Tag Archive | "House Of Representatives"

Tags: , , , , , , , , , , , , , , , , , , ,

The Financial Cliff

The pressure is on in Washington. With President Obama returning to office and signs that some Republicans understand that the party’s ultra-conservative mindset does not resonate with the majority of Americans, it would seem the stage is set for meaningful solutions about the country’s bludgeoning debt. Congress will either follow the Obama lead or the country will fall off the fiscal cliff on December 31. 2012.

Given the erratic record of the Republican House, Americans are edgy about the possibility of a solution to a dilemma that could sink the economy. There is no historical support to think that Congress can coordinate a long-term solution to this pressing problem and place the country’s best interests ahead of their personal own politics.

The House of Representatives will once again attempt to hold Americans hostage, but this time they are negotiating with a President who will not be running for another term and who is committed to represent the middle class, or what is left of it. Analysts have suggested that a temporary debt reduction plan might be implemented but this would be the ultimate kick the can strategy. Americans expect meaningful action.

Three Wings of Fiscal Cliff

The fiscal cliff includes three main components. The temporary payroll tax reduction, the expiration of the Bush Tax cuts and $600 billion in spending cuts are in place to activate on the last day of the year. If negotiations about a remedy are not successful, every American taxpayer will have a heavier burden next year. This will dramatically cut back on consumer spending and severely hurt the Gross Domestic Product (GDP).

The payroll tax reduction has helped many Americans survive the recession and timid recovery. This reduction will most definitely expire.

The $600 billion cuts will cause loss of jobs and send shock waves through the economy. If a debt reduction plan is not in place by December 31, the defense department will suffer the biggest cutbacks.

Bigger Package Needed

As important as avoiding the fiscal cliff is, the country needs a substantial debt reduction plan. The most viable framework for a meaningful debt reduction initiative is the Simpson-Bowles, $4.6 trillion plan. While Simpson-Bowles is an aggressive approach to reduce the deficit, the country needs an even deeper plan.

Americans are exhausted with the dysfunction that has come to symbolize Washington. At a time when the US needs a balanced approach to reduce the debt, the Republican based Grover Norquist Pledge which opposes all legislation with a tax increase, could be the biggest fly in the ointment.

Two other flies in the ointment are Republican Vice Presidential candidate Paul Ryan, whose fiscal approach probably cost Mitt Romney the Presidency and Republican leader of the House, Eric Cantor. Cantor and Ryan have signed the pledge and cannot be relied upon to have any meaningful input in the negotiations. Frankly, the country would be better off if these two thugs were not re-elected.

The only hope to get a substantial deficit reduction plan in place lies with moderate Republicans, a dying breed in Washington. There are signs that the Senate is agreeable to a plan that crosses the aisle. The Congressional Budget Office reports that if a remedy for the fiscal cliff is not resolved, the economy will shrink by 0.5 percent during 2013. More importantly it is very possible that 5 million or more jobs will be lost in 2013, an outcome that apparently is acceptable to Cantor and Ryan. The country will find itself in a deeper recession than the previous recession.

David Cote, CEO of Honeywell explained the intense need for cooperation and action. “If the last debt ceiling discussion was playing with fire, this time they’re playing with nitroglycerin. If they go off the cliff, I think it would spark a recession that’s a lot bigger than economists think. Some think it would just be a small fire. I think it could turn into a conflagration.”

On Wednesday, President Obama met with a number of CEOs. Many of these CEOs are unsympathetic to the gridlock in Congress. Several major corporations have said they are hoarding cash and unwilling to invest in the US in the current political and economic climate. That possibility is another consequence of the fiscal cliff. Some of the country’s biggest corporations will invest in enterprises in other countries.

When the Bush Tax Cuts were introduced as a temporary tax reduction plan. They have been renewed every year since. The President ran on a platform of increasing the tax rate for workers who earn $250,000 or more. Ryan and Cantor are vehemently opposed to this approach despite the fact that many of the country’s wealthiest individuals have said they were amenable to the proposal.

Republicans favor changing the deductions, such as the interest paid on mortgages and other changes to add revenue. At a time when the country desperately needs positive news on the housing crisis, eliminating the deduction for interest would cripple the housing market further.

Just as Republicans did during the election, they continue to step on themselves. MSNBC reported that 60 percent of persons interviewed in exit polls favored tax increases for the nation’s wealthy. It is time for Congress to put their differences aside and negotiate in good faith for a long-term solution.

Forex Trading Articles by Forex Blog & Online Forex Trading

Posted in Forex Trading NewsComments Off on The Financial Cliff

Tags: , , , , , , , , , , , , , , , , , , ,

Budget Differences Threaten Government Shutdown

After a meeting between key Republicans and Democrats at the White House fell apart, President Obama alerted various federal government agencies to prepare for a shutdown effective Friday.  The shutdown will be caused by the failure of Republicans and Democrats to reach an agreement on the long overdue 2011 budget.  The budget has six months remaining.  

The Obama Administration warns that a shutdown would be a monumental setback to the country’s economic recovery, an event that the world is watching with interest.  The consequences of such action would cause massive delays and disruptions to taxpayers and businesses as well as thousands upon thousands of unemployed federal workers.

Political posturing makes the rigid Republicans look like they do not care about the operation of the federal government or the consequences of a shutdown. 

The possible shutdown reflects the widening and bitter differences between Democrats and Republicans.  All the while, there seem deeper than usual differences within the Republican party.  Traditional conservative Republicans, like Speaker Boehner, are being confronted by the ultra-conservative Tea Party Republicans, many of whom were elected on a promise of change. 

The quest for fiscal change has met reality squarely and the federal government is the hostage. 

In December, Republicans held the Administration hostage over a proposed extension of the Bush Tax Cuts, which the Administration did not favor.  At that time, Republicans would not agree to the extension of unemployment benefits for millions of Americans unless the  Bush Tax Cuts were extended.

Should Boehner Step Aside?

The House of Representatives Majority Speaker, John Boehner, discussed the failure of the two parties to reach an agreement and disputed the Administration’s report that he had originally agreed to cuts totaling $33 billion.  The Speaker said deeper cuts were necessary.   

President Obama has agreed to $33 billion in cuts, the largest budget reduction on record.  The President is frustrated that most federal government operations will cease if the two sides do not come to an agreement and that Boehner has now upped the ante.

Of  late, Boehner has adopted a more stringent line of rhetoric that indicates the United States does not have a revenue problem, but does have a spending problem.  This is a popular line from Tea Party advocates.  Not coincidentally, the Republican cuts virtually go after every Obama initiative including the President’s health care program. 

At this time, Boehner’s position is difficult to defend because the politicians are arguing about a budget that has been in place for six months and the Democrats have met the reported $33 billion number originally offered by the Speaker.  What now exists is a disagreement over an acceptable amount to be trimmed from the 2011 budget and where the cuts must be applied.  There is six months to put an acceptable 2012 budget in place.  

Michele Bachmann, a possible Tea Party candidate for President, has said her goal is to deny Obama a second term.  This popular Tea Party theme appears a driving force in the Republican Party.  The Tea Party is a powerful block within the Republican Party and is a block that Boehner apparently cannot control.

With wars in Afghanistan and a presence in Iraq and the new action in Libya, a shutdown of the federal government hardly seems appropriate.  Boehner needs to tearfully step aside as Speaker of the House or take control of his Party.  Either way, it is time for the Speaker to man-up.   

To untangle the gridlock between ideology and politics, it is time for compromise

The Differences

Most taxpayers agree that deep cuts are necessary, but believe these issues are best discussed and debated in the upcoming October budget for 2012.  A budget proposal program from the Chairman of the House Budget Committee Paul Ryan was unveiled today.  This will certainly set the stage for great debate before October.

The Ryan proposal has incorporated some components of the Bowles-Simpson report issued in late 2010.  Ryan’s budget would trim the deficit by $4 Trillion over the next decade and balance the budget in twenty years.

However, the issue at hand is 2011 budget cuts and the operation of government.  Many Republicans are using the term “government slowdown” to describe what will actually happen on Friday.  Tea Party activists have no problem with the “slowdown.”

The budget tussle is focused on the 14 percent that Congress approves for domestic projects each year.  Republicans want to address the discretionary spending set by Congress because it would establish a lower baseline for the future.

These are the Republican demands. 

  • Deeper cuts than the $33 billion approved by Democrats. 
  • Many of the cuts would target many of the Obama Initiatives. 
  • The Republican plan would increase defense spending by about $8 billion.

What no body wants to talk about is referred to as the Big Three; Social Security, the Medicare health plan for retirees, and Medicaid for the poor.  Ryan’s plan and the Bowles-Simpson report do address these issues.  Although Ryan indicated there would be no changes for people receiving benefits now, Americans should expect changes to begin in the next fiscal year.

In Washington, change is the word.  Perhaps politicians need to put Compromise back in their political dictionaries.  The American debt problem is deep and aggravating.  But, as every businessman knows, sometimes you have to give a little to start the ball rolling.  The time is now and the eyes of the world are on Washington.





Forex Trading Articles by Forex Blog & Online Forex Trading

Posted in Forex Trading NewsComments Off on Budget Differences Threaten Government Shutdown

Tags: , , , , , , , , , , , , , , , , , , ,

The Worst Congress Ever?

On Thursday the House of Representatives followed the Senate’s lead and passed what will be called the Obama Tax Cut program.  The mixed messages from Democrats in the House quietly dissipated as the bill passed by a 277 – 148 vote, silencing critics from inside the President’s own party.

In what has boiled down to class warfare, high income Americans with strong backing from Senate Republicans won the day.  Republicans dictated an all or nothing position with the fate of 2 million unemployed Americans and another 5 million, whose benefits will expire in 2011, in jeopardy. 

The tax cut program will add another $858 billion to the federal deficit, which now has closed in on $14 trillion. When Bill Clinton left office ten years ago, President George Bush was handed a national surplus. Polls show that the majority of Americans supported passage of the new tax cuts but with the fate of so many unemployed in the balance, polling is slanted.

In any case, the highest earning Americans will continue to prosper and create an even greater divide between the classes.  The tax cut was approved reluctantly by President Obama and represents a high stakes gamble to boost the sagging economy.

In theory, high income Americans will continue to fuel the economy by investing in the country’s economy while Americans with restored unemployment benefits will spend their survival money on American made goods and services.

Riding a wave of success in November elections, the Republicans used effective bullying tactics to win the day.  However, the November elections should not be taken as an endorsement of the Republican Party but more as a signal that Americans are bitter and angry about the way the nation’s business is being handled in Washington.

At a time when Republicans are dancing in the street, the population is wondering if the current Congress is the worst in the history of the country. For two years, Republicans created gridlock, blocking any number of initiatives and offering no solutions until they had their hands squarely on the unemployed and could dictate legislation.

As the classes continue to divide by wider margins, voters are left to either take to the streets or leave their fate in the hands of egotistical, divisive politicians who have little contact with the real world.  The stakes are high as the U.S. wavers on the brink of becoming a second-class economy.

Sink or Swim Tax Cuts

In efforts to make a bad situation better, Treasury Secretary Timothy Geithner said, “This legislation is good for growth, good for jobs, good for working and middle class families and good for businesses looking to invest and expand their workforce.”  Geithner was part of the President’s team to resolve the tax cut dilemma.

Swayed to affirm the tax cut proposal, Democratic Representative Jane Harman explained, “If it works well, our economic growth rate should go up at least a full point next year.  That is worth taking this bet.”

Favoring tighter fiscal constraints, many economists and fiscal conservatives disagree.  IMF Managing Director Dominique Strauss-Kahn agreed that growth for the U.S. was critical but tempered his support saying, “But, having in mind always that there is no free lunch.  And, so what you do today has to be repaid later on.  And, you cannot just do it now without saying “How are you going to repay it?”

Strauss-Kahn speaks for a majority of Americans but a minority of Washington politicians.  The next obstacle promises to be the President’s budget and the increase of the nation’s debt ceiling.

As Republicans will control the House and Democrats the Senate, the promise of gridlock continues.  The new Congress will have to deal with the budget as early as February.  The incoming politicians are committed to fiscal conservatism and addressing the hard reality ahead.

In the wake of the tax cut debate, the Simpson-Bowles plan to trim the deficit has gained stronger than expected support.  Certain aspects of the stalwart report, which will impact every aspect of American life, may well be included in the new budget.

Heritage Foundation fellow Brian Riedl said, “Republicans have made clear they are going to push for significant spending reductions next year,” That sounds well and good but actions speak louder than words.  This year’s Congressional Republicans have hung America’s hat on tax cuts that have done little to improve the economy over the past ten years.

Bowles – Simpson Path to Success

The bi-partisan commission to trim the deficit was co-chaired by former Senator Republican Alan Simpson and Clinton Chief of Staff Erskine Bowles.  The report required ratification by 14 of the 18 members on the panel before it could be submitted to Congress.  In other words, it was doomed to never reach the floor.

However, few can question the 39 broad point recommendations from the committee whose co-chairs have no political ambitions.  Quite simply, the committee leadership provided an unbiased report that begins to eliminate federal spending immediately and which addresses Medicare and Social Security changes down the road.

The Simpson-Bowles Report would cut the deficit by nearly $4 trillion over the next decade and keep the deficit at 2.3 percent of gross domestic product (GDP) by 2.3 percent.  In 2009, the deficit was 8.9 percent of GDP and heading higher.

The report outlines cuts necessary to stabilize growth in the national debt by 2014 and reducing net debt, excluding Medicare and Social Security, to 60 percent of GDP by 2023 and 40 percent by 2035.  National debt is projected to rise to 68.9 percent by 2011.

The Simpson – Bowles Report does what no politicians have done and squarely faces the mounting deficit issue.  The report takes Washington’s political will out of the picture and provides a blueprint for fiscal redemption. 

There is a lot of pain in Simpson – Bowles.  Deep cuts would take place across the board and some defense spending is targeted immediately.  Simpson and Bowles have served the nation well and have pleaded their case publicly.  The question is, “Are the lights on in Washington?  Is anybody listening?”

Forex Trading Articles by Forex Blog & Online Forex Trading

Posted in Forex Trading NewsComments Off on The Worst Congress Ever?