BA Spending Daily August 30, 2012

ICYMI: The Distractions Aren’t Working
Gretchen Hamel, executive director of Public Notice, editorializes on FoxNews.com, “Can we be honest? Let’s cut through the spin and the rhetoric and look at what the American public have to say about their concerns as voters.  Every day you hear about another random issue or gaffe that is completely unrelated to what’s really on the minds of families and small businesses across the nation. But the distractions aren’t working.   A recent Public Notice poll, conducted by the  Tarrance Group from August 19-23, 2012, found that after more than a year of campaigning the top issues for voters are still jobs and the economy, followed by debt and government spending. … Not only are Americans concerned about the debt, but an overwhelming majority understand the impact it has on the economy and their families.  It doesn’t take an economist to recognize that $16 trillion in debt is holding back the economy. … Both parties would do well to drop the distractions and keep the last two months of the campaign focused on the issues that matter.  We can’t afford to put this conversation off any longer.”

Shadow of Debt Looms Large at the RNC
Hamel also writes in BlogHer, “It won’t be easy to reduce the debt, but the solutions are simple. Lawmakers must reduce government spending and enact policies that will truly encourage economic growth. After all, why would we give Washington another dollar until it can show us it can spend them wisely? It’s like a teen with a bad shopping habit. A parent wouldn’t support the habit by continuing to give the teen more money, so why would we as Americans willingly give our government more money when history showsit will just squander it?”

WSJ: A Downgrade for Illinois
The Wall Street Journal notes that Illinois is second only to California with the worst credit rating in the U.S.  In the editorial, “A Downgrade for Illinois,” the WSJ writes, “In recent years a wave of new reform Governors has washed over the Midwest, but it did skip a few states. Among them is Illinois, which now has the worst credit rating of any state besides California. Voters may want to pay attention. On Tuesday, Standard & Poor’s downgraded Illinois bonds to A from A-plus, with a continuing negative outlook. The credit rating agency singled out five years of budget deficits ranging from bad to worse to way worse. It now stands at $44 billion—another national record.”

Second Quarter Growth Revised Up, Outlook Still Uncertain
Reuters reports, “The economy fared slightly better than initially thought in the second quarter, but the pace of growth remained too slow to shut the door on further monetary easing from the Federal Reserve. Gross domestic product expanded at a 1.7 percent annual rate, the Commerce Department said on Wednesday, as stronger export growth offset a pull-back in restocking by businesses wary of sluggish domestic demand. While that was an improvement on the government’s first estimate of 1.5 percent published last month and the composition of growth was fairly favorable, it was insufficient to cut into an unemployment rate that ticked up to 8.3 percent in July. The lack of stronger job growth, along with the uncertainty stemming from Europe’s debt crisis and fears of big U.S. government spending cuts and tax hikes in 2013, could compel the U.S. central bank to offer additional stimulus by year end.”

“Time to Get Serious on Medicare”
In a column in the Wall Street Journal, David Wessel writes, “Can we talk seriously about Medicare? … Any lasting deficit fix requires restraining health spending. On that there is bipartisan agreement. But Medicare will cost more than it does today no matter what: The ranks of Americans over age 65 will grow by one-third over the next decade. Health costs will climb faster than other expenses. The issue is how much more. … By CBO estimates, budgets crafted by Mr. Obama and by Mr. Romney’s running mate, Rep. Paul Ryan (R., Wis.), would spend 3.5% of GDP on Medicare 10 years from now. That’s half a percentage point less than it would take to maintain the status quo. … But neither side argues that Medicare is on sustainable trajectory; both would ‘cut’ it. The debate that the candidates ought to be having is the best way to spend less on Medicare, rather than hurling accusations at each other.”

Economic Confidence Falls in Euro Area
Bloomberg reports, “Economic confidence in the euro area fell more than economists forecast in August as leaders struggled to rein in the sovereign debt crisis and the region’s slump deepened. An index of executive and consumer sentiment in the 17- nation euro area dropped to 86.1 from 87.9 in July, the European Commission in Brussels said today. That’s the lowest since August 2009. Economists had forecast a decline to 87.5, the median of 26 estimates in a Bloomberg News survey showed. … European consumers and executives are growing more pessimistic about the outlook as officials try to contain the debt turmoil that’s showing little sign of abating. Spanish Prime Minister Mariano Rajoy meets with French President Francois Hollande today as he considers seeking a second European bailout.”

Americans Paying Down Debt (Too Bad Washington Isn’t Doing the Same)
The Wall Street Journal reports, “Americans continued to whittle down their debt during the second quarter, a process that has weighed on the recovery but could free it to gain momentum in the future. Total U.S. household debt fell by 0.5% in the April-to-June period from the previous quarter to $11.38 trillion, the Federal Reserve Bank of New York said Wednesday. … Household debt peaked in the fall of 2008 and has fallen nearly every quarter since, by a total tally of almost $1.3 trillion.This reduction in household debt leaves consumers with less cash to buy houses, cars as well as other goods and services, putting a damper on immediate economic growth. On Wednesday, the Commerce Department reported that the economy expanded at a meager 1.7% annual rate during the second quarter, barely better than the government’s earlier 1.5% estimate. The debt-reduction process, however, could fuel more robust growth in the future by putting consumers on a sounder financial footing.”