CBO

Reagan Budget Director David Stockman: ‘We Are Heading Into An Absolute Fiscal Bloodbath’

I’ m pretty sure I’ve never brought up David Stockman before on this blog, but what he’s warning about the nation’s finances is worth mentioning tonight. Stockman is a former two-term Congressman from Michigan, Director of the Office of Management and Budget under President Reagan, Wall Street veteran, and author. On Wednesday, he appeared on the FOX Business Channel show Mornings with Maria and talked about President Trump and the national debt. Stockman warned viewers:

We are heading into an absolute fiscal bloodbath. As the CBO put out yesterday, there’s $10 trillion of more debt built into the next decade, even before one dime of tax cuts from Trump or infrastructure spending or increasing defense like he wants to. And so what I suggest is that we have an even more absurd fiscal proposition from Donald Trump today than we did back in 1981 when we tried to cut taxes, increase defense substantially, and balance the budget. They are going to be in a crisis within weeks. The debt ceiling was suspended arbitrarily until March 15. When it comes back into effect there will be $20 trillion of debt. And before they can do anything on all of this stimulus they’re talking about they’re going to have to raise the debt ceiling and where are the votes going to come from? It’s going to make 2011, if you remember the debt ceiling crisis in 2011, look like a Sunday school picnic. We’re in bad shape.


“David Stockman: We are heading into an absolute fiscal bloodbath”
FOX Business Channel Video

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s note: A qualified professional should be consulted prior to making a financial decision based on material found in this weblog. If this recommended course of action is not pursued, then it must be understood that the decision is the reader’s and the reader’s alone. The creator/Editor of this blog is not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information contained herein.)

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CBO: Updated 2014-2024 Budget Projections Show Substantially Rising Budget Shorfalls, Federal Debt

That idea that the U.S. could someday resemble a “banana republic” might not be too far off the mark. From the non-partisan Congressional Budget Office website today:

As it usually does each spring, CBO has updated the baseline budget projections that it released earlier in the year…

Between 2015 and 2024, annual budget shortfalls are projected to rise substantially—from a low of $469 billion in 2015 to about $1 trillion from 2022 through 2024—mainly because of the aging population, rising health care costs, an expansion of federal subsidies for health insurance, and growing interest payments on federal debt. CBO expects that cumulative deficits during that decade will equal $7.6 trillion if current laws remain unchanged. As a share of GDP, deficits are projected to rise from 2.6 percent in 2015 to about 4 percent near the end of the 10-year period. By comparison, the deficit averaged 3.1 percent of GDP over the past 40 years and 2.3 percent in the 40 years before fiscal year 2008, when the most recent recession began. From 2015 through 2024, both revenues and outlays are projected to be greater than their 40-year averages as a percentage of GDP (see the figure below)…

In CBO’s baseline projections, federal debt held by the public reaches 78 percent of GDP by 2024, up from 72 percent at the end of 2013 and twice the 39 percent average of the past four decades (see the figure below). As recently as the end of 2007, federal debt equaled just 35 percent of GDP

Such high and rising debt would have serious negative consequences. Federal spending on interest payments would increase considerably when interest rates rose to more typical levels. Moreover, because federal borrowing would eventually raise the cost of investment by businesses and other entities, the capital stock would be smaller, and productivity and wages lower, than if federal borrowing was more limited. In addition, high debt means that lawmakers would have less flexibility than they otherwise would to use tax and spending policies to respond to unexpected challenges. Finally, high debt increases the risk of a fiscal crisis in which investors would lose so much confidence in the government’s ability to manage its budget that the government would be unable to borrow at affordable rates…

(Editor’s note: Bold added for emphasis)

You can read the entire assessment and view the complete document on the CBO website here.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Updated Pandemic Flu Model: Around 95 Million Americans Ill, 2.4 Million Dead

“Autumn is the hush before winter.”

-French proverb

In case you weren’t aware, autumn began today, September 22, at 4:44 ET. Fall is my favorite season of the year, when I try to get outdoors as much as I can. The next month or so will also be a time when I’ll be working hard getting prepared for my first winter in the new house- including stocking up on items to fend off/address a cold or the flu.

Speaking of influenza, the LiveScience website ran a piece this last week which served as a reminder of what could be in store for us one of these winters- a time when people are indoors and in closer proximity to each other, making catching the flu a whole lot easier. Tia Ghose wrote on Tuesday:

A recently declassified U.S. government plan for how to react in the face of a pandemic flu has some scary, but realistic predictions.

According to a 2009 Department of Defense plan, if a flu pandemic strikes, about 30 percent of the U.S. population could fall ill, with 3 million hospitalizations and 2 million deaths. Basic services, such as medical care or essential supply deliveries, will probably be disrupted.

In the plan, the government also says it assumes that a vaccine against a completely new flu strain wouldn’t become available for several months. Even after that, production will ramp up slowly.

(Editor’s note: Italics added for emphasis)

According to Ghose, a flu expert at St. Jude Children’s Research Hospital out in Memphis, Tennessee, backed-up those DOD projections.

Scary.

Back in March 2007, the non-profit, non-partisan Trust for America’s Health (TFAH) released a well-known report on the matter entitled Pandemic Flu and Potential for U.S. Economic Recession in which they said:

According to analyses by 3 major financial and economic research institutions, during a severe pandemic flu outbreak, the U.S. Gross Domestic Product (GDP) could drop between 4.25 and 6 percent. A “severe” outbreak is based on the 1918 pandemic, when 30 percent of the population became ill and 2.5 percent of those who became ill died. In modern times, this would translate into approximately 90 million Americans becoming ill and roughly 2.25 million deaths. An outbreak of this severity would almost certainly lead to a major economic recession.

(Editor’s note: Italics added for emphasis)

The Washington, D.C.-based organization added:

The CBO, the ANU/Lowy Institute, and BMO Nesbitt Burns developed national assumptions about what would constitute a “severe” or “ultra” pandemic outbreak, using estimates of a 30 percent attack rate and 2.5 percent case-fatality rate under “severe” and “ultra” scenarios. In 2005, the national population was nearly 300 million people. With these estimates, approximately 90 million people would get ill, and of those 90 million, roughly 2.25 million would die.

As I type this, the U.S. Census “Population Clock” says the national population is 316,736,690 persons. Updating the above model using the more recent 2010 Census data would show around 95 million Americans possibly falling ill from pandemic flu, with 2.4 million of those stricken potentially dying.

You can read that 2009 Department of Defense plan, “USNORTHCOM CONPLAN 3551-09, Concept Plan to Synchronize DOD Pandemic Influenza Planning, 13 Aug 2009,” via the LiveScience website here (.pdf format).

In addition, you can read the March 2007 TFAH report on their website here (.pdf format).

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Source:

Ghose, Tia. “Pandemic Flu Plan Predicts 30% of US Could Fall Ill.” LiveScience. 17 Sep. 2013. (http://www.livescience.com/39704-overnment-flu-pandemic-plan-revealed.html). 22 Sep. 2013.

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CBO: ObamaCare’s Gross Costs Over 10 Years May Be Nearly Twice White House’s Original Projections

Universal healthcare. A noble idea- if a nation can afford it.

As for “ObamaCare,” the more time that passes since the Affordable Care Act was enacted on March 23, 2010, the more expensive the projected numbers are getting.

Howard Sheppard reported on the website of Central Pennsylvania FOX affiliate WPMT FOX 43 yesterday:

The gross costs of the national healthcare law rammed through Congress by President Barack Obama will reach an estimated $1.76 trillion over 10 years – nearly twice the amount originally projected. The figure, which the Congressional Budget Office (CBO) revealed on Wednesday, is bound to cause embarrassment to the administration as it comes just as debate on “Obamacare” is starting to heat up again, two weeks before the Supreme Court is set to hear arguments on whether the Affordable Care Act is unconstitutional…

Original White House estimates said the gross cost of the healthcare act would be $940 billion over a decade, but the CBO’s new figures raise that figure to a shade under $1.5 trillion. For the 10 years from 2013-2022 that increases even further to $1.76 trillion.

(Editor’s note: Italics added for emphasis)

Back on March 1, I noted that according to a Government Accountability Office (GAO) report released February 26, ObamaCare will increase the long-term federal deficit by $6.2 trillion.

$6.2 trillion.

Considering the growing instability of the U.S. financial house of cards, one might wonder if the costs associated with universal health coverage won’t be the straw that eventually breaks the camel’s back.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Source:

Sheppard, Howard. “CBO: Obamacare estimated cost nearly double to $1.7 trillion.” FOX Central Pennsylvania. 16 May 2013. (http://fox43.com/2013/05/16/cbo-obamacare-estimated-cost-nearly-double-to-1-7-trillion/#axzz2TYdCQnzp). 16 May 2013.

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CBO Reports $1.1 Trillion U.S. Budget Deficit To Conclude FY 2012

I was watching FOX News a short time ago (yes, I watch MSNBC as well to even things out, and even tune into the Blaze now) when it was reported the Congressional Budget Office had released an estimate on the U.S. budget deficit for the fiscal year that ended September 30:

$1.1 trillion

This is the fourth straight year of $1 trillion deficits.

According to the CBO estimate, the federal government borrowed 32 cents for every dollar it spent

For fiscal year 2013, the nonpartisan agency predicts another budget gap of somewhere between $641 billion to $1 trillion according to a report released back on August 22.

You can read that insightful report on what to expect for the next fiscal year here on the CBO website.

Source:

“Budget office tallies 2012 deficit at $1.1T.” Associated Press. 5 Oct. 2012. (http://www.foxnews.com/politics/2012/10/05/budget-office-tallies-2012-deficit-at-11t/). 5 Oct. 2012.

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Friday, October 5th, 2012 Deficits, Fiscal Policy, Government, Spending No Comments

U.S. Budget Deficit Really $5 Trillion In FY 2011?

The federal budget deficit will continue at historically high levels, hitting $1.3 trillion in fiscal 2011, congressional budget analysts said Wednesday.

Washington Post, August 24, 2011

According to a different set of accounting rules, the U.S. budget deficit in FY 2011 was not $1.3 trillion, but almost 4 times that amount. From Dennis Cauchon on the USA TODAY website last Thursday (hat tip Peter Schiff):

The typical American household would have paid nearly all of its income in taxes last year to balance the budget if the government used standard accounting rules to compute the deficit, a USA TODAY analysis finds.

Under those accounting practices, the government ran red ink last year equal to $42,054 per household — nearly four times the official number reported under unique rules set by Congress.

A U.S. household’s median income is $49,445, the Census reports.

The big difference between the official deficit and standard accounting: Congress exempts itself from including the cost of promised retirement benefits. Yet companies, states and local governments must include retirement commitments in financial statements, as required by federal law and private boards that set accounting rules.

The deficit was $5 trillion last year under those rules. The official number was $1.3 trillion. Liabilities for Social Security, Medicare and other retirement programs rose by $3.7 trillion in 2011, according to government actuaries, but the amount was not registered on the government’s books.

(Editor’s note: Italics added for emphasis)

Back in March, the nonpartisan Congressional Budget Office predicted that the U.S. budget deficit for FY 2012 would amount to $1.2 trillion. Brian Faler wrote on the Bloomberg website on March 13:

The budget shortfall for 2012 will be $1.2 trillion, about $93 billion more than forecast two months ago, according to the nonpartisan Congressional Budget Office…

The revised estimate means the government will run a trillion-dollar deficit for the fourth consecutive year, though the gap will narrow slightly from last year’s $1.3 trillion.

“The fundamental story about the federal budget has not changed: Although the deficit is starting to shrink, it remains very large by historical standards,” the agency said yesterday in a report.

(Editor’s note: Italics added for emphasis)

“The government will run a trillion-dollar deficit for the fourth consecutive year.”

Something to think about the next time somebody mentions the U.S. economic “recovery.”

Sources:

Cauchon, Dennis. “Real federal deficit dwarfs official tally.” USA TODAY. 24 May 2012. (http://www.usatoday.com/news/washington/story/2012-05-18/federal-deficit-accounting/55179748/1). 30 May 2012.

Faler, Brian. “U.S. Budget Deficit Revised Upward to $1.2 Trillion for 2012.” Bloomberg. 13 Mar. 2012. (http://www.bloomberg.com/news/2012-03-13/budget-deficit-to-total-1-2-trillion-this-year-cbo-says.html). 30 May 2012.

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TARP Update: $119 Billion Still Owed, Could Eventually Lose $60 Billion

The Troubled Assets Relief Program, which was widely reviled as a $700 billion bailout for Wall Street titans, is now expected to cost the federal government a mere $25 billion – the equivalent of less than six months of emergency jobless benefits.

Washington Post, November 30, 2010

The government’s bailout of banks may cost U.S. taxpayers nearly two times more than originally estimated, according to the Congressional Budget Office.

The Troubled Asset Released Program, better known as TARP, will cost the federal government $34 billion, the CBO reported on its director’s blog.

-Huffington Post, December 16, 2011

$25 billion. $34 billion. These days, the U.S. government thinks TARP could eventually lose $60 billion. From Ronald Orol on the MarketWatch website early this morning:

Taxpayers are still owed $119 billion in outstanding Troubled Asset Relief Program funds, a watchdog for the government crisis response program said Wednesday in a quarterly report to Congress.

That number is down from $133 billion in TARP funds owed as of January, according to the author of the report, the Office of the Special Inspector General for the TARP. The government expects TARP to lose $60 billion.

The program was set up during the height of the financial crisis of 2008 to stem a growing credit contagion by providing taxpayer-funded capital injections into big and smaller banks.

(Editor’s note: Italics added for emphasis)

Opponents of TARP have argued that the bailout would end up wasting a huge chunk of taxpayer funds. Supporters of the program have responded that the U.S. financial system was in serious danger if these funds weren’t provided.

Source:

Orol, Ronald D. “Taxpayers still on hook for $119 bln in TARP funds.” MarketWatch. 25 Apr. 2012. (http://www.marketwatch.com/story/taxpayers-still-on-hook-for-119-bln-in-tarp-funds-2012-04-25). 25 Apr. 2012.

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Wednesday, April 25th, 2012 Bailouts, Banking, Credit, Government No Comments
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