April 11, 2012
The Washington Post
By Lori Montgomery
President Obama’s landmark health-care initiative, long touted as a means to control costs, will actually add more than $340 billion to the nation’s budget woes over the next decade, according to a new study by a Republican member of the board that oversees Medicare financing.
The study is set to be released Tuesday by Charles Blahous, a conservative policy analyst whom Obama approved in 2010 as the GOP trustee for Medicare and Social Security. His analysis challenges the conventional wisdom that the health-care law, which calls for an expensive expansion of coverage for the uninsured beginning in 2014, will nonetheless reduce deficits by raising taxes and cutting payments to Medicare providers.
January 25, 2012
By Nin-Hai Tseng
It was nearly 10 years ago when Dave Cote took the helm at Honeywell International. The company isn’t readily known to most consumers, but products from the Morris Township, NJ-based technology and manufacturing conglomerate are found almost everywhere – from home thermostats to turnout gear donned by New York City fire fighters.
When Cote took the job as CEO, the company was struggling. He turned down media requests, thinking “right now the last thing we need is me out there saying anything when we’ve got so much to fix,” he says. At the time, a third of the top 200 positions were open after an employee exodus. Under Cote, Honeywell grew from $22 billion in sales to about $37 billion today, and the company’s stock surged about 63%.
And with the company transformed, Cote has jumped into the media spotlight. Today he is one of the most outspoken deficit hawks in corporate America. The New Hampshire native visited Fortune’s office in New York City last week to talk about a range of topics – from how to manage a diverse company to doing business in China and India to how the U.S. can turn its fragile economy around. Below is an edited transcript.
You have all these disparate industrial businesses. How do you manage it?
One of the ways that we’ve tried to construct the company is so that there’s no product that’s so big that it requires my approval. I’ve always thought it was a bad position to be in as a company if you really had to bet that big on a product.
The way we’ve tried to construct the company is to create diversity of opportunity – whether it’s diversity in the products you provide, the geographies that you’re in, the services that you provide, or the new products that you’re developing. There’s little that I have to weigh in on like that – maybe occasionally – but really not all that much. I am able to devolve all of this to business leaders who understand what we’re looking for.
October 24, 2011
While all the focus has been on the Eurozone debt crisis recently, the US is suffering a stealth debt crisis of its own which is being ignored – for the moment. As is the burgeoning debt crisis in China.
The US fiscal position is appalling with a $1.6 trillion deficit projected for fiscal 2012 alone. For those who have lost count, the US national debt has risen to over $14.8 trillion. The latest updated projections reveal that the US will reach a 100 percent debt to GDP ratio by Halloween – in 10 days time.
Gold’s recent weakness has coincided with a period of dollar strength but with trade and budget account deficits as far as the eye can see, this dollar strength is likely to be brief.
Indeed, the dollar’s recent strength is due to the fact that while the dollar’s fundamentals are very poor – its competing fiat currencies such as sterling and the euro have similar if not worse outlooks due to imprudent monetary policies.
The possibility that gold could surge to as high as $10,000/oz is gaining traction amongst some respected market participants.
Paul Brodsky, co-founder of QB Asset Management Company has again warned regarding the risks posed to US Treasuries and the possibility of a sharp revaluation of gold that could see gold reach $10,000/oz.
A twenty-year veteran of the bond market in his own right, Brodsky told King World News that the US may return to some form of Gold Standard in order to restore faith in the US dollar.
Proponents, including Steve Forbes and Ron Paul, argue a gold standard would prevent what they see as irresponsible money creation and force the US to live within its means by limiting the amount of money monetary authorities can create.
The idea that the US could revalue gold and devalue the dollar (as was done by Roosevelt in the Great Depression) is gaining increasing currency.
Gold prices would hit $10,000 an ounce or even more should current calls for a return to the gold standard become reality, according to Brodsky.
In conversation with King World News, money manager, Stephen Leeb, said that gold is remarkably undervalued and “is going to add another digit over the next five to ten years there is very little doubt about that.”
Leeb recently said that gold could rise to $12,500/oz. He concluded this based on many of the factors documented by GoldCore in recent years such as gold in terms of financial assets, the monetary base and surging money supply globally.
As the ‘U.S. M2 Money Supply: Accelerating Sharply in 2011’ chart shows, US money supply (M2) has surged in a parabolic manner in the last few months and is up by more than 50% year to date and up 33% in just 4 months – from June 1st to October 1st.
October 18, 2011
By Suzy Khimm
Ever wonder what Ron Paul’s America would look like? Then read the budget outline that Paul released as part of his 2012 presidential bid. It promises to cut $1 trillion during his first year in office, balance the budget by 2015, withdraw us from all foreign wars and eliminate five Cabinet-level agencies in the process. Economists across the political spectrum say the impact of such drastic government spending cuts would be majorly disruptive and harmful to the economy in the short term.
“At the scale he’s talking about, it’s unlikely you could have an immediate reduction in government without hurtling the economy into recession,” says Kevin Hassett, economic policy director for the American Enterprise Institute and chief economic adviser to John McCain’s 2000 presidential campaign. Hassett maintains that Paul’s plan for a limited government “would be really positive” in the long run. But he also believes that there would be better means to achieving that end. “I think that you could achieve his long-run objectives with less short-run disruptions,” he concludes.
By reducing the deficit from more than $1 trillion to $300 billion in just a year, Paul’s plan would upend the economy at a time when it’s already fragile, says Gus Faucher, director of macroeconomics for Moody’s Analytics. “That much deficit reduction in one year is going to be a huge drag on the economy . . . the reduction in spending is much greater than cuts in taxes,” says Faucher. “We’re seeing that impact in Europe right now, where severe fiscal austerity has caused big problems for the European economy.” While long-term deficit reduction is important, legislators need to make sure that the economy is strong before major cuts take effect, he adds, calling Paul’s plan “much more ambitious” than other Republican proposals to date. By comparison, the Congressional supercommittee is required to cut $1.5 trillion over a ten-year period—a feat Paul wants to accomplish in a little more than one year.
Liberal economists were even more dire in their assessments of the Paul budget. “This is almost having the economy fall off a cliff,” says Dean Baker, co-director of the Center for Economic and Policy Research, estimating that cutting $1 trillion in 2013 would prompt the unemployment rate to jump by 3 percentage points. Even if the $1 trillion in cuts were done over two or three years’ time, there would still be double-digit employment, Baker concludes. “This will make it extremely hard to balance the budget, since if the unemployment rate goes to 11 or 12 percent, then the budget picture will look much worse. If his response is still more cuts, then who knows how high he can get the unemployment rate.”
Michael Ettlinger, vice president for economic policy at the Center for American Progress, said Paul’s cuts would destroy the social safety net, as the plan would turn Medicaid and other low-income entitlement programs into block-granted programs that would depend on discretionary appropriations. “Your kids would be out of school, working or begging,” he concludes.
The Paul campaign rejected such claims as “exactly the opposite” of what would come to pass—“an example of the old Keynesian thinking that got us into our current mess,” according to Jesse Benton, a campaign spokesman. “Deficit spending and debt that are crushing our economy and will destroy our country if we do not take bold action.” Benton added that block-granting entitlement programs would actually save them, not shred them. “We face a bankruptcy and a major financial crisis that will destroy the entire social safety net unless we take action.”
The program would also turn Social Security, veterans’ benefits and Medicare into voluntary programs that would allow younger workers to opt out of the entitlements, while fulfilling promises to present-day seniors and veterans. Both liberals and conservatives such as Baker say such changes could destabilize Social Security. “We will likely see a substantial number of young people take that option, especially if he scares them enough that it won’t be there,” says Baker. What’s more, “you will have high-income earners who opt out, and the people you have left are going to be low-income, which could cause problems” in terms of financing, explains Faucher, of Moody’s. All this could complicate Social Security’s long-term fiscal health, as it could end up losing a lot of revenue.
An opt-out option for Medicare would present similar problems, AEI’s Hassett says. He agrees that Medicare reform is critical to achieving long-term deficit reduction but thinks that an opt-out would destabilize the program. “The system taxes young people to pay for benefits for old people. If young people opt out, who will pay for the benefits?” Hassett says. The Paul campaign insists, however, that the plan provides Medicare with a secure future without harming present-day beneficiaries. “This budget is about priorities, and we have to honor our promises to our seniors. Our goal is to fix our debt crisis to preserve our system and make Medicare work better in the future,” Benton says.
On the whole, though, economists say they aren’t surprised to see the Texas congressman come out with such a plan. “Ron Paul’s role in the campaign so far has been the ideologically pure libertarian, and his proposal meets expectations, I would say,” Hassett says.
September 27th, 2011
The Huffington Post
By: Ryan Grim
The 12-member super committee created to slash the federal deficit is powered by the threat that if it doesn’t come up with $1.2 trillion in savings, automatic, across-the-board cuts will be instituted to reach that same goal, with half of those cuts hitting the Pentagon.
Don’t believe it.
The supposed across-the-board cuts aren’t slated to go into effect until January 1, 2013. Put more simply: They might not ever go into effect.
The automatic cuts — known as sequestration — are often discussed in Washington as if they’re certain, an inevitability that Congress won’t be able to prevent. But on the same day those cuts would go into effect, the Bush tax rates, which President Obama extended for two years, are set to expire, leading to an “automatic” tax hike that is treated in Washington as anything but inevitable. (That the two coming policy changes are approached so differently — cuts are expected; expiring tax breaks for the wealthy are brushed aside — is a window into Washington’s priorities.)
A host of other tax cuts and credits will expire on the same day, including the alternative minimum tax, ethanol tax credits, renewable energy credits and others important to businesses, the wealthy and the middle class.
A lame duck Congress would have two months after the 2012 election to stave off the expiration of both that tax policy and the super committee’s “automatic” cuts.
The most likely scenario: The super committee locks up along partisan lines and, after the 2012 election, bipartisan negotiators deal with the tax cuts and the super committee’s sequestration cuts, along with a basket of other expiring provisions, in one set of negotiations. Democrats will be pressured by the coming sequestration, while Republicans will be motivated by the expiration of the Bush tax cuts. And all of their negotiations will take place in a political and economic climate impossible to predict today.
“All of this at some point comes together,” said Budget Committee Chairman Kent Conrad (D-N.D.) of the Bush tax cuts and the sequestration. “One thing about this place, the paces just keep repeating themselves.”
While many have portrayed the super committee as having some sort of automatic axe, other observers haven’t bought the idea. Stan Collender, a Democratic budget expert and consultant to Wall Street and Washington lobbyists, saw through it quickly, writing a report for Qorvis Communications downplaying the likelihood of the automatic cuts.
“There is a high probability that the super committee won’t be able to agree on a deficit reduction deal and that the across-the-board spending cuts that are supposed to be triggered if that happens will NOT go into effect as scheduled in 2013,” he wrote. “Federal budget agreements have seldom, if ever, gone the distance. Instead, they have always been changed, waived, ignored or abandoned.”
Former Rep. Alan Grayson (D-Fla.), who is running again for an Orlando seat, noted in a blog post Monday that the Constitution is not on the side of those pushing for automatic cuts.
“Under Article I, Section 7 of our Constitution, each Congress has the same right as another other Congress to legislate. This includes ‘raising Revenue’ and ‘Appropriation of Money,’” he wrote. “So our 112th Congress can ‘pass a Bill’ setting the federal deficit for this year and next year, but that’s about it. Anything that goes beyond the first week of January, 2013, when the 113th Congress will be sworn in, is subject to change by that Congress, and every subsequent Congress.”
Sen. Max Baucus (D-Mont.), chair of the Senate’s tax-writing committee and a member of the super committee, told HuffPost that the panel is looking at the Bush tax cuts as well as other expiring credits.
“The committee is sure talking of those provisions and there are others too, and we are talking about all of them,” he said.
Tom Harkin (D-Iowa), whose more than two decades in the Senate have made him witness to his share of negotiations, said that both the Bush taxs cuts and the sequestration cuts will be negotiated as one large piece during the lame duck session. “At that time, at that time,” Harkin said. “Not now. At that time.”
Sen. Lamar Alexander (R-Tenn.), who recently resigned from leadership so he can spend more time on bipartisan legislating and less on partisan messaging, agreed with HuffPost that the automatic cuts were not necessarily automatic.
“That’s a good point,” he said. “Congress can always pass a law if it chooses to do that, but the president can veto it, and 40 senators can stop it. So I think while it’s technically possible for that to happen, I think there’s the fact that 38 senators of both parties signed a letter encouraging the committee to think even bigger. It’s a very good sign that something is likely to happen here.”
Sen. Jon Kyl (R-Ariz.), the Senate minority whip and a super committee member, also saw roping the tux cuts and sequestration together as an option.
“I don’t think sequestration will take place, for one thing,” he said, saying there are “lots of different options, possibilities. Who knows?”
Sen. Ben Cardin (D-Md.) said that the committee should think of the possibility of automatic cuts as motivation, but agreed that they’re heavily dependent on Congress.
“The automatic spending cuts take effect not based upon the joint committee; it’s based upon congressional action,” he said.
Dealing with the spending cuts and expiring tax cuts together will give Democrats a negotiating advantage, highlighting how tax policy has contributed to budget hole, Democrats said.
“Since those tax cuts and Bush deregulation and the two wars and the bailout to drug and insurance companies in ’03/’04 created almost all the deficit, clearly that should be part of the solution,” said Sen. Sherrod Brown (D-Ohio).
“Speaking for the Democrats, we want to see a comprehensive approach,” said Cardin. “We think the revenue issues need to be on the table. We have been pretty clear about what we think about the Bush-era tax rates for the higher income.”
There may also be political will to prevent the automatic cuts from going into effect, if only to save the Pentagon’s budget.
“I am very concerned about broad cuts across the board, particularly as it relates the Department of Defense,” Sen. Ben Nelson (D-Neb.) told HuffPost.
And the cuts already agreed to earlier this year, as part of the bargain that created the super committee, may end up being just as fantastical.
“[T]he approximately $900 billion in spending reductions put in place by the Budget Control Act are far more likely to be projected rather than realized,” Collender wrote in his report. “Although the agreement put spending caps in place every year through fiscal 2021, only the $30 billion or so projected for fiscal 2102 — which will start in about a month on October 1 — should be considered likely to occur. The presumed spending reductions for fiscal 2013 and beyond will occur after the 2012 presidential and congressional elections and during the time frame when virtually all other federal budget agreements have fallen apart or changed. In all probability, that will happen in this case as well.”
September 20th, 2011
The Huffington Post
By: Stephen Ohlemacher
President Barack Obama makes it sound as if there are millionaires all over America paying taxes at lower rates than their secretaries.
“Middle-class families shouldn’t pay higher taxes than millionaires and billionaires,” Obama said Monday. “That’s pretty straightforward. It’s hard to argue against that.”
The data tell a different story. On average, the wealthiest people in America pay a lot more taxes than the middle class or the poor, according to private and government data. They pay at a higher rate, and as a group, they contribute a much larger share of the overall taxes collected by the federal government.
There may be individual millionaires who pay taxes at rates lower than middle-income workers. In 2009, 1,470 households filed tax returns with incomes above $1 million yet paid no federal income tax, according to the Internal Revenue Service. That, however, was less than 1 percent of the nearly 237,000 returns with incomes above $1 million.
In his White House address Monday, Obama called on Congress to increase taxes by $1.5 trillion as part of a 10-year deficit reduction package totaling more than $3 trillion. He proposed that Congress overhaul the tax code and impose what he called the “Buffett rule,” named for billionaire investor Warren Buffett.
The rule says, “People making more than $1 million a year should not pay a smaller share of their income in taxes than middle-class families pay.”
“Warren Buffett’s secretary shouldn’t pay a higher tax rate than Warren Buffett. There is no justification for it,” Obama said. “It is wrong that in the United States of America, a teacher or a nurse or a construction worker who earns $50,000 should pay higher tax rates than somebody pulling in $50 million.”
Buffett wrote in a recent piece for The New York Times that the tax rate he paid last year was lower than that paid by any of the other 20 people in his office.
This year, households making more than $1 million will pay an average of 29.1 percent of their income in federal taxes, including income taxes and payroll taxes, according to the Tax Policy Center, a Washington think tank.
Households making between $50,000 and $75,000 will pay 15 percent of their income in federal taxes.
Lower-income households will pay less. For example, households making between $40,000 and $50,000 will pay an average of 12.5 percent of their income in federal taxes. Households making between $20,000 and $30,000 will pay 5.7 percent.
The latest IRS figures are a few years older – and limited to federal income taxes – but show much the same thing. In 2009, taxpayers who made $1 million or more paid on average 24.4 percent of their income in federal income taxes, according to the IRS.
Those making $100,000 to $125,000 paid on average 9.9 percent in federal income taxes. Those making $50,000 to $60,000 paid an average of 6.3 percent.
Obama’s claim hinges on the fact that, for high-income families and individuals, investment income is often taxed at a lower rate than wages. The top tax rate for dividends and capital gains is 15 percent. The top marginal tax rate for wages is 35 percent, though that is reserved for taxable income above $379,150.
With tax rates that high, why do so many people pay at lower rates? Because the tax code is riddled with more than $1 trillion in deductions, exemptions and credits, and they benefit people at every income level, according to data from the nonpartisan Joint Committee on Taxation, Congress’ official scorekeeper on revenue issues.
The Tax Policy Center estimates that 46 percent of households, mostly low- and medium-income households, will pay no federal income taxes this year. Most, however, will pay other taxes, including Social Security payroll taxes.
“People who are doing quite well and worry about low-income people not paying any taxes bemoan the fact that they get so many tax breaks that they are zeroed out,” said Roberton Williams, a senior fellow at the Tax Policy Center. “People at the bottom of the distribution say, but all of those rich guys are getting bigger tax breaks than we’re getting, which is also the case.”
Treasury Secretary Timothy Geithner was pressed at a White House briefing on the number of millionaires who pay taxes at a lower rate than middle-income families. He demurred, saying that people who make most of their money in wages pay taxes at a higher rate, while those who get most of their income from investments pay at lower rates.
“So it really depends on what is your profession, where’s the source of your income, what’s the specific circumstances you face, and the averages won’t really capture that,” Geithner said.
September 13th, 2011
The Raw Story
By: Stephen C. Webster
The president’s $447 billion plan for tax incentives and infrastructure spending to create new jobs would be paid for by adjusting the tax rates of wealthy Americans, such as hedge funds managers and corporate jet owners, laying the burden of continued economic recovery at the feet of those who’ve seen its only benefits over the last two years.
That’s according to Office of Budget Management Director Jack Lew, who told reporters at the White House briefing room on Monday that several of President Barack Obama’s previous budgetary proposals could be combined to pay for the plan.
The proposals would set tighter limits on individual deductions for single earners making over $200,000 a year and families with combined incomes over $250,000 a year, drawing their exempt income down from 35 percent to 28 percent.
It would also adjust how hedge fund managers’ incomes are taxed and eliminate tax deductions for corporate aircraft. Additionally, all subsidies for the oil and gas industries would be eliminated.
Director Lew said these adjustments would add up to $467 billion over the next decade, covering the jobs bill and wiping an additional $20 billion off the nation’s deficit.
The proposals are not new: President Obama has sought to make these changes in his past two budget requests, and in the Affordable Care Act. They have been repeatedly blocked by Republicans in Congress, who claim that raising tax rates on wealthy Americans would deter them from creating jobs.
However, in this case, President Obama’s proposals are largely made up of Republican ideas such as tax credits for small businesses that hire new workers. It remains unclear how Republicans will be able to use their ostensibly pro-jobs argument to resist their own proposals for creating jobs.
What is clear is that President Obama’s jobs proposals will face stiff Republican opposition in Congress thanks to the path the administration has chosen to secure funding, giving more rhetorical fire to those who say it is intended to support his reelection efforts as much as it is meant to boost the economy.
Still, it leaves the president in a politically strong position, as even the majority of Republican voters support raising the top-tier tax rates, which have been at historic lows since President George W. Bush’s first term.
Obama is also backed up by economic reality: As the president noted in his speech last week, corporate profits have indeed come “roaring back,” up 29 percent just from 2009-2010, yet hiring has not risen in tandem.
Recent polling shows an increased appetite for tax fairness among the American public, with a large majority agreeing that wealthy Americans should pay more to ensure the nation’s economic stability.
When the historic-low tax rates were extended for two more years in 2010 after a political battle that saw Republicans threaten to raise taxes on the poor and middle class, the president promised to make taxing the wealthy part of his reelection campaign.
While it does not directly touch upon the Bush tax cuts, the president’s jobs bill seems to be a clear step in this direction.
September 1st, 2011
The Associated Press
By: Richard Lardner
The U.S. has lost billions of dollars to waste and fraud in Iraq and Afghanistan and stands to repeat that in future wars without big changes in how the government awards and manages contracts for battlefield support and reconstruction projects, independent investigators said Wednesday.
The Wartime Contracting Commission urged Congress and the Obama administration to quickly put in place its recommendations to overhaul the contracting process and increase accountability. The commission even suggested that the joint House-Senate debt reduction committee take a close look at the proposals.
“What you’re asking for is more of the same,” said Dov Zakheim, a commission member and the Pentagon comptroller during President George W. Bush’s first term. “More waste. More fraud. More abuse.”
The bipartisan commission, created by Congress in 2008, estimated that at least $31 billion and as much as $60 billion has been lost in Iraq and Afghanistan over the past decade due to lax oversight of contractors, poor planning, inadequate competition and corruption. “I personally believe that the number is much, much closer to $60 billion,” Zakheim said.
Yet new legislation incorporating the changes could prove difficult with Republicans and Democrats divided over the best way to reduce the deficit.
Several of the proposals would require new spending, the commission acknowledged, and that would be a hard sell in an election year when reducing the size of government is a priority for many. Other proposals would cost little or simply require money to be shifted from one account to another, the panel said.
“If these recommendations are not implemented, there ought to be a Hall of Shame,” said Michael Thibault, co-chairman of the commission. “There’s an opportunity at hand.”
The commission’s 15 recommendations include creating an inspector general to monitor war zone contracting and operations, appointing a senior government official to improve planning and coordination among federal agencies, reducing the use of private security companies, and carefully monitoring contractor performance.
Massachusetts Rep. John Tierney, the top Democrat on the House Oversight and Government Reform national security subcommittee, said Wednesday that the commission’s findings are “alarming.” Tierney said he plans to introduce legislation next week to create the inspector general’s post.
Sen. Claire McCaskill, D-Mo., chairwoman of the Senate’s contracting oversight subcommittee, said she plans to prepare legislation based upon the commission’s recommendations.
The commission’s report said contracting waste in Afghanistan and Iraq could grow as U.S. support for reconstruction projects and programs wanes. That would leave the countries to bear the long-term costs of sustaining the schools, medical clinics, barracks, roads and power plants already built with American money.
Overall, the commission said spending on contracts and grants to support U.S. operations is expected to exceed $206 billion by the end of the 2011 budget year. Based on its investigation, the commission said contracting waste in Afghanistan ranged from 10 percent to 20 percent of the $206 billion total. Fraud during the same period ran between 5 percent and 9 percent of the total, the report said. Fraud includes bribery, kickbacks, bid rigging and defective products, according to the commission.
“It is disgusting to think that nearly a third of the billions and billions we spent on contracting was wasted or used for fraud,” McCaskill said.
Styled after the Truman Committee, which examined World War II spending six decades ago, the commission had broad authority to examine military support contracts, reconstruction projects and private security companies. But the law creating the commission set this September as the end of its work, even as contractors continue their heavy support of U.S. operations in the war zones.
Security, transportation, food preparation and delivery, and much more are now handled by the private sector. At the same time, the officials responsible for monitoring contractor performance have been overwhelmed by increasing reliance on private companies.
“We are far more reliant on contractors than we ever were,” said commission member Charles Tiefer, a professor of government contracting at the University of Baltimore Law School. “We always bought munitions from them. But we didn’t used to buy much in the way of services from them.”
The commission cited numerous examples of waste, including a $360 million U.S.-financed agricultural development program in Afghanistan. The effort began as a $60 million project in 2009 to distribute vouchers for wheat seed and fertilizer in drought-stricken areas of northern Afghanistan. The program expanded into the south and east. Soon the U.S. was spending a $1 million a day on the program, creating an environment ripe for waste and abuse, the commission said.
“Paying villagers for what they used to do voluntarily destroyed local initiatives and diverted project goods into Pakistan for resale,” the commission said.
The Afghan insurgency’s second largest funding source after the illegal drug trade is the diversion of money from U.S.-backed construction projects and transportation contracts, according to the commission. But the report does not say how much money has been funneled to the insurgency. The money typically is lost when insurgents and warlords threaten Afghan subcontractors with violence unless they pay for protection, according to the report.
The Associated Press reported this month that U.S. military authorities in Kabul believe $360 million has ended up in the hands of the Taliban, criminals and power brokers with ties to both.
The military said only a small percentage of the $360 million has been garnered by the Taliban and insurgent groups. Most of the money was lost to profiteering, bribery and extortion by criminals and power brokers.
August 12th, 2011
The Raw Story
By: Agence France Presse
Top US House of Representatives Democrat Nancy Pelosi on Thursday appointed three close allies to a “supercommittee” tasked with finding at least $1.2 trillion in deficit cuts over ten years.
Pelosi’s naming of Democratic Representatives James Clyburn, Xavier Becerra, and Chris Van Hollen brought to full strength the 12-member panel that will be ground zero for the next wave of angry battles over the swollen US debt.
“The thrust of the committee must be to grow an American prosperity enjoyed by all Americans,” Pelosi said in a statement that urged a “focus on economic growth and job creation that reduces the deficit.”
Pelosi, who has vowed to protect social safety net programs especially dear to Democrats from the cost-cutter’s axe, said the panel should “make decisions regarding investments, cuts and revenues and their timing to stimulate growth while reducing the deficit.”
Top Republicans have vowed to kill any tax increases and said that any boost in revenues from tax code overhauls must be offset by cuts elsewhere, while Democratic leaders have pushed for raising taxes on the rich and corporations if government-backed health care or retirement programs face belt-tightening.
“We must achieve a ‘grand bargain’ that reduces the deficit by addressing our entire budget, while strengthening Medicare, Medicaid and Social Security,” said Pelosi, the House Democratic Minority Leader.
Clyburn, who is black, and Becerra, who is Hispanic, are the only minorities on the panel, while Democratic Senator Patty Murray, its co-chair, is the only woman.
August 2nd, 2011
The Financial Post
Gold rallied to its ninth record high this year on Tuesday, as growing fears about the spread of the European debt crisis and the increasingly gloomy outlook for the U.S. economy fed a broad investor push into perceived safe-haven assets.
U.S. lawmakers averted an unprecedented default on the country’s debt on Monday but the likelihood of the United States losing its top-notch credit rating as a result of its ballooning deficits boosted the likes of gold, the Swiss franc and German government bonds.
Stocks and bonds of the euro zone’s more fragile members came under fire on Tuesday, pushing yields on Spanish and Italian debt to 14-year highs, while Italian authorities held emergency talks and Spain’s economy ministry kept in permanent contact with its European Union counterparts to try to stem the crisis.
Spot gold (XAU-) was last up 1.3 percent on the day at US$1,638.79 an ounce by 1250 GMT, having touched an all-time high of US$1,640.39 earlier in the day, marking its ninth record this year ahead of the vote in the U.S. Senate later to enshrine the last-minute deal on raising the country’s debt limit into law.
“There’s a market saying ’buy the fear, sell the greed.’ Now obviously, people have been buying the fear, certainly for metals and therefore, later today, and early tomorrow in Asia, do you start to sell the greed? I don’t know,” said Credit Agricole analyst Robin Bhar.
“The U.S. has averted default, but not averted downgrade, so that’s the driving thought. I would have thought gold would pause for breath and move lower, I thought US$1,650 would be the target two or three months down the road,” he said, adding: “There’s no stopping it, and there’s no point standing in the way of it. You just don’t know where the top is going to be.”
Gold has rallied by some 15 percent so far this year, hitting record highs in dollars, euros, sterling, rand and Canadian dollars, indicating investors’ distrust of volatile currencies, while central banks have thus far remained buyers of bullion, with South Korea the latest addition to that list after its first purchase in over 10 years.
South Korea’s central bank said on Tuesday it bought 25 tonnes of gold between June and July to diversify its foreign reserves despite high prices, marking its first purchase in more than a decade and taking its total gold holdings to 39.4 tonnes.
“This news reiterates the fundamental view that most investors, asset managers, and even central banks hold true — that gold remains the quintessential currency hedge, a stabilizing asset for portfolios, and a safe haven in uncertain economic times,” said David Meger, director of metals trading at Vision Financial Markets, a futures broker based in Chicago.
The United States is poised to step back from the brink of economic disaster on Tuesday as a bitterly fought deal to cut the budget deficit is expected to clear the Senate and President Barack Obama’s desk.
Just hours before the Treasury’s authority to borrow funds runs out — risking a damaging U.S. debt default — the Senate was expected to approve the deal to cut the country’s bulging deficit and lift the US$14.3 trillion debt ceiling enough to last beyond the November 2012 elections.
Risk appetite might return now there is agreement on the country’s borrowing limit, but the gloomy economic outlook in the world’s largest economy combined with an ongoing euro zone debt crisis could depress such sentiment, traders and analysts said.
“Gold should be lower after the U.S. debt ceiling deal is reached, but it remains firm as people don’t trust the dollar and would still like to put their money in gold,” said Peter Fung, head of dealing at Wing Fung Precious Metals based in Hong Kong.
Gold priced in euros (XAUEUR-R) rose by 1.7% on the day to hit a record 1,157.51 euros an ounce, while sterling-priced gold also hit a record peak at 1,009.05 pounds an ounce (XAUGBP-R) and gold in Canadian dollars (XAUCAD-R) rose more than 1.5% to a record $1,575.34 an ounce.
In other precious metals, silver (XAG-) was up 1.1% at US$39.68 an ounce, while the platinum group metals were modestly higher, with platinum (XPT-) up 0.1 percent at US$1,790.24 an ounce and palladium (XPD-) up 0.1% at US$826.22 an ounce.