Debt doomsday may come sooner than expected

Debt doomsday may come sooner than expected
By SEUNG MIN KIM | 2/24/12 3:17 PM EST

The federal government could hit the debt ceiling sooner than expected — and possibly around the November election — according to a report out Friday.

Lawmakers on Capitol Hill had hoped that last summer’s deal to end the nasty fight over lifting the debt ceiling would ensure the issue wouldn’t resurface until at least 2013.

But the Bipartisan Policy Center said Friday that the debt-limit doomsday could come earlier than that.
Analysts from the Bipartisan Policy Center projected that the United States will hit its $16.4 trillion debt ceiling between late November 2012 and early January 2013 due to lower-than-expected corporate tax revenues and the recent extension of the payroll tax holiday.

Read more: http://www.politico.com/news/stories/0212/73260.html#ixzz1nORhhFor

Obama budget to miss deficit goal

Obama budget to miss deficit goal
By Richard Wolf, USA TODAY

President Obama's proposed 2013 budget will forecast a $901 billion deficit for next year, falling far short of his goal to halve the deficit in four years.

The budget, an outline of which was released by the White House Friday night, will show a higher deficit this year than in 2011, up from $1.3 trillion to $1.33 trillion.

http://content.usatoday.com/communities/theoval/post/2012/02/obama-budget-to-miss-deficit-goal/1

Fitch Keeps U.S. Credit Rating at ‘AAA’, Cuts Outlook to Negative

Fitch Keeps U.S. Credit Rating at ‘AAA’, Cuts Outlook to Negative

Fitch Ratings kept its pristine AAA rating on the U.S. on Monday, but the credit-ratings company downgraded its outlook to “negative” in the wake of the Supercommittee’s failure to find $1.2 trillion in spending cuts.

The development, which had been hinted at last week, could have been worse for the U.S. as McGraw-Hill’s (MHP: 41.20, +0.66, +1.63%) Standard & Poor’s slashed its credit rating for the first time ever in August.

However, the negative outlook indicates a “slightly greater” than 50% chance that Fitch downgrades the U.S. over the next two years.
“Failure to reach agreement in 2013 on a credible deficit reduction plan and a worsening of the economic and fiscal outlook would likely result in a downgrade of the U.S. sovereign rating,” David Riley, a managing director at Fitch, said in the report.

Read more: http://www.foxbusiness.com/economy/2011/11/28/fitch-keeps-us-credit-rating-at-aaa-cuts-outlook-to-negative/#ixzz1f3wQslkL

S&P sounds alarm on US debt

S&P sounds alarm on US debt

By Robin Harding and James Politi in Washington and Michael Mackenzie in New York

Published: April 18 2011 15:19 | Last updated: April 18 2011 22:48

Standard & Poor’s issued a stark warning to Washington on Monday, cutting its outlook on US sovereign debt for the first time and throwing more fuel on the raging debate over America’s swollen deficits.

The agency kept America’s credit rating at triple A but for the first time since it started rating US debt 70 years ago, cut its outlook from “stable” to “negative”. A negative outlook means there is a one-third chance of a downgrade in the next two years.

http://www.ft.com/cms/s/0/d6c97342-69bd-11e0-826b-00144feab49a.html#ixzz1JvCRXEuR

Stuck on Stupid : US deficit up 15.7% in first half of fiscal 2011

Stuck on Stupid : US deficit up 15.7% in first half of fiscal 2011

US deficit up 15.7% in first half of fiscal 2011
(AFP) – 1 hour ago

WASHINGTON — The US budget deficit shot up 15.7 percent in the first six months of fiscal 2011, the Treasury Department said Wednesday as political knives were being sharpened for a new budget battle.

The Treasury reported a deficit of $829 billion for the October-March period, compared with $717 billion a year earlier, as revenue rose a sluggish 6.9 percent as the economic recovery slowly gained pace.

The Treasury argued that the pace of increase in the deficit was deceptive because of large one-off reductions in expenditures made during the first half of fiscal 2010, compared with previous and subsequent periods.

Those included a $115 billion reduction in funds spent on the Troubled Asset Relief Program (TARP) -- the financial institution bailout program -- in March 2010.

But 2011 so far has also seen significant increases in spending on defense, Social Security, health and debt service, while receipts have not grown as fast.

http://www.google.com/hostednews/afp/article/ALeqM5il-7COiRQUJ9kbLkZ3gg4nrlac5Q?docId=CNG.dcd81b51497966fd4c6461748e63e3ee.921

Ryan: Debt on Track to Hit 800 Percent of GDP

Ryan: Debt on Track to Hit 800 Percent of GDP; 'CBO Can't Conceive of Any Way' Economy Can Continue Past 2037
Wednesday, April 06, 2011
By Nicholas Ballasy

(CNSNews.com) – House Budget Chairman Congressman Paul Ryan (R-Wis.) said President Barack Obama’s budget strategy is to “do nothing, punt, duck, kick the can down the road” while the debt remains on track to eventually hit 800 percent of GDP. Ryan added that the CBO is saying it "can't conceive of any way" that the economy can continue past 2037 given its current trajectory.

Ryan also said that the House Republicans’ FY2012 budget, which he unveiled yesterday, would save Medicare and help the United States avoid a debt crisis.

http://cnsnews.com/news/article/rep-ryan-obama-s-budget-path-do-nothing

Bankruptcy of U.S. is ‘Mathematical Certainty,’ Says Former CEO of Nation's 10th Largest Bank

Bankruptcy of U.S. is ‘Mathematical Certainty,’ Says Former CEO of Nation's 10th Largest Bank

Thursday, November 04, 2010
By Terence P. Jeffrey

http://www.cnsnews.com/news/article/former-bbt-ceo-bankruptcy-us-mathematica


(CNSNews.com) - John Allison, who for two decades served as chairman and CEO of BB&T, the nation's 10th largest bank, told CNSNews.com it is a “mathematical certainty” that the United States government will go bankrupt unless it dramatically changes its fiscal direction.

Allison likened what he sees as the predictable future bankruptcy of the United States to the problems at Fannie Mae and Freddie Mac, whose insolvency he also said was foreseeable to those who studied their business practices and financial situation.

“I think the first thing we have to realize is where we’re going and to face it objectively,” Allison told CNSNews.com, when asked about the trillion-dollar-plus deficits the federal government has run for three straight years, the more than $13 trillion in federal debt, and the $61.9 trillion long-term shortfall the government faces (according to the analysis of the Peter G. Peterson Foundation) if the government is to pay all the benefits it has promised through entitlement programs.

“If you run the numbers, on all those numbers that you just talked about, which I think are accurate, very accurate, in 20 or 25 years, the United States goes bankrupt,” said Allison. “It’s a mathematical certainty.

“It reminds me very much of that story I told you about Freddie Mac and Fannie Mae,” said Allison. “We were running the numbers, and Freddie Mac and Fannie Mae went bankrupt, and we got there. In 20 or 25 years, the United States goes bankrupt.

http://www.cnsnews.com/news/article/former-bbt-ceo-bankruptcy-us-mathematica

Roubini : A presidency heading for a fiscal train wreck

Roubini : A presidency heading for a fiscal train wreck

By Nouriel Roubini

Published: October 28 2010 20:48
Last updated: October 28 2010 20:48

http://www.ft.com/cms/s/0/dd140d16-e2c2-11df-8a58-00144feabdc0.html

What has been the fiscal performance of President Barack Obama? He inherited the worst economic crisis since the Great Depression, as well as a budget deficit that – after much needed bail-outs and a series of reckless tax cuts – was already close to $1,000bn. His stimulus package, together with a backstop of the financial system, low rates and quantitative easing from the Federal Reserve, prevented another depression. Mr Obama also deserves credit that the US, alone among advanced economies, currently supports a “growth now”, rather than an “austerity now” path.

But this is but one half of the picture; we must also judge his first two years on his ability to anticipate what the economy will need tomorrow. Here the picture is much less positive. Given the likely path of fiscal policy after next Tuesday’s election – with the expiration of existing stimulus and transfer payments, and even with most of the 2001-03 tax cuts being kept – the US economy will soon experience serious fiscal drag just when it needs a further boost. Problematically, the administration’s failures leave it relying on the Fed, which is bent on further QE, likely to be announced next Wednesday. But studies show this will have little effect on US growth in 2011, so fiscal policy should be doing some of the lifting to prevent a double dip recession.

 In an ideal world Mr Obama would also have been able to move towards reforming and reducing entitlement spending, with commitments to measures that could be phased in over the next few years, therefore avoiding short-term fiscal pain. He would also have committed to increase, gradually over the next few years, less distortionary taxes such as a VAT and a carbon tax. This would have reduced the fiscal deficit, and created a climate in which no investor would worry about additional stimulus.

http://www.ft.com/cms/s/0/dd140d16-e2c2-11df-8a58-00144feabdc0.html

Obama Stimulus Made Economic Crisis Worse, `Black Swan' Author Taleb Says

Obama Stimulus Made Economic Crisis Worse, `Black Swan' Author Taleb SaysBy Frederic Tomesco - Sep 25, 2010 10:36 AM ET U.S.

President Barack Obama and his administration weakened the country’s economy by seeking to foster growth instead of paying down the federal debt, said Nassim Nicholas Taleb, author of “The Black Swan.”

“Obama did exactly the opposite of what should have been done,” Taleb said yesterday in Montreal in a speech as part of Canada’s Salon Speakers series. “He surrounded himself with people who exacerbated the problem. You have a person who has cancer and instead of removing the cancer, you give him tranquilizers. When you give tranquilizers to a cancer patient, they feel better but the cancer gets worse.”

Today, Taleb said, “total debt is higher than it was in 2008 and unemployment is worse.”

more:
http://www.bloomberg.com/news/2010-09-25/-black-swan-author-taleb-says-obama-s-stimulus-made-economic-crisis-worse.html

White House predicts budget deficit will reach a record $1.47 trillion this year. The government is borrowing 41 cents of every dollar it spends

White House predicts budget deficit will reach a record $1.47 trillion this year. The government is borrowing 41 cents of every dollar it spends


By ANDREW TAYLOR, Associated Press Writer Andrew Taylor, Associated Press Writer – Fri Jul 23, 3:12 pm ET

http://news.yahoo.com/s/ap/20100723/ap_on_bi_ge/us_budget_deficit_2


WASHINGTON – New estimates from the White House on Friday predict the budget deficit will reach a record $1.47 trillion this year. The government is borrowing 41 cents of every dollar it spends.

That's actually a little better than the administration predicted in February.

The new estimates paint a grim unemployment picture as the economy experiences a relatively jobless recovery. The unemployment rate, presently averaging 9.5 percent, would average 9 percent next year under the new estimates.

The Office of Management and Budget report has ominous news for President Barack Obama should he seek re-election in 2012 — a still-high unemployment rate of 8.1 percent. That would be well above normal, which is closer to a rate of 5.5 percent to 6 percent. Private economists don't think the unemployment rate will drop to those levels until well into this decade.

The gaping deficits are of increasing concern to voters. But Obama and Democrats controlling Congress are mostly taking a pass on deficit reduction this year as they await possible recommendations from Obama's deficit commission.

While there's a slight improvement in the deficit for the current year, next year's predicted $1.42 trillion worth of red ink — that's 37 cents of borrowing for every dollar spent — is looking worse. It's about $150 billion more than previously predicted, because of still-slumping tax revenues.

White House budget director Peter Orszag said the numbers represent a "fiscal situation that requires attention."

Deficits have skyrocketed since the recession took hold in 2008 and Congress responded with a massive bailout of the financial system and last year's $862 billion stimulus measure.

Associated Press writer Jeannine Aversa contributed to this report.

http://news.yahoo.com/s/ap/20100723/ap_on_bi_ge/us_budget_deficit_2

U.S. sovereign debt downgrade : "While we see limited risk of a U.S. sovereign debt downgrade in the next 2-3 years, beyond that we cannot be so certain," wrote Societe Generale's economics team in a recent report.

U.S. Debt Shock May Hit In 2018, Maybe As Soon As 2013: Moody's


By JED GRAHAM, INVESTOR'S BUSINESS DAILY

Posted 05/05/2010 07:56 PM ET

http://www.investors.com/NewsAndAnalysis/Article.aspx?id=532490

Spiraling debt is Uncle Sam's shock collar, and its jolt may await like an invisible pet fence.


"Nobody knows when you bump up against the limit, but you know when it happens it will really hurt," said fiscal watchdog Maya MacGuineas of the Committee for a Responsible Federal Budget.

The great uncertainty about how much debt is too much has tended to make fiscal discipline seem less urgent, rather than more. There is no obvious threshold beyond which investors will demand higher real yields for holding U.S. debt. Vague warnings from ratings agencies about the loss of America's 'AAA' status haven't added much clarity — until recently.

In the wake of the financial crisis and recession, Moody's Investors Service has brought new transparency to its sovereign ratings analysis — so much so that 2018 lights up as the year the U.S. could be in line for a downgrade if Congressional Budget Office projections hold.

The key data point in Moody's view is the size of federal interest payments on the public debt as a percentage of tax revenue. For the U.S., debt service of 18%-20% of federal revenue is the outer limit of AAA-territory, Moody's managing director Pierre Cailleteau confirmed in an e-mail.

Under the Obama budget, interest would top 18% of revenue in 2018 and 20% in 2020, CBO projects.

But under more adverse scenarios than the CBO considered, including higher interest rates, Moody's projects that debt service could hit 22.4% of revenue by 2013.

"While we see limited risk of a U.S. sovereign debt downgrade in the next 2-3 years, beyond that we cannot be so certain," wrote Societe Generale's economics team in a recent report.

The Moody's ratings framework is one that could have a significant influence on policy — particularly in a crisis.

Because debt levels and interest rates can't be lowered overnight, the obvious way of staying within the AAA limits set by Moody's would be to raise revenue.

"It would bias the remedy in favor of tax increases for countries that want to improve their bond rating," said Brian Riedl, budget analyst at the conservative Heritage Foundation.

Because economic growth is a key to fiscal health, Riedl argues that a ratings agency concerned about whether bondholders are repaid should bias spending cuts over tax increases.

read the rest :

http://www.investors.com/NewsAndAnalysis/Article.aspx?id=532490

Thomas Hoenig, president of the Federal Reserve Bank of Kansas City:The US must fix its growing debt problems or risk a new financial crisis

Lone voice warns of debt threat to Fed
By Alan Rappeport in Washington

http://www.ft.com/cms/s/0/c918b8dc-1b37-11df-953f-00144feab49a.html

Published: February 16 2010 20:23 Last updated: February 16 2010 20:23

The US must fix its growing debt problems or risk a new financial crisis, Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, warned on Tuesday, adding a mounting deficit could spur inflation.

Mr Hoenig said that rising debt was infringing on the central bank’s ability to fulfil its goals of maintaining price stability and long-term economic growth. “Stunning” deficit projections were putting political pressure on the Fed to keep interest rates low, infringing on its independence at the risk of inflation, he said.

“Without pre-emptive action, the US risks its next crisis,” Mr Hoenig said in a speech at the Pew-Peterson Commission on Budget Reform.

He was the only Fed member who dissented at last month’s meeting against language indicating that interest rates should remain near zero for an “extended period”.

On Tuesday he said that the worst option for the US was a scenario where the government “knocks on the central bank’s door” and asks it to print more money. Instead, the administration must find ways to cut spending and generate revenue. He called for a “reallocation of resources” and noted that the process would be painful and politically inconvenient.

The US budget deficit is projected to be $8,000bn (€5,800bn, £5,000bn) in the next decade. Barack Obama, US president, recently lifted the government’s borrowing authority to $14,300bn.


see the full story ...
http://www.ft.com/cms/s/0/c918b8dc-1b37-11df-953f-00144feab49a.html