Spending Daily | October 1, 2012

New Poll: Americans Believe Government Spending Doing More Harm Than Good
Public Notice today released the results of a national survey of registered “likely voters” conducted by the Tarrance Group via telephone Sept. 24-27, 2012, with a margin of error of +/- 3.1 percent on the issues of government spending and the economy.  The results showed that by a ratio of 2-to-1, likely voters believe federal government spending is doing more harm than good. On the question of whether federal government spending has improved the overall economy, 74 percent say it has not helped, with 52 percent responding that it has actually hurt the economy.  When asked how federal government spending has impacted personal financial situations, 86 percent of those surveyed say it has not helped, with 35 percent responding that it hurt. “It’s clear to the vast majority of Americans that the reckless and wasteful government spending we’ve seen from Washington has not only failed to improve the economy, it’s making things worse,” said Public Notice Executive Director Gretchen Hamel. “With debt and spending now a top issue in this election, the debate from here on out should be focused on which candidate has the most credible plan to reduce spending and the debt and get our fiscal house in order.”

What It Means For The Presidential Race… 
The Weekly Standard reports, “Mitt Romney could have a winning argument that incorporates his messages on both the economy and federal spending. A new poll from the Tarrance Group, a Republican-affiliated polling firm, for Public Notice shows most Americans believe increased federal spending has not helped the overall economy or their own economic situation. Of the 1,005 likely voters polled, 52 percent said federal spending has hurt the overall economy, compared to 26 percent who say it has helped and 18 percent who say it has made difference. On the question of how federal spending has affected their ‘personal financial situation,’ 49 percent said it made no difference, while 35 percent said it has hurt and only 14 percent have said it has helped. The survey also shows that a majority of the independents (55 percent), seniors (54 percent), and married women (59 percent) have said federal spending hurts the economy.”

Ahead of the Presidential Debate, “Debt-focused group urges focused questions” 
Politico reports, “The group Public Notice, which is focused on the issue of the national debt, is out with a memo of suggested questions to the candidates at Wednesday’s debate, that could force them to get more specific than either has about solutions. Among them:  Since 2008, the role of the federal government in the economy has grown with corporate bailouts, stimulus spending and the Patient Protection and Affordable Care Act. The result has been trillion dollar deficits each year since FY 2009 and ‘the worst recovery in history,’ according to CBS News. Do you view trillion dollar deficits and an economy increasingly dependent on the federal government as conducive to long-¬-term growth and prosperity?” Click here to read more.

Public Notice Executive Director Gretchen Hamel: “With the national debt recently topping $16 trillion and voters listing debt and government spending as a top concern, both candidates have a responsibility to clearly explain their plan to address the problem.  Since neither has detailed a plan to reduce the debt, it isn’t surprising that neither holds a commanding lead on the issue. Fiscal responsibility is always good policy, but right now it is actually smart politics too.” Click here to read Public Notice’s questions for the presidential candidates.

Bad Connection: Free Cell Phones Back In The Spotlight
A federal program that Bankrupting America highlighted two weeks ago in our Wednesday Waste is now under the spotlight again for the millions of taxpayer dollars being spent on free cell phones.  Fox News reports that the program, “Lifeline,” is drawing increased scrutiny “as a national debate unfolds on entitlements and the growing percentage of Americans who pay no income taxes and get a long menu of government benefits.”  Although some form of the program existed since 1985, critics such as Congressman Tim Griffing (R-AR) “note the program has swelled from $772 million in 2008 to $1.6 billion. … Griffin, who introduced H.R. 3481 in November to end the program, claims to have evidence of dead people getting free cell phones in the mail, ineligible people getting multiple phones and electronic kiosks in convenience stores to encourage people to get the phones.”

Outlook Not So Good As Companies Cut Costs Job Growth Looks Bleak
Bloomberg reports, “Weakening demand is forcing new and accelerated cost reductions at companies from Bank of America Corp. and Hewlett-Packard Co.(HPQ) to Staples Inc. (SPLS) and Eastman Kodak Co. (EKDKQ), dimming the outlook for an already struggling U.S. labor market. Even as consumer confidence and housing show signs of recovering, sales for businesses in the Standard & Poor’s 500 Index fell 0.9 percent from a year earlier in July through September, the second consecutive quarterly drop and biggest decline since 2009, according to analyst forecasts compiled by Bloomberg. A 1.2 percent gain projected for October-December still is smaller than the 5.4 percent rise in this year’s first three months.” Read More

Investors Fear High Taxes, Debt Burden After Election 
The Associated Press reports, “As President Barack Obama widened his lead over Mitt Romney in polls this month, traders at hedge funds and investment firms began shooting emails to clients with a similar theme: It’s time to start preparing for an Obama victory. What many in the market worry about isn’t that high earners may pay more in taxes if Obama wins. They worry that federal spending cuts and tax hikes scheduled for 2013 will kick in on Jan. 1 and start pulling the country into another recession. The higher taxes and lower spending would total $600 billion. They take effect automatically unless Congress and the White House reach a deal before then.” Investors also fear the gridlock between a Republican House and the President, which was seen last August during the debt ceiling talks. “’If you have any kind of gridlock, you run the risk of inaction,’ says Tom Simons, a market economist at the investment bank Jefferies. ‘This is a situation where inaction is the worst outcome.’”

U.S. Economic Outlook: Confusing. Good and Bad Signals Puzzle Many
The Associated Press reports, “Anyone puzzled by the most recent U.S. economic data has reason for feeling so: The numbers sketch a sometimes contradictory picture of the economy. … Consumers are more confident but aren’t spending much. Fewer people are losing jobs, but not many are being hired. Home and stock prices are up, but workers’ pay is trailing inflation. Auto sales have jumped, but manufacturing is faltering. … ‘The U.S. outlook could best be described as one of near-term weakness and long-term strength,’ says Chris Jones, an economist at TD Bank. … The September jobs report will come out Friday. Economists think the economy will show a modest gain of about 100,000 jobs. Given employers’anxiety about the U.S. fiscal cliff and Europe’s economic crisis, few expect a significant pickup in hiring soon.”

“White House Says Government May Help Firms Buffer Cost of Sequester”
The Wall Street Journal reports, “The White House on Friday signaled the federal government could help firms deal with litigation and other costs if they are forced to abruptly cancel contracts or lay off employees early next year because of congressionally mandated spending cuts. The announcement, in the form of a memorandum from the White House’s Office of Management and Budget, is tied to the possibility that without a congressional deal on the budget, government spending could be cut sharply on Jan. 2—a scenario often referred to as the ‘fiscal cliff.’ Most areas of defense spending are expected to be cut roughly 9% starting in January, potentially causing defense contractors to lay off scores of workers. Other areas of government spending are set to be reduced as well.”

Social Security “ripe for congressional action”
According to the Associated Press, “Unless Congress acts, the trust funds that support Social Security will run out of money in 2033, according to the trustees who oversee the retirement and disability program. At that point, Social Security would collect only enough tax revenue each year to pay about 75 percent of benefits. That benefit cut wouldn’t sit well with the millions of older Americans who rely on Social Security for most of their income. … Social Security is already the largest federal program and it’s getting bigger as millions of baby boomers reach retirement. More than 56 million retirees, disabled workers, spouses and children get Social Security benefits. That number that will grow to 91 million by 2035, according to congressional estimates. … Nevertheless, Social Security is ripe for congressional action in the next year or two, if lawmakers get serious about addressing the nation’s long-term financial problems. Why? Because Social Security is fixable.”

Payroll Tax Cut May Soon Be Axed
Annie Lowrey of The New York Times reports, “Regardless of who wins the presidential election in November or what compromises Congress strikes in the lame-duck session to keep the economy from automatic tax increases and spending cuts, 160 million American wage earners will probably see their tax bills jump after Jan. 1. That is when the temporary payroll tax holiday ends. Its expiration means less income in families’ pocketbooks — the tax increase would be about $95 billion in 2013 alone — at a time when the economy is little better than it was when the White House reached a deal on the tax break last year.” The fallout from the cut expiring could burden the already struggling economy even more as some analysts predict it could shave a percentage point off 2013 economic output. “’This has to be a temporary tax cut,’ said Timothy F. Geithner, the Treasury secretary, testifying before the Senate Budget Committee this year and voicing the view of many in the White House and on Capitol Hill. ‘I don’t see any reason to consider supporting its extension.’ … The payroll tax holiday this year has reduced workers’ tax on wages up to $110,100 to 4.2 percent from 6.2 percent. In 2012 that translated into a $700 tax cut for a person making $35,000 a year and a $2,202 tax cut for workers making $110,100 and up.”

Will Spain Take EU Bailout?
The Associated Press reports, “Spain’s Prime Minister Mariano Rajoy and Economy Minister Luis de Guindos were to hold separate rounds of talks Monday with European commissioner for monetary affairs Olli Rehn to discuss the country’s efforts to manage its stricken finances and whether it will need to seek further financial aid from the region. The meetings come days after Spain announced new austerity plans and the results of bank stress tests in a bid to convince international lenders and investors that it can control its finances.” Spain presented a draft of its 2013 budget on Thursday and it hopes it will be enough to fullfill the spending cut pledge it made to the EU. “Spain is at the center of Europe’s financial crisis being the fourth-largest among the 17 countries that use the euro. Besides a shaky banking sector, the country is struggling to support its heavily indebted regional governments.” Spain’s unemployment is at a staggering 25 percent and the country is in its second recession is 3 years.