Monday, February 14, 2011

Two speeches at CPAC have a link and are well worth listening assured they are not the only ones, rather only ones I could find: Indiana Governor Mitch Daniels at the Ronald Reagan Dinner Friday, George Will introducing him, and the closing speech of Congressman Allen West.

This happened before the full effects of Obamacare....scary how regulations can strangle a good system. Question, Mr. President, if entitlements are the largest portion of the budget and all agree that changes must be made to reign in spending on entitlements, why on earth, are you insisting that the largest entitlement ever be enacted?

Most of today's news is on budgets.... state and federal.

David Malpass on the President's budget: The President released his budget this morning covering ten years beginning with FY2012 (which starts October 1.)

Federal deficits, though large, decline during the 10-year budget window from $1.6 trillion in FY11 to $1.1 trillion in FY12 and to a low of $619 billion in FY18.
Spending grows to $5.7 trillion in 2021 from $3.8 trillion this year.
Over the 10-year budget window, the federal government would receive $39 trillion in taxes and spend $46 trillion.
Marketable debt grows to $19 trillion from $9 trillion now, putting it at 77% of GDP. The budget includes a graph showing that the debt-to-GDP ratio explodes beginning in the mid-2020s, heading to 150% of GDP in 2050 based on current policies (e.g. the rapid growth in real spending on Medicare in the 2020s and 2030s.)
Statutory debt grows to $26 trillion in 2021 from $14 trillion now. In the budget, that’s a 106% debt-to-GDP ratio in 2021 (GDP is assumed to reach $24.6 trillion in GDP.)
Net interest paid over the 10-year budget window is $5.7 trillion, with $844 billion paid in 2021 on the $19 trillion in marketable debt (about 4.4% average interest cost.)

Many of the assumptions used in the budget are optimistic. We think the debt-to-GDP ratios will be much higher than shown in the budget for both marketable and statutory debt unless policies are changed dramatically. In the next few weeks, CBO will provide a re-estimate of the president’s budget using more realistic (though still optimistic) assumptions. It will probably increase all of the deficit and debt estimates.

The president’s budget assumes an all-out economic boom, with real growth climbing from an already rosy 4% in 2012 to 4.5% in 2013 and 4.2% in 2014. This is over 1% faster than the CBO and Blue Chip economic forecasts and well above any growth rate achieved in the Bush expansion (when the national debt and unemployment were much lower.)
The budget assumes wages and salaries grow 6.6% per year in 2013 and 2014 when inflation is assumed to be a very low 2%. This means huge raises for workers even though unemployment is still assumed to be 6%-9% in that period.
Despite very fast GDP growth, the 10-year Treasury note is assumed to average 3.6% in 2012, the current yield.
Also holding the deficit down, the budget assumes that top bracket income tax rates rise sharply at the end of 2012 (when the Bush rates expire). The tax increase raises roughly $900 billion from 2013-2021, with no negative impact on economic growth.
The budget assumes the tax rate on carried interest is increased to ordinary income tax rates in mid-2011 (there are no current plans for such a tax bill). The new tax treatment of private equity is assumed to raise $2 billion per year in FY2012 and beyond.
The budget assumes defense spending is cut sharply to $553 billion in nominal terms in FY2012 and then grows very slowly throughout the budget window, reaching $668 billion in 2021. In contrast, interest costs rise from $242 billion in FY12 to $844B in FY21, putting interest costs well above defense spending. Defense spending would be only 2.7% of GDP in FY21, a record low.

What could you do with $3.73 trillion?

We know what Yemeni tobacco smuggler Taha "Saleh" Mutaher, did with the ill gotten gains from bootlegged cigarettes.

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