BA Spending Daily August 17, 2012

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Heart of the Debate: How to Fix Medicare
The Associated Press reports, “President Barack Obama and Republican rival Mitt Romney agree there has to be a limit to how much seniors pay for Medicare, but they’re worlds apart on how to make that happen. You wouldn’t know it from the accusations they hurl on the campaign trail, but that is the real heart of the argument between the two leaders and their political parties. There will be consequences for seniors and the nation’s health care industry no matter which way the debate is decided, because both sides agree Medicare spending must be controlled.”
Pension Liabilities Exposed Through New Rules 
The Washington Post reports, “Already-strapped state and local governments are coming under increasing pressure to reduce pension benefits or increase taxpayer contributions that help pay for them because of new rules that would require them to report those obligations more honestly, advocates say. The latest rules come on line from the bond-rating firm Moody’s at the end of this month. They are projected to triple the gap between what states and municipalities report they have in their funds and what they have promised to pay out to retirees. That hole would stand at $2.2 trillion. … More likely, public workers may have to contribute more to their retirements or see promised benefits curtailed, measures that have already been implemented in more than 40 states. … The new rules come at a difficult time for state and local governments struggling with weakened tax revenue and stronger demand for services in the wake of the recession. In addition, states and localities face the prospect of substantial reductions in aid from the federal government beginning in January unless Congress and the White House come up with an alternative to automatic budget cuts.”
Obama’s Job Creation Effort: $470M for Road, Bridge Repair 
The Associated Press reports, “The Obama administration is making nearly half a billion dollars in unspent highway funds available to states that promise to use the money to create jobs and improve transportation. A White House official says Transportation Secretary Ray LaHood will announce Friday that more than $470 million will be made immediately available for projects such as repairing crumbling roads and bridges. The official spoke on condition of anonymity because the plan has not been publicly announced. The move is part of President Barack Obama’s election-year effort to sidestep Congress with programs which Obama says will create jobs. … The money initially was allocated to the Transportation Department for special projects known as earmarks from 2003 to 2006. The Republican-controlled House has since banned earmarks, which are provisions tucked into bills which direct taxpayer dollars to lawmakers’ pet projects. Obama has vowed to veto any bill that includes earmarks and has supported efforts by lawmakers in both parties to permanently ban the practice.”
Increase in Greek Debt 
The Associated Press reports, “Greece’s Finance Ministry says the country’s total central government debt stood at €303.5 billion ($372.67 billion) at the end of July 2012, up from €280.2 billion at the end of the first three months of this year. The country has been struggling with a severe financial crisis since late 2009, and is dependent on international rescue loans from the International Monetary Fund and other European countries that use the euro. In return for billions of euros in loans, Greece has imposed stringent austerity measures in an effort to make its debt sustainable and allow it to return to borrowing on the market, from which it has been barred by sky-high interest rates.”
WSJ: Treasury to Amend Terms of Fannie, Freddie Bailout
The Wall Street Journal reports, “The Treasury Department is preparing to revamp the terms of its nearly four-year-old financial backing of Fannie Mae and Freddie Mac FMCC 0.00% in a bid to allay investor concerns that the companies could one day exhaust their federal lifelines, according to government officials familiar with the plans. The renegotiated agreements, which could be announced as soon as Friday, would change the way the firms pay the government for its support … Currently, the government-controlled mortgage-finance companies make 10% dividend payments to the Treasury every quarter, an arrangement that has forced them to borrow money from the government during periods where they don’t turn a large profit. Under the new arrangement between Treasury and the companies’ federal regulator, all the firms’ quarterly profits would be turned over to the government as a dividend payment; the government wouldn’t require such payments in periods when the firms are unprofitable.”
Fed Action Might Mean Only “minimal long-term benefit”
The Wall Street Journal reports, “The Federal Reserve’s ‘hawks’ are speaking out against additional action by the central bank to spur the economy. The Fed has moved despite this group’s opposition before. Thus, the new comments don’t represent a signal from the central bank that it is backing away from its statement earlier this month that it might act. But the remarks do highlight the complicated decision Fed policy makers face as they consider whether to launch a new bond-buying program, known as quantitative easing… Charles Plosser, president of the Federal Reserve Bank of Philadelphia, said in an interview Wednesday with The Wall Street Journal that additional action by the Fed would be of minimal long-term benefit to the economy. Moreover, he said, the Fed could do little on its own to address problems out of its control that are holding back growth, including public uncertainty about government budgets in Europe and the U.S.”
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