Sunday, May 27, 2012

May 27th, 2012 Edition

Rating agencies warn feds risks downgrade without deficit plan
By Peter Schroeder
May 25, 2012

Rating agencies are warning that the federal government risks another downgrade of its creditworthiness if it fails to come up with a credible plan this year to lower the federal deficit.

The warning comes amid growing expectations that Washington will punt major tax and spending decisions into next year because lawmakers would have little time to address them in a lame-duck session after the November election.

Such a delay would not guarantee a downgrade, but officials at rating agencies say they need to be convinced that Washington has a real plan to reduce its growing debt if the nation is to avert future downgrades.

“It’s highly uncertain ... because of the political circumstances,” said Steven Hess, Moody’s lead analyst for U.S. ratings. “Our stance at this point is to wait and see.”

Action on the debt almost certainly won’t happen before the election, because both parties are building their fall campaigns on differences over taxes and spending.

As a result, the administration and lawmakers are headed for the mother of all lame-duck sessions in November, when Congress must decide whether to raise the debt ceiling, extend the Bush tax rates and replace $1.2 trillion in automatic spending cuts set to begin in January 2013.

Lobbyists on K Street are already expecting the government to agree to a short-term deal in the lame duck that would punt longer-term decisions on taxes and spending into 2013, but possibly extend current tax rates in the short term while slightly raising the debt ceiling.

Number of the Week: Half of U.S. Lives in Household Getting Benefits
By Phil Izzo
May 26, 2012

49.1%: Percent of the population that lives in a household where at least one member received some type of government benefit in the first quarter of 2011.

Cutting government spending is no easy task, and it’s made more complicated by recentCensus Bureau data showing that nearly half of the people in the U.S. live in a household that receives at least one government benefit, and many likely received more than one.

The 49.1% of the population in a household that gets benefits is up from 30% in the early 1980s and 44.4% as recently as the third quarter of 2008.

The increase in recent years is likely due in large part to the lingering effects of the recession. As of early 2011, 15% of people lived in a household that received food stamps, 26% had someone enrolled in Medicaid and 2% had a member receiving unemployment benefits. Families doubling up to save money or pool expenses also is likely leading to more multigenerational households. But even without the effects of the recession, there would be a larger reliance on government.

The Census data show that 16% of the population lives in a household where at least one member receives Social Security and 15% receive or live with someone who gets Medicare. There is likely a lot of overlap, since Social Security and Medicare tend to go hand in hand, but those percentages also are likely to increase as the Baby Boom generation ages.

With increased government spending comes the need to pay for it, and if taxes aren’t going to increase that means deficits.

Walker Wins Debate Against Barrett

By Aaron Rodriguez
May 27, 2012

In the first of two recall debates, [Wisconsin] Governor Scott Walker and Mayor Tom Barrett went toe to toe in what Barrett described as "not a do over." 

Barrett (left); Governor  Walker (right)
In his opening remarks, Walker spoke about Wisconsin moving forward with job growth, lower unemployment, a budget surplus of $154 million, no tax increases, no massive layoffs, no cuts to major entitlement programs, and the first time property taxes had decreased in over 14 years. It was a positive message of how Wisconsin was turning the corner.

In Barrett’s opened by renewing his charge on the John Doe investigation asking Walker to release emails and explain why he had set up a criminal defense fund. Barrett’s strategy to focus on Walker’s character instead of his policies developed quickly within the first few moments of the debate.

Barrett’s theme of the night was Walker’s civil war, which he described as an environment where neighbors, relatives, and co-workers were no longer speaking with each other. Barrett also criticized Walker for putting his national ambitions ahead of Wisconsin and for his lucrative outstate fundraising prowess.

Walker retorted that it started when millions were poured into the state by unions to upset a Supreme Court race and to recall six State Senators. Walker said he wouldn’t have to raise a penny if it weren’t for the out of state special interests trying to depose him.

Walker won the debate partly because he’s a naturally gifted public speaker, but also because some of Barrett’s charges were too assumptive. Barrett told Walker he used a budget bill to tear apart the state and that leaders like Franklin Roosevelt were great not because they divided the country, but because they united it.

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