Here are the newest National Debt Statistics for July 2009 as reported at www.treasurydirect.gov
As of July 23, 2009
Publicly held debt:
$7,264,963,795,966.75
Intragovernmental holdings:
$4,340,557,283,875.38
Total Debt:
$11,605,521,079,842.13
June 2009 Interest payment
$106,612,310,280.24
Fiscal Year 2009 Interest
$320,650,178,293.51
Gifts to reduce the public debt
May 2009: $51,546.51
FY 2009: $2,909,454.76
Increase in the debt since President Obama's Inauguration:
$978,644,030,929.05
Rate of increase each day in the 184 days of the Obama Administration:
$5,318,717,559.40
Monday, July 27, 2009
Monday, July 6, 2009
Money and kids: Raising responsible spenders in a debt-driven world
by Jamie Richardson
www.examiner.com
The national debt is now about $11.4 trillion, according to USA Today. That is about $37,000 per person. And the number is rising quickly.
How can parents teach their kids to do better than the deep-pocketed politicians?
Here are 3 tips on teaching kids fiscal responsibility.
1. Teach the values of money early. Consider a rewards bank for good behavior. Like an earned allowance for an older child, this is the perfect starting point to let younger ones understand that things are earned, not just given freely. Give a dime for each good act, take one away for misbehavior. When the child has earned enough, take them to a dollar store and let them pick out their own reward. Let them pay the cashier to allow them the full experience of earning and buying.
2. Let them make some choices at the grocery store. For older kids, let them know how much money is allotted for the things on their breakfast or lunch table. With that money they can choose either their favorite chips, cookie, or cereal, but they only have that much money to spend on "fun" food. If the children are not old enough to read price tags, that does not eliminate them from the smart shopping experience. Give them options. Timmy can have either the name brand cereal OR the fruity candy, but not both. Or Timmy can get the store brand of both for the same price. The package may not have his favorite cartoon character on it, but he will learn to make decisions based more on flavor than advertising.
3. Cash is king. The movie Confessions of a Shopaholic gave me a whole new perspective on credit cards. The star is remembering back to her childhood and watching all the well-off ladies in the stores. She thought they were princesses and they did not even need "real money" because they had magic cards. As an adult, she chose to have 12 of those magic cards and she did not have full respect for their power until she wracked up thousands of dollars in debt that she could not afford.
And while the credit card debt per household is holding steady at about $10,000, Americans really are passing along this impression of a magic card to the next generation. For a child to truly respect money, kids need to see the power of actual money. If they see that the same money is spent on groceries and lunches, and toys and treats and that there is a limited supply of money, they catch on much faster to having a finite amount to spend.
www.examiner.com
The national debt is now about $11.4 trillion, according to USA Today. That is about $37,000 per person. And the number is rising quickly.
How can parents teach their kids to do better than the deep-pocketed politicians?
Here are 3 tips on teaching kids fiscal responsibility.
1. Teach the values of money early. Consider a rewards bank for good behavior. Like an earned allowance for an older child, this is the perfect starting point to let younger ones understand that things are earned, not just given freely. Give a dime for each good act, take one away for misbehavior. When the child has earned enough, take them to a dollar store and let them pick out their own reward. Let them pay the cashier to allow them the full experience of earning and buying.
2. Let them make some choices at the grocery store. For older kids, let them know how much money is allotted for the things on their breakfast or lunch table. With that money they can choose either their favorite chips, cookie, or cereal, but they only have that much money to spend on "fun" food. If the children are not old enough to read price tags, that does not eliminate them from the smart shopping experience. Give them options. Timmy can have either the name brand cereal OR the fruity candy, but not both. Or Timmy can get the store brand of both for the same price. The package may not have his favorite cartoon character on it, but he will learn to make decisions based more on flavor than advertising.
3. Cash is king. The movie Confessions of a Shopaholic gave me a whole new perspective on credit cards. The star is remembering back to her childhood and watching all the well-off ladies in the stores. She thought they were princesses and they did not even need "real money" because they had magic cards. As an adult, she chose to have 12 of those magic cards and she did not have full respect for their power until she wracked up thousands of dollars in debt that she could not afford.
And while the credit card debt per household is holding steady at about $10,000, Americans really are passing along this impression of a magic card to the next generation. For a child to truly respect money, kids need to see the power of actual money. If they see that the same money is spent on groceries and lunches, and toys and treats and that there is a limited supply of money, they catch on much faster to having a finite amount to spend.
Saturday, July 4, 2009
MOUNTAIN OF DEBT: Rising debt may be next crisis
By TOM RAUM
WASHINGTON (AP) - The Founding Fathers left one legacy not celebrated on Independence Day but which affects us all. It's the national debt.
The country first got into debt to help pay for the Revolutionary War. Growing ever since, the debt stands today at a staggering $11.4 trillion - equivalent to about $37,000 for each and every American. And it's expanding by over $1 trillion a year.
The mountain of debt easily could become the next full-fledged economic crisis without firm action from Washington, economists of all stripes warn.
"Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth," Federal Reserve Chairman Ben Bernanke recently told Congress.
Higher taxes, or reduced federal benefits and services - or a combination of both - may be the inevitable consequences.
The debt is complicating efforts by President Barack Obama and Congress to cope with the worst recession in decades as stimulus and bailout spending combine with lower tax revenues to widen the gap.
Interest payments on the debt alone cost $452 billion last year - the largest federal spending category after Medicare-Medicaid, Social Security and defense. It's quickly crowding out all other government spending. And the Treasury is finding it harder to find new lenders.
The United States went into the red the first time in 1790 when it assumed $75 million in the war debts of the Continental Congress.
Alexander Hamilton, the first treasury secretary, said, "A national debt, if not excessive, will be to us a national blessing."
Some blessing.
Since then, the nation has only been free of debt once, in 1834-1835.
The national debt has expanded during times of war and usually contracted in times of peace, while staying on a generally upward trajectory. Over the past several decades, it has climbed sharply - except for a respite from 1998 to 2000, when there were annual budget surpluses, reflecting in large part what turned out to be an overheated economy.
The debt soared with the wars in Iraq and Afghanistan and economic stimulus spending under President George W. Bush and now Obama.
The odometer-style "debt clock" near Times Square - put in place in 1989 when the debt was a mere $2.7 trillion - ran out of numbers and had to be shut down when the debt surged past $10 trillion in 2008.
The clock has since been refurbished so higher numbers fit. There are several debt clocks on Web sites maintained by public interest groups that let you watch hundreds, thousands, millions zip by in a matter of seconds.
The debt gap is "something that keeps me awake at night," Obama says.
He pledged to cut the budget "deficit" roughly in half by the end of his first term. But "deficit" just means the difference between government receipts and spending in a single budget year.
This year's deficit is now estimated at about $1.85 trillion.
Deficits don't reflect holdover indebtedness from previous years. Some spending items - such as emergency appropriations bills and receipts in the Social Security program - aren't included, either, although they are part of the national debt.
The national debt is a broader, and more telling, way to look at the government's balance sheets than glancing at deficits.
According to the Treasury Department, which updates the number "to the penny" every few days, the national debt was $11,518,472,742,288 on Wednesday.
The overall debt is now slightly over 80 percent of the annual output of the entire U.S. economy, as measured by the gross domestic product.
By historical standards, it's not proportionately as high as during World War II, when it briefly rose to 120 percent of GDP. But it's still a huge liability.
Also, the United States is not the only nation struggling under a huge national debt. Among major countries, Japan, Italy, India, France, Germany and Canada have comparable debts as percentages of their GDPs.
Where does the government borrow all this money from?
The debt is largely financed by the sale of Treasury bonds and bills. Even today, amid global economic turmoil, those still are seen as one of the world's safest investments.
That's one of the rare upsides of U.S. government borrowing.
Treasury securities are suitable for individual investors and popular with other countries, especially China, Japan and the Persian Gulf oil exporters, the three top foreign holders of U.S. debt.
But as the U.S. spends trillions to stabilize the recession-wracked economy, helping to force down the value of the dollar, the securities become less attractive as investments. Some major foreign lenders are already paring back on their purchases of U.S. bonds and other securities.
And if major holders of U.S. debt were to flee, it would send shock waves through the global economy - and sharply force up U.S. interest rates.
As time goes by, demographics suggest things will get worse before they get better, even after the recession ends, as more baby boomers retire and begin collecting Social Security and Medicare benefits.
While the president remains personally popular, polls show there is rising public concern over his handling of the economy and the government's mushrooming debt - and what it might mean for future generations.
If things can't be turned around, including establishing a more efficient health care system, "We are on an utterly unsustainable fiscal course," said the White House budget director, Peter Orszag.
Some budget-restraint activists claim even the debt understates the nation's true liabilities.
The Peter G. Peterson Foundation, established by a former commerce secretary and investment banker, argues that the $11.4 trillion debt figures does not take into account roughly $45 trillion in unlisted liabilities and unfunded retirement and health care commitments.
That would put the nation's full obligations at $56 trillion, or roughly $184,000 per American, according to this calculation.
WASHINGTON (AP) - The Founding Fathers left one legacy not celebrated on Independence Day but which affects us all. It's the national debt.
The country first got into debt to help pay for the Revolutionary War. Growing ever since, the debt stands today at a staggering $11.4 trillion - equivalent to about $37,000 for each and every American. And it's expanding by over $1 trillion a year.
The mountain of debt easily could become the next full-fledged economic crisis without firm action from Washington, economists of all stripes warn.
"Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth," Federal Reserve Chairman Ben Bernanke recently told Congress.
Higher taxes, or reduced federal benefits and services - or a combination of both - may be the inevitable consequences.
The debt is complicating efforts by President Barack Obama and Congress to cope with the worst recession in decades as stimulus and bailout spending combine with lower tax revenues to widen the gap.
Interest payments on the debt alone cost $452 billion last year - the largest federal spending category after Medicare-Medicaid, Social Security and defense. It's quickly crowding out all other government spending. And the Treasury is finding it harder to find new lenders.
The United States went into the red the first time in 1790 when it assumed $75 million in the war debts of the Continental Congress.
Alexander Hamilton, the first treasury secretary, said, "A national debt, if not excessive, will be to us a national blessing."
Some blessing.
Since then, the nation has only been free of debt once, in 1834-1835.
The national debt has expanded during times of war and usually contracted in times of peace, while staying on a generally upward trajectory. Over the past several decades, it has climbed sharply - except for a respite from 1998 to 2000, when there were annual budget surpluses, reflecting in large part what turned out to be an overheated economy.
The debt soared with the wars in Iraq and Afghanistan and economic stimulus spending under President George W. Bush and now Obama.
The odometer-style "debt clock" near Times Square - put in place in 1989 when the debt was a mere $2.7 trillion - ran out of numbers and had to be shut down when the debt surged past $10 trillion in 2008.
The clock has since been refurbished so higher numbers fit. There are several debt clocks on Web sites maintained by public interest groups that let you watch hundreds, thousands, millions zip by in a matter of seconds.
The debt gap is "something that keeps me awake at night," Obama says.
He pledged to cut the budget "deficit" roughly in half by the end of his first term. But "deficit" just means the difference between government receipts and spending in a single budget year.
This year's deficit is now estimated at about $1.85 trillion.
Deficits don't reflect holdover indebtedness from previous years. Some spending items - such as emergency appropriations bills and receipts in the Social Security program - aren't included, either, although they are part of the national debt.
The national debt is a broader, and more telling, way to look at the government's balance sheets than glancing at deficits.
According to the Treasury Department, which updates the number "to the penny" every few days, the national debt was $11,518,472,742,288 on Wednesday.
The overall debt is now slightly over 80 percent of the annual output of the entire U.S. economy, as measured by the gross domestic product.
By historical standards, it's not proportionately as high as during World War II, when it briefly rose to 120 percent of GDP. But it's still a huge liability.
Also, the United States is not the only nation struggling under a huge national debt. Among major countries, Japan, Italy, India, France, Germany and Canada have comparable debts as percentages of their GDPs.
Where does the government borrow all this money from?
The debt is largely financed by the sale of Treasury bonds and bills. Even today, amid global economic turmoil, those still are seen as one of the world's safest investments.
That's one of the rare upsides of U.S. government borrowing.
Treasury securities are suitable for individual investors and popular with other countries, especially China, Japan and the Persian Gulf oil exporters, the three top foreign holders of U.S. debt.
But as the U.S. spends trillions to stabilize the recession-wracked economy, helping to force down the value of the dollar, the securities become less attractive as investments. Some major foreign lenders are already paring back on their purchases of U.S. bonds and other securities.
And if major holders of U.S. debt were to flee, it would send shock waves through the global economy - and sharply force up U.S. interest rates.
As time goes by, demographics suggest things will get worse before they get better, even after the recession ends, as more baby boomers retire and begin collecting Social Security and Medicare benefits.
While the president remains personally popular, polls show there is rising public concern over his handling of the economy and the government's mushrooming debt - and what it might mean for future generations.
If things can't be turned around, including establishing a more efficient health care system, "We are on an utterly unsustainable fiscal course," said the White House budget director, Peter Orszag.
Some budget-restraint activists claim even the debt understates the nation's true liabilities.
The Peter G. Peterson Foundation, established by a former commerce secretary and investment banker, argues that the $11.4 trillion debt figures does not take into account roughly $45 trillion in unlisted liabilities and unfunded retirement and health care commitments.
That would put the nation's full obligations at $56 trillion, or roughly $184,000 per American, according to this calculation.
Thursday, June 25, 2009
Newest National Debt Statistics posted June 2009
The newest National Debt Statistics are as follows. My apologies for the late posting, I usually try to get these posted as soon as the report is made public.
According to www.TreasuryDirect.gov, the National Debt on June 23, 2009 is as follows:
Publicly held: $7,127,688,946,496.39
Intragovernmental Holdings: $4,280,284,814,654.63
Total: 11,407,973,761,151.02
This represents a per capita debt of approximately $37,159.52 for each man, woman and child in the United States (using a U.S. Population of 307,000,000 as a variable).
In May 2009, taxpayers paid $20,600,287,859.26 in interest payments alone, and $214,037,868,013.27 for the entire fiscal year to-date.
In April 2009, the bureau of the public debt received $2,857,908.25 in gifts to reduce the public debt.
Since President Obama took office, the debt has grown by $779,092,275,640.79. This represents a daily growth of $5,059,040,750.91 increase per day during the 154 days he's been in office.
According to www.TreasuryDirect.gov, the National Debt on June 23, 2009 is as follows:
Publicly held: $7,127,688,946,496.39
Intragovernmental Holdings: $4,280,284,814,654.63
Total: 11,407,973,761,151.02
This represents a per capita debt of approximately $37,159.52 for each man, woman and child in the United States (using a U.S. Population of 307,000,000 as a variable).
In May 2009, taxpayers paid $20,600,287,859.26 in interest payments alone, and $214,037,868,013.27 for the entire fiscal year to-date.
In April 2009, the bureau of the public debt received $2,857,908.25 in gifts to reduce the public debt.
Since President Obama took office, the debt has grown by $779,092,275,640.79. This represents a daily growth of $5,059,040,750.91 increase per day during the 154 days he's been in office.
Monday, June 8, 2009
Could US Debt Reach 100% Of GDP?
by Douglas A. McIntyre
www.247wallst.com
Bill Gross, the chief investment officer of bond management firm Pimco, makes the case in a letter to investors that the US national debt could easily reach 100% of GDP, perhaps as quickly as in five years. His calculations are that the Treasury would have to pay 5% or 6% on the national debt to attract enough investors to fund it.
The consequences of the debt being that high could be that foreign governments including China would slow their purchases of America debt due to concerns about the US eventually defaulting.
China will probably find that there is nowhere other than Treasury-issued debt to put its money, even if the rating on that debt goes below “AAA.” The hundreds of billion of dollars that the US will borrow over the next several years will likely be the only pool of bonds large enough to accommodate China’s need to put its capital somewhere outside its own borders. America will have to pay a higher yield. The Chinese will take it, viewing Treasury debt as still by far the safest place that it can invest what may become its growing surplus.
It is obvious what the American government will have to do as the deficit balloons. It could hope to rely on its stimulus package to accelerate the economy to the point where GDP growth is routinely above 4%. That is the assumption of the Administration and Congress has gone along with it to the extent that it has approved the funds for the $787 billion investment in turning around the US economy.
There are a number of skeptics who believe that at sharp rebound in GDP is nearly impossible because the American economy has been so terribly weakened in the last two years. Lack of access to credit and rising unemployment may have crippled the chance for consumer spending to improve.
The 1981/1982 recession drove unemployment to over 10% for two quarters, but by 1983 and 1984, GDP was growing at a healthy rate again. A great deal of this was due to inflation and the US may end up “inflating” itself out of the current recession as well. That will cause the costs of goods and services to rise, but it will also probably increase corporate revenue and personal income. The extent to which the economy suffers inflation-based damage will be based on whether inflation is at modest 5% or at a much, much higher rate. The Fed can hope to mitigate inflation by manipulating rates, but that is based on a very inexact science, the application of which has not always been successful in the past.
The Treasury’s only other real alternative to bringing down debt is to sharply increase taxes to both individuals and businesses. Most economists believe that high taxes suck so much capital out of the private sector that business and consumer spending cannot recover. That pushes GDP down further.
The odds are high that the Treasury can rely on the fact that the economy will get some benefit from the huge stimulus package and that taxes will have to go up. Those two factors would have to work nearly perfectly in tandem to stop the increase in the national debt. “Perfect” sets that bar very high, perhaps too high to clear.
www.247wallst.com
Bill Gross, the chief investment officer of bond management firm Pimco, makes the case in a letter to investors that the US national debt could easily reach 100% of GDP, perhaps as quickly as in five years. His calculations are that the Treasury would have to pay 5% or 6% on the national debt to attract enough investors to fund it.
The consequences of the debt being that high could be that foreign governments including China would slow their purchases of America debt due to concerns about the US eventually defaulting.
China will probably find that there is nowhere other than Treasury-issued debt to put its money, even if the rating on that debt goes below “AAA.” The hundreds of billion of dollars that the US will borrow over the next several years will likely be the only pool of bonds large enough to accommodate China’s need to put its capital somewhere outside its own borders. America will have to pay a higher yield. The Chinese will take it, viewing Treasury debt as still by far the safest place that it can invest what may become its growing surplus.
It is obvious what the American government will have to do as the deficit balloons. It could hope to rely on its stimulus package to accelerate the economy to the point where GDP growth is routinely above 4%. That is the assumption of the Administration and Congress has gone along with it to the extent that it has approved the funds for the $787 billion investment in turning around the US economy.
There are a number of skeptics who believe that at sharp rebound in GDP is nearly impossible because the American economy has been so terribly weakened in the last two years. Lack of access to credit and rising unemployment may have crippled the chance for consumer spending to improve.
The 1981/1982 recession drove unemployment to over 10% for two quarters, but by 1983 and 1984, GDP was growing at a healthy rate again. A great deal of this was due to inflation and the US may end up “inflating” itself out of the current recession as well. That will cause the costs of goods and services to rise, but it will also probably increase corporate revenue and personal income. The extent to which the economy suffers inflation-based damage will be based on whether inflation is at modest 5% or at a much, much higher rate. The Fed can hope to mitigate inflation by manipulating rates, but that is based on a very inexact science, the application of which has not always been successful in the past.
The Treasury’s only other real alternative to bringing down debt is to sharply increase taxes to both individuals and businesses. Most economists believe that high taxes suck so much capital out of the private sector that business and consumer spending cannot recover. That pushes GDP down further.
The odds are high that the Treasury can rely on the fact that the economy will get some benefit from the huge stimulus package and that taxes will have to go up. Those two factors would have to work nearly perfectly in tandem to stop the increase in the national debt. “Perfect” sets that bar very high, perhaps too high to clear.
Friday, May 29, 2009
LTTE: Time to start paying down national debt
The following Letter to the Editor appeared in the May 24, 2009 edition of the Bellingham Herald in Bellingham, Washington.
In eight years in office George W. Bush acquired a national debt of $5 trillion. Not to be outdone, Barack Obama has indebted us to the tune of $1.375 trillion.
I believe this is totally unacceptable. We are giving economic stimulus packages to different businesses when we should be thinking of possibly raising taxes to pay off this enormous debt.
It is estimated that if each person in America was taxed to pay the debt it would amount to four hundred thousand dollars each.
Michael Coleman
Bellingham
In eight years in office George W. Bush acquired a national debt of $5 trillion. Not to be outdone, Barack Obama has indebted us to the tune of $1.375 trillion.
I believe this is totally unacceptable. We are giving economic stimulus packages to different businesses when we should be thinking of possibly raising taxes to pay off this enormous debt.
It is estimated that if each person in America was taxed to pay the debt it would amount to four hundred thousand dollars each.
Michael Coleman
Bellingham
Thursday, May 21, 2009
When to plug Fed's flow?
By Tom Raum • The Associated Press • May 17, 2009
This item appeared in the Cincinnati Enquirer
WASHINGTON - The federal government has committed trillions of dollars to domestic bailouts and propping up the recessionary economy, much of it borrowed, much created out of thin air by the Federal Reserve.
How much longer can all this go on? That's the pressing question facing policymakers, and one without a clear answer.
At some point, "You have to take away the punchbowl, as someone once said, in order to avoid the inflation risk," said Federal Reserve Chairman Ben Bernanke, paraphrasing William McChesney Martin Jr., who served as Fed chairman in the 1950s and '60s under five presidents.
But change course too soon, and it could nip a fragile recovery in the bud. Wait too long, and runaway inflation and gargantuan federal debt could be the sequel to the worst downturn since the 1930s.
While nobody thinks the current combination of near-zero interest rates, bank and auto bailouts and trillion-dollar annual deficits is a sustainable economic model, knowing just when to take away the punchbowl is the problem.
For now, the Bernanke Fed is still filling the punchbowl. And President Barack Obama and the Democratic-controlled Congress are doing the same with government spending.
One reason the Fed has been so aggressive in slashing rates and taking unconventional recession-fighting steps is because "we are trying to avoid another form of price instability, which is deflation," Bernanke told a Fed financial conference last week.
The risk of deflation - a widespread and prolonged decline in retail prices, wages and real estate and other asset values - is "receding, but it certainly needs not to be ignored," Bernanke said.
Despite some recent glimmers of hope, evidence is mixed on whether things are getting better or still worse. Disappointing reports Wednesday on falling retail sales and a jump in foreclosures fueled continuing uncertainties and helped push stocks down.
"You've got to take the stimulus off at some point. I don't think that point is this year," said David Wyss, chief economist at Standard & Poor's in New York. He said Wednesday's reports on weak retail sales for April point to a continuing recession, despite some recent encouraging signs.
Government and most private economists expect the recession, which began in December 2007, to end later this year, although they expect high levels of joblessness to continue beyond.
In the meantime, recent developments are complicating efforts to tame the deficit once the recession does end:
White House budget officials said recently that the deficit would widen to a record $1.8 trillion this year, $89 billion more than their estimate in February. They blamed the recession.
With nearly 80 million baby boomers nearing retirement, the government reported that Medicare and Social Security will face insolvency sooner than previously projected because of the recession - for Medicare in 2017 and for Social Security in 2037.
A potential $90 billion shortfall opened up in paying for Obama's health care proposal. The gap comes from congressional reluctance to go along with his proposal to help pay for the plan by limiting high-income families' charitable-giving and other tax deductions. House Speaker Nancy Pelosi said the health care bill will be on the House floor before the August recess.
The administration asked Congress on Tuesday to add $100 billion in new U.S. contributions to the International Monetary Fund as part of a war-spending bill.
Obama proposed just $17 billion in new spending cuts earlier this month, representing savings of less than one-half of 1 percent in his $3.4 trillion budget. Republicans scoffed - and some top Democrats criticized him for targeting popular programs in recessionary times.
By some accounts, the sum of all the U.S. grants, loans, guarantees and new money created electronically by the Fed since the financial crisis began totals some $11 trillion - roughly equal to the country's national debt.
That sum does include loan guarantees that might not be needed, money that hasn't been spent, various revolving accounts and U.S. investments in bad mortgages and other toxic, hard-to-value securities that could someday return money to taxpayers. Still, staggering amounts are involved.
"We are creating a government debt bubble that we're going to have to deal with in a massive way," suggested Rep. Kevin Brady of Texas, the senior Republican on the Congressional Joint Economic Committee.
History shows the dangers of calling the end of economic downturns too soon.
President Franklin D. Roosevelt made this mistake in 1936 when, believing the Depression largely over, he sought to pare back public spending and to balance the federal budget. It torpedoed a fragile recovery and pushed the economy back under water in 1937.
Japanese leaders made a similar mistake in the 1990s when they prematurely - and temporarily - withdrew government stimulus spending, helping to prolong Japan's recession to one that lasted a full decade.
At the White House, presidential spokesman Robert Gibbs dismissed suggestions by some, including Liz Ann Sonders, chief investment strategist for brokerage Charles Schwab, that the recession may have ended.
"I can report nobody has intoned that message" at daily White House economic briefings, Gibbs said. "There's much work to be done."
Veteran budget analyst Stanley Collender said increases in public spending are an important fiscal tool and that "a bigger deficit is justified in the current economic environment."
Furthermore, Collender added, if Obama doesn't push his agenda for more health care, energy and education spending now, when will he?
"He's got a 60-percent-plus approval rating. And Democrats are willing to work with him. He should go for it now. He's never going to get a better chance," Collender said.
This item appeared in the Cincinnati Enquirer
WASHINGTON - The federal government has committed trillions of dollars to domestic bailouts and propping up the recessionary economy, much of it borrowed, much created out of thin air by the Federal Reserve.
How much longer can all this go on? That's the pressing question facing policymakers, and one without a clear answer.
At some point, "You have to take away the punchbowl, as someone once said, in order to avoid the inflation risk," said Federal Reserve Chairman Ben Bernanke, paraphrasing William McChesney Martin Jr., who served as Fed chairman in the 1950s and '60s under five presidents.
But change course too soon, and it could nip a fragile recovery in the bud. Wait too long, and runaway inflation and gargantuan federal debt could be the sequel to the worst downturn since the 1930s.
While nobody thinks the current combination of near-zero interest rates, bank and auto bailouts and trillion-dollar annual deficits is a sustainable economic model, knowing just when to take away the punchbowl is the problem.
For now, the Bernanke Fed is still filling the punchbowl. And President Barack Obama and the Democratic-controlled Congress are doing the same with government spending.
One reason the Fed has been so aggressive in slashing rates and taking unconventional recession-fighting steps is because "we are trying to avoid another form of price instability, which is deflation," Bernanke told a Fed financial conference last week.
The risk of deflation - a widespread and prolonged decline in retail prices, wages and real estate and other asset values - is "receding, but it certainly needs not to be ignored," Bernanke said.
Despite some recent glimmers of hope, evidence is mixed on whether things are getting better or still worse. Disappointing reports Wednesday on falling retail sales and a jump in foreclosures fueled continuing uncertainties and helped push stocks down.
"You've got to take the stimulus off at some point. I don't think that point is this year," said David Wyss, chief economist at Standard & Poor's in New York. He said Wednesday's reports on weak retail sales for April point to a continuing recession, despite some recent encouraging signs.
Government and most private economists expect the recession, which began in December 2007, to end later this year, although they expect high levels of joblessness to continue beyond.
In the meantime, recent developments are complicating efforts to tame the deficit once the recession does end:
White House budget officials said recently that the deficit would widen to a record $1.8 trillion this year, $89 billion more than their estimate in February. They blamed the recession.
With nearly 80 million baby boomers nearing retirement, the government reported that Medicare and Social Security will face insolvency sooner than previously projected because of the recession - for Medicare in 2017 and for Social Security in 2037.
A potential $90 billion shortfall opened up in paying for Obama's health care proposal. The gap comes from congressional reluctance to go along with his proposal to help pay for the plan by limiting high-income families' charitable-giving and other tax deductions. House Speaker Nancy Pelosi said the health care bill will be on the House floor before the August recess.
The administration asked Congress on Tuesday to add $100 billion in new U.S. contributions to the International Monetary Fund as part of a war-spending bill.
Obama proposed just $17 billion in new spending cuts earlier this month, representing savings of less than one-half of 1 percent in his $3.4 trillion budget. Republicans scoffed - and some top Democrats criticized him for targeting popular programs in recessionary times.
By some accounts, the sum of all the U.S. grants, loans, guarantees and new money created electronically by the Fed since the financial crisis began totals some $11 trillion - roughly equal to the country's national debt.
That sum does include loan guarantees that might not be needed, money that hasn't been spent, various revolving accounts and U.S. investments in bad mortgages and other toxic, hard-to-value securities that could someday return money to taxpayers. Still, staggering amounts are involved.
"We are creating a government debt bubble that we're going to have to deal with in a massive way," suggested Rep. Kevin Brady of Texas, the senior Republican on the Congressional Joint Economic Committee.
History shows the dangers of calling the end of economic downturns too soon.
President Franklin D. Roosevelt made this mistake in 1936 when, believing the Depression largely over, he sought to pare back public spending and to balance the federal budget. It torpedoed a fragile recovery and pushed the economy back under water in 1937.
Japanese leaders made a similar mistake in the 1990s when they prematurely - and temporarily - withdrew government stimulus spending, helping to prolong Japan's recession to one that lasted a full decade.
At the White House, presidential spokesman Robert Gibbs dismissed suggestions by some, including Liz Ann Sonders, chief investment strategist for brokerage Charles Schwab, that the recession may have ended.
"I can report nobody has intoned that message" at daily White House economic briefings, Gibbs said. "There's much work to be done."
Veteran budget analyst Stanley Collender said increases in public spending are an important fiscal tool and that "a bigger deficit is justified in the current economic environment."
Furthermore, Collender added, if Obama doesn't push his agenda for more health care, energy and education spending now, when will he?
"He's got a 60-percent-plus approval rating. And Democrats are willing to work with him. He should go for it now. He's never going to get a better chance," Collender said.
Monday, May 18, 2009
Obama's Risky Debt
By Robert J. Samuelson
Washington Post
Monday, May 18, 2009
Just how much government debt does a president have to endorse before he's labeled "irresponsible"? Well, apparently much more than the massive amounts envisioned by President Obama. The final version of his 2010 budget, released last week, is a case study in political expediency and economic gambling.
Let's see. From 2010 to 2019, Obama projects annual deficits totaling $7.1 trillion; that's atop the $1.8 trillion deficit for 2009. By 2019, the ratio of publicly held federal debt to gross domestic product (GDP, or the economy) would reach 70 percent, up from 41 percent in 2008. That would be the highest since 1950 (80 percent). The Congressional Budget Office, using less optimistic economic forecasts, raises these estimates. The 2010-19 deficits would total $9.3 trillion; the debt-to-GDP ratio in 2019 would be 82 percent.
But wait: Even these totals may be understated. By various estimates, Obama's health plan might cost $1.2 trillion over a decade; Obama has budgeted only $635 billion. Next, the huge deficits occur despite a pronounced squeeze of defense spending. From 2008 to 2019, total federal spending would rise 75 percent, but defense spending would increase only 17 percent. Unless foreign threats recede, military spending and deficits might both grow.
Except from crabby Republicans, these astonishing numbers have received little attention -- a tribute to Obama's Zen-like capacity to discourage serious criticism. Everyone's fixated on the present economic crisis, which explains and justifies big deficits (lost revenue, anti-recession spending) for a few years. Hardly anyone notes that huge deficits continue indefinitely.
One reason Obama is so popular is that he has promised almost everyone lower taxes and higher spending. Beyond the undeserving who make more than $250,000, 95 percent of "working families" receive a tax cut. Obama would double federal spending for basic research in "key agencies." He wants to build high-speed-rail networks that would require continuous subsidy. Obama can do all this and more by borrowing.
Consider the extra debt as a proxy for political evasion. The president doesn't want to confront Americans with choices between lower spending and higher taxes -- or, given the existing deficits, perhaps both less spending and more taxes. Except for talk, Obama hasn't done anything to reduce the expense of retiring baby boomers. He claims to be containing overall health costs, but he's actually proposing more government spending (see above).
Closing future deficits with either tax increases or spending cuts would require gigantic changes. Discounting the recession's effect on the deficit, Marc Goldwein of the Committee for a Responsible Federal Budget puts the underlying "structural deficit" -- the basic gap between the government's spending commitments and its tax base -- at 3 to 4 percent of GDP. In today's dollars, that's roughly $400 billion to $600 billion.
It's true that since 1961 the federal budget has run deficits in all but five years. But the resulting government debt has consistently remained below 50 percent of GDP; that's the equivalent of a household with $100,000 of income having a $50,000 debt. (Note: Deficits are the annual gap between government's spending and its tax revenue. The debt is the total borrowing caused by past deficits.) Adverse economic effects, if any, were modest. But Obama's massive, future deficits would break this pattern and become more threatening.
At best, the rising cost of the debt would intensify pressures to increase taxes, cut spending -- or create bigger, unsustainable deficits. By the CBO's estimates, interest on the debt as a share of federal spending will double between 2008 and 2019, to 16 percent. Huge budget deficits could also weaken economic growth by "crowding out" private investment.
At worst, the burgeoning debt could trigger a future financial crisis. The danger is that "we won't be able to sell [Treasury debt] at reasonable interest rates," says economist Rudy Penner, head of the CBO from 1983 to 1987. In today's anxious climate, this hasn't happened. American and foreign investors have favored "safe" U.S. Treasurys. But a glut of bonds, fears of inflation -- or something else -- might one day shatter confidence. Bond prices might fall sharply; interest rates would rise. The consequences could be worldwide because foreigners own half of U.S. Treasury debt.
The Obama budgets flirt with deferred distress, though we can't know what form it might take or when it might occur. Present gain comes with the risk of future pain. As the present economic crisis shows, imprudent policies ultimately backfire, even if the reversal's timing and nature are unpredictable.
The wonder is that these issues have been so ignored. Imagine hypothetically that a President McCain had submitted a budget plan identical to Obama's. There would almost certainly have been a loud outcry: "McCain's Mortgaging Our Future." Obama should be held to no less exacting a standard.
Washington Post
Monday, May 18, 2009
Just how much government debt does a president have to endorse before he's labeled "irresponsible"? Well, apparently much more than the massive amounts envisioned by President Obama. The final version of his 2010 budget, released last week, is a case study in political expediency and economic gambling.
Let's see. From 2010 to 2019, Obama projects annual deficits totaling $7.1 trillion; that's atop the $1.8 trillion deficit for 2009. By 2019, the ratio of publicly held federal debt to gross domestic product (GDP, or the economy) would reach 70 percent, up from 41 percent in 2008. That would be the highest since 1950 (80 percent). The Congressional Budget Office, using less optimistic economic forecasts, raises these estimates. The 2010-19 deficits would total $9.3 trillion; the debt-to-GDP ratio in 2019 would be 82 percent.
But wait: Even these totals may be understated. By various estimates, Obama's health plan might cost $1.2 trillion over a decade; Obama has budgeted only $635 billion. Next, the huge deficits occur despite a pronounced squeeze of defense spending. From 2008 to 2019, total federal spending would rise 75 percent, but defense spending would increase only 17 percent. Unless foreign threats recede, military spending and deficits might both grow.
Except from crabby Republicans, these astonishing numbers have received little attention -- a tribute to Obama's Zen-like capacity to discourage serious criticism. Everyone's fixated on the present economic crisis, which explains and justifies big deficits (lost revenue, anti-recession spending) for a few years. Hardly anyone notes that huge deficits continue indefinitely.
One reason Obama is so popular is that he has promised almost everyone lower taxes and higher spending. Beyond the undeserving who make more than $250,000, 95 percent of "working families" receive a tax cut. Obama would double federal spending for basic research in "key agencies." He wants to build high-speed-rail networks that would require continuous subsidy. Obama can do all this and more by borrowing.
Consider the extra debt as a proxy for political evasion. The president doesn't want to confront Americans with choices between lower spending and higher taxes -- or, given the existing deficits, perhaps both less spending and more taxes. Except for talk, Obama hasn't done anything to reduce the expense of retiring baby boomers. He claims to be containing overall health costs, but he's actually proposing more government spending (see above).
Closing future deficits with either tax increases or spending cuts would require gigantic changes. Discounting the recession's effect on the deficit, Marc Goldwein of the Committee for a Responsible Federal Budget puts the underlying "structural deficit" -- the basic gap between the government's spending commitments and its tax base -- at 3 to 4 percent of GDP. In today's dollars, that's roughly $400 billion to $600 billion.
It's true that since 1961 the federal budget has run deficits in all but five years. But the resulting government debt has consistently remained below 50 percent of GDP; that's the equivalent of a household with $100,000 of income having a $50,000 debt. (Note: Deficits are the annual gap between government's spending and its tax revenue. The debt is the total borrowing caused by past deficits.) Adverse economic effects, if any, were modest. But Obama's massive, future deficits would break this pattern and become more threatening.
At best, the rising cost of the debt would intensify pressures to increase taxes, cut spending -- or create bigger, unsustainable deficits. By the CBO's estimates, interest on the debt as a share of federal spending will double between 2008 and 2019, to 16 percent. Huge budget deficits could also weaken economic growth by "crowding out" private investment.
At worst, the burgeoning debt could trigger a future financial crisis. The danger is that "we won't be able to sell [Treasury debt] at reasonable interest rates," says economist Rudy Penner, head of the CBO from 1983 to 1987. In today's anxious climate, this hasn't happened. American and foreign investors have favored "safe" U.S. Treasurys. But a glut of bonds, fears of inflation -- or something else -- might one day shatter confidence. Bond prices might fall sharply; interest rates would rise. The consequences could be worldwide because foreigners own half of U.S. Treasury debt.
The Obama budgets flirt with deferred distress, though we can't know what form it might take or when it might occur. Present gain comes with the risk of future pain. As the present economic crisis shows, imprudent policies ultimately backfire, even if the reversal's timing and nature are unpredictable.
The wonder is that these issues have been so ignored. Imagine hypothetically that a President McCain had submitted a budget plan identical to Obama's. There would almost certainly have been a loud outcry: "McCain's Mortgaging Our Future." Obama should be held to no less exacting a standard.
Saturday, May 9, 2009
Newest National Debt Statistics posted May 2009
Here is the newest National Debt report courtesy of www.TreasuryDirect.gov - the website of the U.S. Treasury Department.
As of May 7, 2009:
Publicly Held Debt:
$6,955,434,473,527.65
Intragovernmental Holdings:
$4,300,832,166,522.55
Total:
$11,256,266,640,050.20
Interest paid, April 2009:
$24,846,792,476.82
Interest paid, Fiscal Year 2009:
$193,437,580,154.01
Gifts to reduce the public debt March 2009:
$431,181.21
Gifts to reduce the public debt FY09:
$2,232,641.09
Amount of increase in the debt since Obama began presidency:
$627,385,154,539.97
Daily increase since Obama began presidency:
$5,809,121,801.30 per day
As of May 7, 2009:
Publicly Held Debt:
$6,955,434,473,527.65
Intragovernmental Holdings:
$4,300,832,166,522.55
Total:
$11,256,266,640,050.20
Interest paid, April 2009:
$24,846,792,476.82
Interest paid, Fiscal Year 2009:
$193,437,580,154.01
Gifts to reduce the public debt March 2009:
$431,181.21
Gifts to reduce the public debt FY09:
$2,232,641.09
Amount of increase in the debt since Obama began presidency:
$627,385,154,539.97
Daily increase since Obama began presidency:
$5,809,121,801.30 per day
Tuesday, May 5, 2009
HOUSE TO VOTE ON FINANCE COMMISSION WED
From Domenico Montanaro and Abby Livingston
www.msnbc.com
The House will act likely on Wednesday on legislation that would include a commission to examine the financial meltdown, according to Democratic and Republican Capitol Hill sources.
"The details of the commission language are still being worked out between the Judiciary Committees between the House and the Senate," said Nadeam Elshami, spokesman for House Speaker Nancy Pelosi. "That language could be similar to the Senate, but it is in the process of intensive legislative discussions."
The options for the bill are either:
1. The House passes its own House version, and then go to conference with the Senate, or
2. Pass essentially the same bill between the House and Senate that would be ready quickly for the president to sign, which is what they're working on.
Both sides want to move quickly and negotiations are centering on "working off the Senate version."
The way the commission could work, according to preliminary details, is as follows:
(1) It would be bipartisan,
(2) Members of Congress would be excluded
(3) There would be at least eight people on the committee, and perhaps one to two more. (Each leader would get one person on the committee. There are four leaders. And each financial committee chair -- Banking in Senate, Financial Services in House -- and ranking member would get a pick. That's four more for a total of eight and maybe one to two others.
The office of Congressman Darrell Issa (R-CA) said the legislation would be identical to the Senate-passed (S. 386) and according to an Issa spokesman, the House will pass Wednesday. Issa's office contends that the commission will be comprised of 10 members, precludes elected officials from serving on the board and would have subpoena power.
Issa's office also described the development as a "rare case where everyone set aside partisan measures."
For historical context, there was a commission in the early 1930s called "the Pecora Commission" that investigated the 1929 Crash. The revelations uncovered led to many reforms, including Glass-Steagall Act of 1933. With that context, in March, First Read questioned why in this town that loves its bipartisan blue-ribbon panels, there wasn't a greater movement for a financial panel.
www.msnbc.com
The House will act likely on Wednesday on legislation that would include a commission to examine the financial meltdown, according to Democratic and Republican Capitol Hill sources.
"The details of the commission language are still being worked out between the Judiciary Committees between the House and the Senate," said Nadeam Elshami, spokesman for House Speaker Nancy Pelosi. "That language could be similar to the Senate, but it is in the process of intensive legislative discussions."
The options for the bill are either:
1. The House passes its own House version, and then go to conference with the Senate, or
2. Pass essentially the same bill between the House and Senate that would be ready quickly for the president to sign, which is what they're working on.
Both sides want to move quickly and negotiations are centering on "working off the Senate version."
The way the commission could work, according to preliminary details, is as follows:
(1) It would be bipartisan,
(2) Members of Congress would be excluded
(3) There would be at least eight people on the committee, and perhaps one to two more. (Each leader would get one person on the committee. There are four leaders. And each financial committee chair -- Banking in Senate, Financial Services in House -- and ranking member would get a pick. That's four more for a total of eight and maybe one to two others.
The office of Congressman Darrell Issa (R-CA) said the legislation would be identical to the Senate-passed (S. 386) and according to an Issa spokesman, the House will pass Wednesday. Issa's office contends that the commission will be comprised of 10 members, precludes elected officials from serving on the board and would have subpoena power.
Issa's office also described the development as a "rare case where everyone set aside partisan measures."
For historical context, there was a commission in the early 1930s called "the Pecora Commission" that investigated the 1929 Crash. The revelations uncovered led to many reforms, including Glass-Steagall Act of 1933. With that context, in March, First Read questioned why in this town that loves its bipartisan blue-ribbon panels, there wasn't a greater movement for a financial panel.
Thursday, April 30, 2009
Stalking The Fed
King Banaian of SCSU Scholars just posted a very informative post regarding H.R. 1207, a bill that would instruct the General Accounting Office to audit the Federal Reserve. As an economist, he argues against it. You can find out why by clicking here.
Tuesday, April 28, 2009
Treasury needs record $361B April-June borrowing
By MARTIN CRUTSINGER
WASHINGTON (AP) — The Treasury Department said Monday it will need to borrow $361 billion in the current April-June quarter, a record amount for that period.
It's the third straight quarter the government's borrowing needs have set records for those periods.
Treasury also estimated it will need to borrow $515 billion in the July-September quarter, down slightly from the $530 billion borrowed during the year-ago period. The all-time high of $569 billion was set in the October-December period.
The huge borrowing needs reflect the soaring costs of the $700 billion financial rescue program and the recession, which is nearing a record as the longest in the post World War II period.
The slump has cut sharply into tax revenue and boosted government spending for benefit programs such as unemployment insurance and food stamps.
The administration is projecting the federal deficit for the entire budget year ending Sept. 30, will total a record $1.75 trillion. A deficit at that level would nearly quadruple the previous record of $454.8 billion set last year.
To cover the government's heavy borrowing needs, Congress in February boosted the limit for the national debt to $12.1 trillion as part of the legislation that enacted President Barack Obama's $787 billion economic stimulus program. The national debt now stands at $11.1 trillion.
The government released its estimate of borrowing needs for the quarter before a news conference Wednesday when officials are scheduled provide exact details of how much debt the government plans to sell next week and in what maturity levels as part of Treasury's regular quarterly debt auctions.
The $361 billion estimate for borrowing this quarter compared with borrowing needs of just $13 billion in the year-ago period. Normally the government's borrowing needs shrink sharply in the April-June quarter because of all the tax revenue being collected.
The government announced in February that it was bringing back the seven-year note and doubling the number of 30-year bond auctions it would hold each year to help finance the surging borrowing needs.
WASHINGTON (AP) — The Treasury Department said Monday it will need to borrow $361 billion in the current April-June quarter, a record amount for that period.
It's the third straight quarter the government's borrowing needs have set records for those periods.
Treasury also estimated it will need to borrow $515 billion in the July-September quarter, down slightly from the $530 billion borrowed during the year-ago period. The all-time high of $569 billion was set in the October-December period.
The huge borrowing needs reflect the soaring costs of the $700 billion financial rescue program and the recession, which is nearing a record as the longest in the post World War II period.
The slump has cut sharply into tax revenue and boosted government spending for benefit programs such as unemployment insurance and food stamps.
The administration is projecting the federal deficit for the entire budget year ending Sept. 30, will total a record $1.75 trillion. A deficit at that level would nearly quadruple the previous record of $454.8 billion set last year.
To cover the government's heavy borrowing needs, Congress in February boosted the limit for the national debt to $12.1 trillion as part of the legislation that enacted President Barack Obama's $787 billion economic stimulus program. The national debt now stands at $11.1 trillion.
The government released its estimate of borrowing needs for the quarter before a news conference Wednesday when officials are scheduled provide exact details of how much debt the government plans to sell next week and in what maturity levels as part of Treasury's regular quarterly debt auctions.
The $361 billion estimate for borrowing this quarter compared with borrowing needs of just $13 billion in the year-ago period. Normally the government's borrowing needs shrink sharply in the April-June quarter because of all the tax revenue being collected.
The government announced in February that it was bringing back the seven-year note and doubling the number of 30-year bond auctions it would hold each year to help finance the surging borrowing needs.
Debt Day Comes Sooner This Year
by Congresswoman Michele Bachmann
For Americans from coast to coast, Sunday, April 26 marked our nation's Debt Day. Debt Day is the day during the fiscal year – which runs from October 1, 2008 to September 30, 2009 this year – on which government spending exceeds revenue for the first time during the year.
Last year's Debt Day fell more than three months later, on Aug. 5.
Judging by the penchant for spending we've seen from Congress and the White House, I think it's safe to say that this infamous day will be creeping earlier and earlier for the next several years. It's simply another symptom of a government that spends too much, borrows too much, and taxes too much.
I come from the strong Minnesota culture of thrift, spending only what I truly can and eschewing debt. But, the trend in Washington is just the opposite. It’s very much a “spend now, and our children will pay later” attitude. That’s why I voted against the trillion-dollar-plus so-called stimulus bill, the nearly-half-a-trillion “omnibus” spending bill, and the multi-hundred billion-dollar Wall Street bailouts.
It’s high-time your family budget took priority here in Washington – and that means not just looking out for your finances today, but also looking out for your children’s futures.
For Americans from coast to coast, Sunday, April 26 marked our nation's Debt Day. Debt Day is the day during the fiscal year – which runs from October 1, 2008 to September 30, 2009 this year – on which government spending exceeds revenue for the first time during the year.
Last year's Debt Day fell more than three months later, on Aug. 5.
Judging by the penchant for spending we've seen from Congress and the White House, I think it's safe to say that this infamous day will be creeping earlier and earlier for the next several years. It's simply another symptom of a government that spends too much, borrows too much, and taxes too much.
I come from the strong Minnesota culture of thrift, spending only what I truly can and eschewing debt. But, the trend in Washington is just the opposite. It’s very much a “spend now, and our children will pay later” attitude. That’s why I voted against the trillion-dollar-plus so-called stimulus bill, the nearly-half-a-trillion “omnibus” spending bill, and the multi-hundred billion-dollar Wall Street bailouts.
It’s high-time your family budget took priority here in Washington – and that means not just looking out for your finances today, but also looking out for your children’s futures.
Friday, April 24, 2009
Dave Ramsey: The Stock Market Will Rebound
by Dave Ramsey
www.daveramsey.com
History proves we’re going to make it through this recession.
Bear markets—when stock prices decline by 20% or more over at least two consecutive months—are no fun, but they have historically set up the market to bounce back and surpass its previous highs. And it might happen sooner than you think it will. Just look at the past bear markets the stock market has overcome.
What you see below is a graph of past bear markets and how they affected the S&P 500. The graph shows, on average, how long a bear market lasted and how much the stocks improved after it ended.
As you can see, the average bear market lasted around 13 months. Even more revealing is that, on average, the S&P 500 recovered all of its value and more within one to two years after the bear market ended.
If you cashed out your investments during one of those bear markets, you would have missed out on about a 50% gain. That’s a lot of money!
So what does history teach us?
1. Don’t cash out your investments during a bear market. If you do, you may lock in the losses and miss the rebound of the stock market.
2. Never give up hope. This recession and the bear market will end. You and your investments will be stronger in the long run.
www.daveramsey.com
History proves we’re going to make it through this recession.
Bear markets—when stock prices decline by 20% or more over at least two consecutive months—are no fun, but they have historically set up the market to bounce back and surpass its previous highs. And it might happen sooner than you think it will. Just look at the past bear markets the stock market has overcome.
What you see below is a graph of past bear markets and how they affected the S&P 500. The graph shows, on average, how long a bear market lasted and how much the stocks improved after it ended.
As you can see, the average bear market lasted around 13 months. Even more revealing is that, on average, the S&P 500 recovered all of its value and more within one to two years after the bear market ended.
If you cashed out your investments during one of those bear markets, you would have missed out on about a 50% gain. That’s a lot of money!
So what does history teach us?
1. Don’t cash out your investments during a bear market. If you do, you may lock in the losses and miss the rebound of the stock market.
2. Never give up hope. This recession and the bear market will end. You and your investments will be stronger in the long run.
Wednesday, April 22, 2009
Thune: Use TARP repayments to reduce national debt
The Daily Republic
Published Wednesday, April 22, 2009
U.S. Sen. John Thune, R-S.D., introduced legislation today that would require the secretary of the treasury to use taxpayer funds returned by financial institutions under the $700 billion Troubled Assets Relief Program (TARP) to reduce the national debt, according to a news release from Thune's office.
From the release:
"Several financial institutions that received TARP funding have returned or expressed an interest in returning billions in taxpayer funding.
“'Congress is responsible for allocating taxpayer dollars and this legislation will prevent the Obama Administration from attempting to turn this money into a revolving slush fund,' said Thune. 'TARP was designed for the President to report back to Congress and seek approval for additional funding. This legislation ensures the returned funds are not reallocated by the administration for other priorities. Instead, this bill would work to reduce the size of the national debt in this country, something that seems to be a forgotten idea with the current Democrat leadership.'
"Recently, Secretary of the Treasury Timothy Geithner has indicated that he intends to spend these funds on additional TARP activities without Congressional approval."
Published Wednesday, April 22, 2009
U.S. Sen. John Thune, R-S.D., introduced legislation today that would require the secretary of the treasury to use taxpayer funds returned by financial institutions under the $700 billion Troubled Assets Relief Program (TARP) to reduce the national debt, according to a news release from Thune's office.
From the release:
"Several financial institutions that received TARP funding have returned or expressed an interest in returning billions in taxpayer funding.
“'Congress is responsible for allocating taxpayer dollars and this legislation will prevent the Obama Administration from attempting to turn this money into a revolving slush fund,' said Thune. 'TARP was designed for the President to report back to Congress and seek approval for additional funding. This legislation ensures the returned funds are not reallocated by the administration for other priorities. Instead, this bill would work to reduce the size of the national debt in this country, something that seems to be a forgotten idea with the current Democrat leadership.'
"Recently, Secretary of the Treasury Timothy Geithner has indicated that he intends to spend these funds on additional TARP activities without Congressional approval."
Friday, April 10, 2009
Newest National Debt Statistics posted April 2009
Here are the newest National Debt Statistics as of April 9, 2009:
Held by Public:
$6,892,835,801,149.21
Intragovernmental Holdings:
$4,276,630,578,859.11
Total Debt:
$11,169,466,380,008.32
Gifts to reduce the public debt:
February 2009: $31,067.03
Fiscal Year 2009:
$2,232,641.09
Fiscal Year 2008 (comparison):
$2,189,358.89
Increase in Debt during FY2009:
$1,144,741,483,095.83
Increase in National Debt since 'HOPE and CHANGE' of Obama Adminstration began:
$542,589,331.095.24
($6,868,219,380.95 per day rate of increase)
Held by Public:
$6,892,835,801,149.21
Intragovernmental Holdings:
$4,276,630,578,859.11
Total Debt:
$11,169,466,380,008.32
Gifts to reduce the public debt:
February 2009: $31,067.03
Fiscal Year 2009:
$2,232,641.09
Fiscal Year 2008 (comparison):
$2,189,358.89
Increase in Debt during FY2009:
$1,144,741,483,095.83
Increase in National Debt since 'HOPE and CHANGE' of Obama Adminstration began:
$542,589,331.095.24
($6,868,219,380.95 per day rate of increase)
Tuesday, April 7, 2009
Communities print their own currency to keep cash flowing
By Marisol Bello, USA TODAY
A small but growing number of cash-strapped communities are printing their own money.
Borrowing from a Depression-era idea, they are aiming to help consumers make ends meet and support struggling local businesses.
The systems generally work like this: Businesses and individuals form a network to print currency. Shoppers buy it at a discount — say, 95 cents for $1 value — and spend the full value at stores that accept the currency.
Workers with dwindling wages are paying for groceries, yoga classes and fuel with Detroit Cheers, Ithaca Hours in New York, Plenty in North Carolina or BerkShares in Massachusetts.
Ed Collom, a University of Southern Maine sociologist who has studied local currencies, says they encourage people to buy locally. Merchants, hurting because customers have cut back on spending, benefit as consumers spend the local cash.
A small but growing number of cash-strapped communities are printing their own money.
Borrowing from a Depression-era idea, they are aiming to help consumers make ends meet and support struggling local businesses.
The systems generally work like this: Businesses and individuals form a network to print currency. Shoppers buy it at a discount — say, 95 cents for $1 value — and spend the full value at stores that accept the currency.
Workers with dwindling wages are paying for groceries, yoga classes and fuel with Detroit Cheers, Ithaca Hours in New York, Plenty in North Carolina or BerkShares in Massachusetts.
Ed Collom, a University of Southern Maine sociologist who has studied local currencies, says they encourage people to buy locally. Merchants, hurting because customers have cut back on spending, benefit as consumers spend the local cash.
Wednesday, April 1, 2009
Zogby: The Modest Majority
Forget the personal debt horror stories--most Americans are living within their means.
by John Zogby
www.forbes.com
It's no secret that Americans have become addicted to credit in order to maintain an artificially high standard of living. According to a recent CardTrak.com survey of 55,000 consumers, 13% of Americans have credit card balances of more than $25,000.
Have we lost our way when it comes to credit? Now celebrating my 25th year as a pollster, I've learned to read statistics with a bit of dyslexia, taking a look at them backward and upside down. So I discovered that almost half of that 13% were people who could well afford to carry that much credit card debt--which meant to me that approximately nine in 10 Americans were living within their means with regard to credit card debt. The real truth here is that most Americans are living their lives modestly, but this does not make a dramatic headline.
But Americans have bought into the misconception that most of us are overextended. Taking into account a household's overall financial picture, a Zogby Interactive survey conducted in March 2008 found that 79% of Americans believe they themselves live within their means financially, given their current personal financial situation.
This same survey found that 87% believe that most other Americans are living beyond their financial means. Our more recent polling shows Americans have been trimming their budgets in response to today's financial reality--on entertainment, major purchases, even groceries. The Great Recession has not created a new mindset, because it was already here.
It's not so much that we're a nation of debtors--though there are a lot of us with too much debt--but that we're not a nation of savers. On the surface, it would appear that Americans have an insatiable appetite for things they cannot afford. The Economist reported in 2008 that household and consumer debt was up from 100% of gross domestic product in 1980 to 173% by 2007.
But consider the reality that much new debt has been caused by students who graduate from college with unmanageable credit card payments, and that a substantial burden is being carried by these college graduates well into their thirties. Much of this growing debt is in start-up costs for young people and added penalties and interest rates.
There are many of us working for less, and many who have come to the realization that they cannot achieve the American Dream on a buy-now pay-later basis. The Great Recession is not creating a new trend but rather accelerating one I have noted over the last decade: a move away from easy credit, away from buying what we can't afford, away from seeking out fantasy.
by John Zogby
www.forbes.com
It's no secret that Americans have become addicted to credit in order to maintain an artificially high standard of living. According to a recent CardTrak.com survey of 55,000 consumers, 13% of Americans have credit card balances of more than $25,000.
Have we lost our way when it comes to credit? Now celebrating my 25th year as a pollster, I've learned to read statistics with a bit of dyslexia, taking a look at them backward and upside down. So I discovered that almost half of that 13% were people who could well afford to carry that much credit card debt--which meant to me that approximately nine in 10 Americans were living within their means with regard to credit card debt. The real truth here is that most Americans are living their lives modestly, but this does not make a dramatic headline.
But Americans have bought into the misconception that most of us are overextended. Taking into account a household's overall financial picture, a Zogby Interactive survey conducted in March 2008 found that 79% of Americans believe they themselves live within their means financially, given their current personal financial situation.
This same survey found that 87% believe that most other Americans are living beyond their financial means. Our more recent polling shows Americans have been trimming their budgets in response to today's financial reality--on entertainment, major purchases, even groceries. The Great Recession has not created a new mindset, because it was already here.
It's not so much that we're a nation of debtors--though there are a lot of us with too much debt--but that we're not a nation of savers. On the surface, it would appear that Americans have an insatiable appetite for things they cannot afford. The Economist reported in 2008 that household and consumer debt was up from 100% of gross domestic product in 1980 to 173% by 2007.
But consider the reality that much new debt has been caused by students who graduate from college with unmanageable credit card payments, and that a substantial burden is being carried by these college graduates well into their thirties. Much of this growing debt is in start-up costs for young people and added penalties and interest rates.
There are many of us working for less, and many who have come to the realization that they cannot achieve the American Dream on a buy-now pay-later basis. The Great Recession is not creating a new trend but rather accelerating one I have noted over the last decade: a move away from easy credit, away from buying what we can't afford, away from seeking out fantasy.
Top 10 States in Budget Trouble
Click here for the Top 10 States in Budget Trouble, as reported at Real Clear Politics and cross posted from Obama Alert blog.
Monday, March 30, 2009
Sen. Gregg: Obama's budget plan 'will lead to immense national debt'
Sen. Judd Gregg, once President Barack Obama's choice to be commerce secretary, yesterday said the President's proposed budget "spends too much, taxes too much, and borrows too much."
New Hampshire's senior senator, the ranking Republican on the Senate Budget Committee, delivered the weekly Republican address.
The President focused his weekly address to the nation yesterday on the flooding in the Midwest, laying out the multi-agency federal response to the natural disaster.
He praised the efforts of thousands of volunteers who have pitched in to fill sandbags, build levees and provide other support -- and used their example to renew his call for community service.
"In the face of an incredible challenge, the people of these communities have rallied in support of one another," Obama said. "And their service isn't just inspirational -- it's integral to our response."
Gregg began his six-minute address by acknowledging the "difficult times" and "the efforts being made by our President and his seriousness about addressing these issues."
But, he said, the administration's budget would increase the national debt, taxes and government spending.
In contrast, Gregg said, Republicans "believe you create prosperity by having an affordable government that pursues its responsibilities without excessive costs, taxes or debt, that it is the individual American who creates prosperity and good jobs, not the government."
Gregg also said the Obama administration wants to create what he called "a new national sales tax on everyone's electric bill."
Republicans have criticized the administration's proposal to create a "cap and trade" system, which would require companies to purchase credits for carbon emissions.
The administration proposes using revenues generated from such a system to fund clean energy technology, and pay for a tax credit for Americans who earn less than $250,000 a year, a key campaign pledge for Obama. White House officials have said the "Making Work Pay" tax credit would compensate middle-class Americans for any increased utility costs under such a system, according to published reports.
The White House budget includes funding for that tax credit for 10 years. However, current House and Senate budget proposals cut funding for that tax credit beyond 2010, according to published reports.
Yesterday, Gregg warned that Obama's budget plan "will lead to an immense national debt that not only threatens the value of the dollar and puts at risk our ability to borrow money to run the government," but also places the next generation "at a huge disadvantage as they inherit this debt, which will make their chances of success less than those given to us by our parents."
Near the end of his five-minute address, the President hailed Congress' passage of a bill that promotes national service. "In facing sudden crises or more stubborn challenges, the truth is we are all in this together -- as neighbors and fellow citizens," Obama said.
And he closed by offering thoughts, prayers and "our continued assistance" to those dealing with the flooding.
NOTE: When first posted, this article misidentified the Cabinet post that Judd Gregg turned down.
New Hampshire's senior senator, the ranking Republican on the Senate Budget Committee, delivered the weekly Republican address.
The President focused his weekly address to the nation yesterday on the flooding in the Midwest, laying out the multi-agency federal response to the natural disaster.
He praised the efforts of thousands of volunteers who have pitched in to fill sandbags, build levees and provide other support -- and used their example to renew his call for community service.
"In the face of an incredible challenge, the people of these communities have rallied in support of one another," Obama said. "And their service isn't just inspirational -- it's integral to our response."
Gregg began his six-minute address by acknowledging the "difficult times" and "the efforts being made by our President and his seriousness about addressing these issues."
But, he said, the administration's budget would increase the national debt, taxes and government spending.
In contrast, Gregg said, Republicans "believe you create prosperity by having an affordable government that pursues its responsibilities without excessive costs, taxes or debt, that it is the individual American who creates prosperity and good jobs, not the government."
Gregg also said the Obama administration wants to create what he called "a new national sales tax on everyone's electric bill."
Republicans have criticized the administration's proposal to create a "cap and trade" system, which would require companies to purchase credits for carbon emissions.
The administration proposes using revenues generated from such a system to fund clean energy technology, and pay for a tax credit for Americans who earn less than $250,000 a year, a key campaign pledge for Obama. White House officials have said the "Making Work Pay" tax credit would compensate middle-class Americans for any increased utility costs under such a system, according to published reports.
The White House budget includes funding for that tax credit for 10 years. However, current House and Senate budget proposals cut funding for that tax credit beyond 2010, according to published reports.
Yesterday, Gregg warned that Obama's budget plan "will lead to an immense national debt that not only threatens the value of the dollar and puts at risk our ability to borrow money to run the government," but also places the next generation "at a huge disadvantage as they inherit this debt, which will make their chances of success less than those given to us by our parents."
Near the end of his five-minute address, the President hailed Congress' passage of a bill that promotes national service. "In facing sudden crises or more stubborn challenges, the truth is we are all in this together -- as neighbors and fellow citizens," Obama said.
And he closed by offering thoughts, prayers and "our continued assistance" to those dealing with the flooding.
NOTE: When first posted, this article misidentified the Cabinet post that Judd Gregg turned down.
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