Don’t savings lower the deficit?
AP’s Andrew Taylor describes a part of the federal budget debate that needs clarification for the average voter and others regarding this current round of ‘negotiations’:
Some $18 billion of the spending cuts involve cuts to so-called mandatory programs whose budgets run largely on autopilot. To the dismay of budget purists, these cuts often involve phantom savings allowed under the decidedly arcane rules of congressional budgeting. They include mopping up $2.5 billion in unused money from federal highway programs and $5 billion in fudged savings from capping payments from a Justice Department trust fund for crime victims
Both ideas officially “score” as savings that could be used to pay for spending elsewhere in the day-to-day budgets of domestic agencies. But they have little impact, if any, on the deficit.
We continue to chase defecit reduction “straw men” floated by the same group of con men, criminals, pseudo-intellectuals and economists, and right wing Republican hacks that created the financial crisis and deficits in the first place. Below are some excerpts from the “
“CONCLUSIONS OF THE FINANCIAL CRISIS INQUIRY COMMISSION”.
Many of our Congessman, especially Republicans the phony baloney Dick Army “Tea Party do not want Americans to read this report. It is obvious that the tax breaks they propose are for the most egregious class of criminals in history. A financial transaction tax and return of the progressive tax structure, along with huge cuts in defense waste, fraud, and abuse, would cover the deficit.
From 1978 to 2007, the amount of debt held by the financial sector soared from
3 trillion to 36 trillion, more than doubling as a share of gross domestic product.
The very nature of many Wall Street firms changed—from relatively staid private
partnerships to publicly traded corporations taking greater and more diverse kinds of
risks. By 2005, the 10 largest U.S. commercial banks held 55% of the industry’s assets,
more than double the level held in 1990. On the eve of the crisis in 2006, financial
sector profits constituted 27% of all corporate profits in the United States, up from
15% in 1980. Understanding this transformation has been critical to the Commission’s
analysis.
• We conclude this financial crisis was avoidable. The crisis was the result of human
action and inaction, not of Mother Nature or computer models gone haywire.
We conclude widespread failures in financial regulation and supervision
proved devastating to the stability of the nation’s financial markets. The sentries
were not at their posts, in no small part due to the widely accepted faith in the selfcorrecting
nature of the markets and the ability of financial institutions to effectively
police themselves.
To give just three examples: the Securities and Exchange Commission could have required
more capital and halted risky practices at the big investment banks. It did not.
The Federal Reserve Bank of New York and other regulators could have clamped
down on Citigroup’s excesses in the run-up to the crisis. They did not. Policy makers
and regulators could have stopped the runaway mortgage securitization train. They
did not.
We conclude dramatic failures of corporate governance and risk management
at many systemically important financial institutions were a key cause of this crisis.
There was a view that instincts for self-preservation inside major financial firms
would shield them from fatal risk-taking without the need for a steady regulatory
hand, which, the firms argued, would stifle innovation.
We conclude a combination of excessive borrowing, risky investments, and lack
of transparency put the financial system on a collision course with crisis. Clearly,
this vulnerability was related to failures of corporate governance and regulation, but
it is significant enough by itself to warrant our attention here.
We conclude the government was ill prepared for the crisis, and its inconsistent
response added to the uncertainty and panic in the financial markets. As part of
our charge, it was appropriate to review government actions taken in response to the
developing crisis, not just those policies or actions that preceded it, to determine if
any of those responses contributed to or exacerbated the crisis.
We conclude there was a systemic breakdown in accountability and ethics. The
integrity of our financial markets and the public’s trust in those markets are essential
to the economic well-being of our nation.
Second, we clearly believe the crisis was a result of human […]
Spending a current year appropriation on an immediate outlay raises the deficit, as treasury has to raise cash and there is no mattress for US government trust funds.
I worked on a military procurement in the 80’s part of it funded by a Dept of Transportation trust fund.
We were informed on one occasion that DoT money was not forthcoming as expected because congress was fighting the deficit that year (Graham Rudman or such) and would not allow borrowing to provide cash for the expenditure from the trust. I am sure the users’ fees that built that trust were fully collected that year.
That is because cashing from a trust fund requires treasury to either send over tax collections or borrow money.
As Bruce Webb pointed out the debt remains it is just that not lowering the lowering debt leessens the cash budget fix, and reduced borrowing or taxing in the year the expenditure…………..
Tightening on trust fund use is a time honored approach to cash management.
The answer actually is Yes and No! Yes if we are talking about the “projected/budget” deficit. Any change to revenues or spending does impact the deficit. If we are talking about the “actual/calculated” deficit, a shifting within spending (cost shifting) not covered by the revenues, as indicated by the example, doesn’t impact the deficit. Actual/calculated deficits are determined by taking revenues in from expenditures out for a specific period, typically monthly and annually.
However, when we compare the “actual/calculated” deficit to the projected deficit we will see a difference, and all the budget actions are based on projections. The “actual/calculated” deficit is where the borrowing is tracked, so that is the important number to watch.
The details of the budget agreement will not be released until Monday.
Andrew Taylor’s contentions don’t make much sense to me. It doesn’t sound like he understands how the General Fund or the trust funds of the U.S. Government work.
I will wait until the details are released per agreement on Monday.
The White House has already violated the agreement with its blog posting last night, not that it provided a complete breakdown. Par for the course with this Administration.