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Deficit

Article Index

It's Time to Tackle Government Pay

By , Global Investing Specialist, Money Morning -

It's fairly well known that the U.S. public sector is paid more than the private sector. What's less well known is that the gap between federal-employee pay and benefits and private-sector pay and benefits is increasing - by about 18% over the last decade.

Given the current level of U.S. unemployment and the size of the budget deficit, it would appear that some economies could be made. In short, it's time to tackle government pay.

After all, if Greece can economize, so can the United States...

To see why government pay cuts are justified, read on...

Eurozone Action on Greece Fails to Defuse the Ticking Global "Debt Bomb"

By , Contributing Writer, Money Morning -

European leaders said yesterday (Thursday) that they were prepared to take a "determined" action to stave off the worst crisis in the euro currency's 11-year history. But their plan was short on details and is unlikely to totally dispel fears of a possible default by Greece.

European Council President Herman Van Rompuy said assistance for Greece would be forthcoming. But his speech lacked specifics about exactly what form that assistance would take and he offered no timeline for when aid for Greece would be initiated.

The statement seemed to be primarily aimed at reassuring markets that the EU wouldn't allow Greece's ballooning deficit to spark a debt crisis.  It simply ordered Greece to clean up its accounts and gave the International Monetary Fund (IMF) a monitoring role.

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Obama's Budget Adds $1 Trillion in Taxes, Balloons Federal Deficit

By , Contributing Writer, Money Morning -

President Barack Obama yesterday (Monday) unveiled a $3.8 trillion budget proposal that includes big tax increases on individuals and businesses, and expands the federal deficit by more than $5.5 trillion by the end of the decade, including a record $1.6 trillion next year.

The budget blueprint for the fiscal year that begins Oct. 1 reflects the administration's struggle to find a balance between containing the spiraling federal deficit with the need to boost the economy and create jobs - both of which figure to be political bombshells in the upcoming 2010 elections.

"We're trying to accomplish a soft landing in terms of our fiscal trajectory," Peter Orszag, director of the White House Office of Management and Budget, said at a press briefing.

But the budget is certain to add fuel to the debate over the size and scope of government. As expected, Republicans railed against the administration's big spending programs and tax increases.

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Why the Government Wants to Hijack Your 401(k)

By , Chief Investment Strategist, Money Map Report -

It's bad enough that we've been forced to bail out Wall Street. But now the Obama administration is hatching plans to raid our retirement savings, too.

To say that I'm "outraged" doesn't come close to describing the emotions I experience every time I think about the government's latest hare-brained scheme.

According to widespread media reports, both the U.S. Treasury Department and the Department of Labor plan are planning to stage a public-comment period before implementing regulations that would require U.S. savers to invest portions of their 401(k) savings plans and Individual Retirement Accounts (IRAs) into annuities or other "steady" payment streams backed by U.S. government bonds.

Folks, there's only one reason these agencies would do such a thing - the nation's creditors think that U.S. government bonds are a bad bet and don't want to buy them anymore. So like a grifter who's down to his last dollar, the administration is hoping to get its hands on our hard-earned savings before the American people realize they've had the wool pulled over their eyes ... once again.

For the full details on the government's newest financial gambit, read on...

Wall Street's Stranglehold on the Economy Is Choking Americans

By , Chief Investment Strategist, Money Morning • @ShahGilani_TW -

America's Founding Fathers were afraid of any concentration of power in the republic. They were particularly afraid that banking interests could hijack our fledgling democracy.

And yet today, 234 years later, our Founding Fathers' worst fears have come true. Wall Street's stranglehold on the economy threatens our very prosperity, and the future of a truly democratic republic.

It's high time we address the truth about Wall Street's tyranny and set a course for a more secure economic future - one that's anchored by a safe banking system, not a system rigged by banks.

How Wall Street is Choking America? Read on...

TARP Tax More Politics Than Economics

By , Managing Editor, Money Morning -

U.S. President Barack Obama today (Thursday) unveiled the widely anticipated "Financial Crisis Responsibility Fee," which effectively amounts to a tax on banks to pay back money the government lost on the Troubled Asset Relief Program (TARP).

The fee would apply to financial firms - both domestic firms and U.S. subsidiaries of foreign companies - with more than $50 billion in consolidated assets, and equate to 15 basis points, or 0.15% of a company's covered liabilities each year. Deposits assessed by the Federal Deposit Insurance Corp. (FDIC) would not count toward those liabilities.

The tax, which must be approved by Congress, would go into effect on June 30, 2010, and earn about $90 billion over 10 years, but could go on longer. The White House said collecting $117 billion would take about 12 years.

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Banking's Bigwigs Called to Carpet as Obama Prepares New Bank Tax

By , Contributing Writer, Money Morning -

Four prominent Wall Street executives testified on Capitol Hill yesterday (Wednesday) about errors they committed during the financial crisis. But no amount of contrition or case making will be able to spare the financial services industry from the wrath of public opinion and a new tax to be imposed by President Barack Obama.

The bigwigs from Goldman Sachs Group Inc. (NYSE: GS), JP Morgan Chase & Co. (NYSE: JPM), Morgan Stanley (NYSE: MS), and Bank of America Corp. (NYSE: BAC) were called on yesterday (Wednesday) to explain themselves to the U.S. Congress' Financial Crisis Inquiry Commission (FCIC) - the ten-member commission appointed with goal of investigating the causes of the financial crisis.

"Over the course of this crisis, we as an industry caused a lot of damage," Brian Moynihan, chief executive of Bank of America, said before a standing-room only crowd in the House Ways and Means Committee room, The Wall Street Journal reported.

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Don't Be Fooled by the Housing Market's False Bottom

By , Global Investing Specialist, Money Morning -

Existing home sales surprised the markets by rising 7.4% to an annual rate of 6.54 million units in November, the highest since February 2007, according to the National Association of Realtors (NAR). That's only 10% below the all-time peak in 2005.

What's more is that house prices, as measured by the S&P/Case-Shiller 20-city Home Price Index, rose for the fourth consecutive month in September before stabilizing in October when prices were flat.

The NAR is inevitably convinced that the worst is over and that housing is due for a rapid recovery, and that home prices will take out 2006's peaks some time in 2011 or 2012.

Not so fast, guys!

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Coming Soon: The Bill for the Massive U.S. Debt

By , Contributing Writer, Money Morning -

Americans could be in for a rude awakening in coming months when they discover the true scope of the massive national debt racked up by the U.S. government.

In fact, the $1.6 trillion deficit expected for 2010, which is above 10% of gross domestic product (GDP), is only the beginning.

Since the current economic crisis began in late 2007, the U.S. Federal Reserve has tripled the size of its balance sheet, creating enormous amounts of new money by lending to hundreds of ailing banks and buying up more than $1 trillion of questionable asset-backed securities.

But that's only a small part of the story. Since the beginning of the crisis, the Fed has lent, spent, or guaranteed $11.6 trillion, including underwriting the entire system of mortgage finance in the United States, a system that currently shows a nearly $1 trillion loss.

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Which of the "Rich Four" Countries Will Default First?

By , Global Investing Specialist, Money Morning -

Volume in the credit default swap market for rich countries has soared and so have credit spreads, according to a recent Financial Times story, while volume in emerging markets CDS has stagnated. In other words, traders are betting against the governments with high budget deficits, like Britain and the United States, as well as against […]

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Japan's Economic Growth Accelerates, but Deficit Raises Concerns

By , Associate Editor, Money Morning -

Stimulus measures in Japan helped the world's second-largest economy grow at its fastest pace in more than two years, but it's unlikely policymakers will reduce spending despite the nation's rapidly growing debt.

Gross domestic product (GDP) in Japan grew at 4.8% annual rate in the third quarter, surpassing all the forecasts of 20 economists polled by Bloomberg News. That follows a revised gain of 2.7% in the three months ended June 30, according to Japan's Cabinet Office. Japan's economy grew 1.2% on a quarterly basis.

"The turnaround in public investment has definitely contributed to the rebound in GDP, so if they do start to cut it'll weigh on growth,” Hiromichi Shirakawa, chief Japan economist at Credit Suisse Group AG (NYSE ADR: CS), told Bloomberg.

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Is the Government Rehabilitating the Economy or Delaying the Inevitable?

By , Money Morning -

While all the talk at present is about economic corners turned and markets charging ahead, no one is paying much notice to an American economy that's deteriorating right before our eyes.

These myopic commentators seem to be simply moving past the now almost-universally held conclusion that, before the crash of 2008, our economy was on an unsustainable course. If these imbalances had been corrected, then perhaps I, too, would be joining in the euphoria. But evidence abounds that we have not veered at all from that dangerous path.

The U.S. Bureau of Economic Analysis just reported that consumer spending as a percentage of U.S. gross domestic product (GDP) has risen to 71%, a post-World War II record. This level is notably higher than other wealthy industrialized countries, and vastly higher than the levels sustained by China and other emerging economies. At the same time, our industrial output is contracting, our trade deficit is expanding once again (after contracting earlier in the year), and our savings rate is plummeting (after an early year surge).

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Special Report: How the Government is Setting Us Up for a Second Subprime Crisis

By , Chief Investment Strategist, Money Morning • @ShahGilani_TW -

[Editor's Note: Shah Gilani, a retired hedge fund manager and noted expert on the global credit crisis, predicted this developing FHA debacle in a July 2008 Money Morning essay.] Is the government creating another subprime-mortgage bubble? The first time around, the three-headed federal serpent – the Bush administration, the Treasury Department and the U.S. Federal […]

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The Slow Death of General Motors

By , Global Investing Specialist, Money Morning -

By Martin Hutchinson Contributing Editor Money Morning U.S. President Barack Obama's firing of General Motors Corp. (GM) Chief Executive Officer G. Richard Wagoner Jr. may be the beginning of the final act of a long and sad drama – the slow death of GM. The company nameplate may soldier on in some form, but it […]

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The Real Reason for the Global Financial Crisis…the Story No One's Talking About

By , Chief Investment Strategist, Money Morning • @ShahGilani_TW -

[Part I of a three-part series looking at how so-called “credit default swap” derivatives could ignite a worldwide capital markets meltdown.] By Shah GilaniContributing Editor Are you shell-shocked? Are you wondering what's really going on in the market? The truth is probably more frightening than even your worst fears. And yet, you won't hear about […]

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