Spending Daily January 16, 2013

Spending Daily January 16, 2013

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Spending Daily | January 16, 2013

A Dose of Debt Ceiling Reality for President Obama
Public Notice Executive Director Gretchen Hamel writes for BlogHer, “Sometimes it feels like we swing from one fiscal crisis to the next. Earlier this month it was the fiscal cliff, now it is the debt ceiling, and after that will be the sequester. All of these are self-inflicted consequences of rampant overspending in the federal government and a propensity to take the easy way out rather than budget responsibly. Overheated rhetoric plays a big role here, often distracting from the real problem by tugging at the heartstrings. Consider this your dose of debt ceiling reality.” Click here to read more.

Fitch: Downgrade Looming Even If Debt Ceiling Crisis Averted
The Los Angeles Times reports, “As Congress again veers close to the nation’s debt limit, a leading credit rating company is delivering a stark warning: Don’t wait until the last minute. Fitch Ratings said Tuesday that the U.S. could lose its AAA credit rating if lawmakers don’t raise the $16.4-trillion debt limit in a ‘timely manner’ as a possible default looms as early as mid-February. … But the firm also noted that failure by Congress and the White House to agree on a plan to reduce the deficit could lead to a credit-rating downgrade later this year ‘even if another debt-ceiling crisis is averted.'”

House Approves $50 Billion in Sandy Aid
The Washington Post reports, “The House on Tuesday approved about $50 billion in relief for victims of Hurricane Sandy, a package designed to speed aid to devastated communities in New York and New Jersey and a vote that provided an early test of the resolve of GOP deficit hawks. … Traditionally, storm relief is considered emergency spending, much like money to fund wars, and appropriated quickly by Congress on top of other spending priorities. But some fiscal conservatives have expressed exasperation with that notion. The total $60 billion relief package is larger than the budgets of many states. It also would swallow up more than half of the spending cuts set to take effect next month as part of the hard-fought sequester process, which was designed to begin denting the federal deficit.”

World Bank “sharply reduced” 2013 Growth Forecast
The Washington Post reports, “The World Bank has sharply reduced its estimate of global economic growth in 2013, projecting that the downturn in Europe and the United States’ fiscal problems will continue to weigh on investment and spending. The bank said it expects the world economy to expand 2.4 percent this year, compared with 3 percent growth it had forecast as of June. The second half of 2012 saw a worsening of the euro crisis, fiscal brinksmanship in the United States that left central debt and spending issues unresolved, and a recognition that developing countries were slowing as well.”

Administration Taps Retiree Funds to Push Off Debt Limit
Reuters reports, “The Treasury said on Tuesday it was temporarily tapping the retirement funds of government workers to avoid hitting the $16.4 trillion debt ceiling, adding retirees would nonetheless continue to receive benefits. The Treasury has said it can only stave off default through such extraordinary measures until around mid-February to early March. … Treasury has estimates the suspension of new investments into the measure would give it around $156 billion in additional spending capacity. However, the letter said, the fund will be made whole once the debt limit is raised.”

Republicans Preparing Legislation to Prioritize Treasury Payments
Reuters reports, “Republican lawmakers are preparing to introduce legislation to direct the U.S. Treasury to make interest payments on U.S. bonds first and then prioritize other government outlays in case Congress does not raise the debt ceiling. Supporters of the idea see it as a politically palatable alternative to default, which could rattle markets as occurred in the summer of 2011. … But critics, including some Republicans, say prioritizing payments is largely unworkable and would not fool the markets.”

“Why debt limit must be used to force a balanced budget”
Michael Needham, Tony Perkins and Chris Chocola editorialize in POLITICO, “Rather than enter discussions about cutting the excessive spending that has driven $16 trillion in debt, [President Obama] instead castigated the fiscally prudent with ad hominems like ‘irresponsible and absurd’. … All this obfuscation hides the real issue. When approaching this debt ceiling increase, there appear to be only two options on the table: balance now by refusing to raise the ceiling or balance never by raising it and continuing the status quo. The former would be difficult to absorb but the latter guarantees perpetual decline and a future economic Greece-like calamity.”

Polls Shows Country Split On How To Reduce Debt Ceiling
The National Journal reports, “Surveys showed that Americans sided with President Obama and Democrats in last month’s debate over extending the Bush tax cuts for most taxpayers, but according to a new United Technologies/National Journal Congressional Connection Poll, the country is more divided over how to reduce the deficit as the White House and Congress fight over the debt ceiling and sequestration. Respondents to the new poll were split over whether further efforts to reduce the deficit should include a mixture of tax increases and spending cuts, as Democrats favor, or, as Republicans insist, spending cuts alone. Forty-nine percent favor reducing the deficit through spending cuts alone, while 48 percent prefer both tax increases and spending cuts.”