Spending Daily | September 28, 2012
Following Congressional Delays, “U.S. Postal Service to Default on Second $5.6B Payment”
The Associated Press reports, “The U.S. Postal Service, on the brink of default on a second multibillion-dollar payment it can’t afford to pay, is sounding a new cautionary note that having squeezed out all the cost savings within its power, the mail agency’s viability now lies almost entirely with Congress. In an interview, Postmaster General Patrick Donahoe said the mail agency will be forced to miss the $5.6 billion payment due to the Treasury on Sunday, its second default in as many months. Congress has left Washington until after the November elections, without approving a postal fix. For more than a year, the Postal Service has been seeking legislation that would allow it to eliminate Saturday mail delivery and reduce its $5 billion annual payment for future retiree health benefits. … ‘Absolutely, we would be profitable right now,’ Donahoe told The Associated Press, when asked whether congressional delays were to blame for much of the postal losses, expected to reach a record $15 billion this year. He said the two missed payments totaling $11.1 billion for future retiree health benefits – payments ordered by Congress in 2006 that no other government agency or business is required to make – along with similar expenses make up the bulk of the annual loss.”
America Faces Economic Crisis in November No Matter Who Wins
Bloomberg reports, “Whoever wins the presidency will contend with a budget on a trajectory dubbed unsustainable by Federal Reserve Chairman Ben S. Bernanke. Barack Obama or Mitt Romney will have to tame a deficit that has topped $1 trillion in each of the past three years, Bloomberg Markets magazine reports in its November issue. How the new president goes about it will influence the direction of financial markets and define the economy and society for his four-year term and beyond.” America has reached the “Reinhart-Rogoff” threshold which is when central government debt exceeds 90 percent of annual GDP. This threshold has historically been an indicator of trouble to come. “Gross federal debt has exceeded 90 percent of GDP for the past two years and is projected to remain above that level through 2017 at least, according to the White House’s Office of Management and Budget. Even publicly held debt, which excludes the special-issue securities held by the Social Security trust fund and other government agencies, reached 68 percent of GDP in 2011.” High unemployment, the fiscal cliff, and rising debt all add to an economic crisis that Americans will face regardless of who wins in November.
Economy Down But Confidence Up?
Robert J. Samuelson editorializes in the Washington Post, “With less than six weeks to the election, President Obama is benefiting from a curious paradox. Although the economy remains weak by most indicators, consumer optimism has registered a distinct, though modest, gain. … Economist Gail Fosler, a consultant who once headed the Conference Board, attributes the improvement to ‘the combination of [a higher] stock market and rising housing prices. People are beginning to see houses move in their neighborhood.’ … Still, downbeat economic indicators abound. On Thursday, the Commerce Department lowered its estimate of economic growth for the March-June quarter from an already-weak 1.7 percent to an anemic 1.3 percent. … As troubling, the government reported on Thursday a steep 13.2 percent drop in orders for durable goods — machinery, vehicles, computers, telecommunications equipment — in August. … And overall shipments to customers fell 3 percent, the largest decline since January 2009 at the depth of the Great Recession.”
Panetta Seeks “whatever the hell deal” Over Sequestration
The Hill reports, “Defense Secretary Leon Panetta on Thursday said he’d take any deal that would avoid across-the-board cuts to defense spending. Lawmakers have begun floating short-term agreements to stop the $500 billion in defense cuts known as sequestration from beginning in January amid concerns they won’t be able to strike a ‘grand bargain’ on taxes and spending. ‘I’ll take whatever the hell deal they can make right now to deal with sequestration,’ Panetta said. He said the problem now was Congress had ‘left town’ for the election. ‘All of this has now been put off into the lame-duck session,’ Panetta said.”
Economic Rain Delay
The New York Times reports, “The Commerce Department said Thursday that the United States economy grew at an annual pace of just 1.3 percent in the second quarter of the year, showing that the recovery came close to stalling in the spring. The revision was down from the 1.7 percent rate the government reported in August. The economy grew at a 2 percent pace in the first quarter of the year and 3 percent at the end of 2011. … Thursday’s report underscored that the recovery has proved insufficient to pull down the unemployment rate, which has been stuck between 8.1 percent and 8.3 percent all year. The renewed weakness this month spurred the Federal Reserve to act to support the economy, putting in place a third major round of bond purchases designed to aid the nascent housing recovery and to encourage employers to add jobs.”
Obama Comments on Deficit Found False
PolitiFact reports, ”In an interview with CBS’s 60 Minutes that aired on Sept. 23, 2012, President Barack Obama blamed the Bush administration for much of the nation’s recent debt. …To figure out what caused the accumulation of deficits over the past decade, CBO tracked the surplus it had projected back in 2001 and compared it to the actual cumulative deficits that resulted instead. Between 2002 and 2011, the government was projected to run a cumulative surplus of $5.6 trillion. Instead, the government ran a cumulative deficit of $6.1 trillion. That’s a swing of about $11.7 trillion. … Over this period, 38 percent of the swing comes from spending, 20 percent from tax cuts, 14 percent from interest increases and 28 percent from faulty CBO projections. Using Obama’s strict definition of what laws count as ‘Bush’s’ and ‘Obama’s,’ about 17 percent of this swing is attributable to Obama, not 10 percent.”
“Democrats make hay out of stalled farm bill”
According to The Hill, “Democrats are using the stalled farm bill to hammer their GOP opponents in congressional races across the country. The legislation, which provides subsidy and aid to farmers nationwide, as well as authorizes funding for a number of nutritional programs, expires on Sept. 30. The Senate was able to pass a bill, but House Speaker John Boehner (R-Ohio) said late last week that the House would have to wait until after the election to pick back up on the legislation, despite a flurry of last-minute activity from lawmakers on both sides of the aisle in an attempt to bring it to the floor. Democrats in states where agriculture plays a large role have been quick to launch attacks on their opponents that aimed to hang congressional inaction around their necks.”