulus that Republicans opposed as wasteful spending.

The aide said the White House appeared to support extending the current payroll tax cut for employees, although there has been discussion on Capitol Hill of also expanding that tax cut to employers.

Biden is to return to the Senate on Wednesday for another meeting with the bipartisan group of lawmakers looking for ways to significantly reduce deficits. A deep cut in spending -- in the neighborhood of $4 trillion over a decade -- is a Republican requirement for allowing a vote to increase U.S. borrowing authority that is hitting up against a $14.3 trillion limit.

The group is facing an August 2 deadline for resolving the debt limit problem and thinks that it needs to make some decisions within the next few days in order to give the Senate and House of Representatives enough time to write and pass spending cut and debt limit legislation.

Durbin told reporters he thought that effort could become a "two-step" process containing a "serious down payment on the deficit" followed by more work on long-term savings.

"We're just not going to be able to accomplish (all of) it by August 2," Durbin said.

The Biden group has aimed to raise borrowing authority by enough to get through 2012 and next year's presidential and congressional elections.

"I hope Vice President Biden can get an agreement that takes us through the election. I don't know if he can," Durbin said.

CBO Sees Government Benefits Swamping Economy

June 22, 2011

Reuters – The United States will find little relief from its bleak long-term fiscal outlook so long as growing federal healthcare and retirement programs gobble up more and more of the country's resources, said a new economic report issued on Wednesday.

The findings by the non-partisan Congressional Budget Office came as the Obama administration and Congress were struggling to find ways to make ends meet amid $1.5 trillion annual budget deficits and a national debt that, at $14.3 trillion, is seen as posing a danger to the nation.

"The aging of the population and the rising cost of health care would cause spending on the major mandatory healthcare programs and Social Security to grow from roughly 10 percent of GDP today to about 15 percent of GDP 25 years from now," CBO said in an annual report.

By comparison, CBO noted, total federal spending, excluding interest payments on the debt, has averaged about 18.5 percent of GDP over the past 40 years.

"CBO's new long-term budget outlook again highlights the urgency of reaching agreement on a bipartisan and comprehensive long-term deficit and debt reduction plan," Senate Budget Committee Chairman Kent Conrad said.

He has been calling for about $4 trillion in long-term savings through a mix of spending cuts and tax increases.

Vice President Joe Biden and a bipartisan group of six lawmakers were to continue their negotiations on Wednesday on how to achieve enough in deficit reductions to clear the way for Congress to raise U.S. borrowing authority.

Republicans in Congress have called for a major revamp of the Medicare healthcare program for the elderly -- one that would basically privatize it with government vouchers to help cover some of the costs.

House Budget Committee Chairman Paul Ryan, the author of the Republican Medicare plan, said

The CBO report underscored that the United States was headed to an "economic crisis" that "is actively hurting job creation today, as businesses hold back on expansion out of concerns that we are headed for a future of massive tax increases and higher interest rates."

But there has been a political backlash against Ryan's Medicare plan, as it is projected to cost seniors about $6,000 more in healthcare costs annually.

Democrats, including President Barack Obama, acknowledge the need for some Medicare reforms. But in deficit-reduction talks that Biden has led since May, Democrats have put more emphasis on a combination of cutting or freezing other domestic programs coupled with select tax increases on the wealthy.

SOME OPTIMISM FOR SHORT-TERM

Unless Washington gets control of its deficit spending over time, economists worry the United States will have to pay sharply higher borrowing rates as its AAA credit rating and reputation as a rock-solid investment haven are undermined.

To keep deficits and debt from climbing to unsustainable levels, CBO said,

"Policymakers will need to increase revenues substantially as a percentage of GDP, decrease spending significantly from projected levels, or adopt some combination of those two approaches."

Similar recommendations were made last December by a presidential commission.

CBO had some optimistic words for the short-term.

"As the economy continues to recover and the policies adopted to counteract the recession phase out, budget deficits will probably decline markedly in the next few years," the budget analysis agency for Congress concluded.

But for the long-run, there was no such optimism.

CBO said that its economic and fiscal projections "understate the severity of the long-term budget problem" because they don't take into account the snowballing effects that growing debt will have on the economy or the impact of any tax increases, which could occur if Congress does not extend current low rates beyond their 2012 expiration.

The Biden group is hoping that within the next few days it can present the outlines of a deficit-reduction plan to Obama and Congress and thus clear the way for raising U.S. borrowing authority before August 2.

That is when the Treasury Department says it will run out of tools for paying its debts and government programs.

But with deep divides between Republicans and Democrats over Medicare and taxes, there is some speculation that the Biden group might have to seek a short-term debt limit increase while negotiations continue.