Unemployment

Damon Vickers, Chief Investment Officer of Nine Points Capital Partners on CNBC

Damon Vickers, Chief Investment Officer of Nine Points Capital Partners with Glenn Beck

Entitlement Spending and the Long-Term Budget Outlook

Entitlement spending is often viewed as a long-term budget challenge, but in fact such spending contributes significantly to the budget challenge facing the country during the next 10 years as well as the more distant future. CBO estimates that, if current laws remained in place, the federal deficit would shrink sharply during the next few years but would remain a little more than 3 percent of gross domestic product (GDP) between 2013 and 2019. Although the country has experienced persistent large deficits beforedeficits during the economic expansion of the 1980s averaged about 4 percent of GDP the budget challenge of the next decade will be especially acute in three respects:

Federal debt held by the public will equal about 60 percent of GDP by the end of this fiscal year, the highest level since the early 1950s. As a result, further large deficits and increases in the debt will raise serious economic risks.

The difference between current law (which underlies CBOs baseline projections) and current policy as perceived by many people (in particular, the personal income tax rates now in effect) is very large. If the 2001 and 2003 tax cuts were extended (rather than expiring at the end of 2010, as under current law), the exemption amount for the alternative minimum tax (AMT) was indexed to inflation (rather than falling back sharply, as under current law), and no other policy changes were made, the deficit would exceed 6 percent of GDP by 2019 and debt would be nearly 90 percent of GDP.

The aging of the U.S. population and rising costs for health care are making federal spending on Social Security, Medicare, and Medicaid a much larger burden relative to GDP. During the expansion of the 1980s, federal spending on those three programs stayed close to 7 percent of GDP; by 2019, CBO projects that spending on those programs will be a little below 12 percent of GDP.

Beyond the 10-year budget window, the budget outlook is even more sobering. CBOs report on the long-term budget outlook presented two scenarios one that adheres closely to current law, and one that extrapolates current policy as many people might view it (including the tax changes I mentioned earlier and federal spending apart from Social Security, Medicare, and Medicaid that stays a roughly constant share of GDP). In the latter scenario, debt continues to rise sharply relative to GDP in the 2020s and beyond.

The imbalance between spending and revenues widens in part because of the aging of the population. As the baby boomers retire during the next two decades, the number of beneficiaries of Social Security, Medicare, and Medicaid will increase significantly. The imbalance between spending and revenues also widens because, under current law, spending per beneficiary in the Medicare and Medicaid programs will probably continue to increase more rapidly than total spending and income in the economy (and thus more rapidly than the tax base that supports that spending).

I concluded the talk by emphasizing that fiscal policy is on an unsustainable path to an extent that cannot be solved by minor tinkering. The country faces a fundamental disconnect between the services the people expect the government to provide, particularly in the form of benefits for older Americans, and the tax revenues that people are willing to send to the government to finance those services. That fundamental disconnect will have to be addressed in some way if the budget is to be placed on a sustainable course.

Exclusive: Jobs ‘Saved or Created’ in Congressional Districts That Don’t Exist

Here’s a stimulus success story: In Arizona’s 15th congressional district, 30 jobs have been saved or created with just $761,420 in federal stimulus spending. At least that’s what the Web site set up by the Obama administration to track the $787 billion stimulus says.

There’s one problem, though: There is no 15th congressional district in Arizona; the state has only eight districts.

And ABC News has found many more entries for projects like this in places that are incorrectly identified.

Late Monday, officials with the Recovery Board created to track the stimulus spending, said the mistakes in crediting nonexistent congressional districts were caused by human error.

“We report what the recipients submit to us,” said Ed Pound, Communications Director for the Board.

Pound told ABC News the board receives declarations from the recipients – state governments, federal agencies and universities – of stimulus money about what program is being funded.

“Some recipients clearly don’t know what congressional district they live in, so they appear to be just throwing in any number. We expected all along that recipients would make mistakes on their congressional districts, on jobs numbers, on award amounts, and so on. Human beings make mistakes,” Pound said.

The issue has raised hackles on Capitol Hill.

Rep. David Obey, D-Wisc, who chairs the powerful House appropriations Committee, issued a paper statement demanding that the recovery.gov Web site be updated.

“The inaccuracies on recovery.gov that have come to light are outrageous and the Administration owes itself, the Congress, and every American a commitment to work night and day to correct the ludicrous mistakes.”

Gulf single currency not imminent: Kuwait minister

The planned Gulf single currency is unlikely to be launched soon as “sufficient time” is needed for preparations, Kuwait’s Finance Minister Mustafa al-Shamali said on Tuesday.

“The Gulf single currency is not happening tomorrow or the day after. It needs sufficient time,” the minister told parliament during a debate on the ratification of the Gulf monetary council pact.

Gulf states have set the start of next year to launch the single currency, but recently there have been increasing signals that the target date is unrealistic.
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