Washington, U.S.A. — The Concord Coalition has said that new projections by the Congressional Budget Office (CBO) underscore the need for Washington to commit to long-term fiscal reforms while dealing with this year’s looming budget decisions. Concord said the new numbers should also provide a sobering picture for this year’s candidates for federal office one that should temper election-year impulses to offer voters unrealistic promises.

“Once again, CBO’s projections show that if politicians don’t deviate from current policies, the country will continue down an unsustainable path that threatens to weaken the country, jeopardize our standard of living and leave our children and future generations with unmanageable levels of government debt,” said Robert L. Bixby, Concord’s executive director. “These numbers should frame this year’s political debates, and candidates from both parties would do well to spend some time studying their implications.”

“We need to put the country on a better fiscal path,” he added, “and candidates must clearly explain to voters — with specifics, not empty rhetoric — how they plan to do that. It will require setting priorities and making changes throughout the federal budget, and voters deserve to hear credible plans for doing this.”

CBO’s Update to the Budget and Economic Outlook estimates that the federal deficit for this fiscal year, which ends Sept. 30, will total $1.1 trillion. While that is down slightly from CBO’s March projection, it will be the fourth consecutive deficit of more than $1 trillion. In addition, federal debt held by the public would reach 73 percent of GDP, which CBO notes is the highest level since 1950 and is “about twice the share that it measured at the end of 2007, before the financial crisis and recession.”

The CBO prepared two sets of projections. The first — the CBO’s “baseline projections” — assumes that current laws will generally remain in effect. An alternative scenario, however, looks at what could happen if Congress changes certain laws to continue many current policies. This alternative scenario presents a far more troubling long-term picture. Using the new CBO numbers, The Concord Coalition today updated its own “Plausible Baseline,” which applies what Concord considers to be realistic assumptions about future policy decisions. These projections are close to the CBO’s alternative scenario.

The budget office notes that the outlook for budget deficits, federal debt and the economy are “especially uncertain now because substantial changes to tax and spending policies are scheduled to take effect in January 2013.” These changes have often been called the “fiscal cliff” because if Congress allows all of them to take effect at once, it could cause substantial short-term economic damage, perhaps triggering a recession.

Under Concord’s Plausible Baseline, deficits between 2013 and 2022 would be much higher, averaging over 5 percent of GDP rather than 1 percent. Debt held by the public would grow to 93 percent of GDP by 2022, the highest level since shortly after World War II. As the budget office points out, that is not a sustainable level of federal debt.

“The differences between the CBO baseline and either CBO’s alternative scenario or Concord’s Plausible Baseline are striking, and they highlight the importance of the policy decisions that elected officials must confront before the end of the year,” Bixby said.

“While it is important to support the economic recovery, Washington should also be laying the groundwork for the big fiscal reforms that are necessary to put the federal budget on a more responsible track over the long term. It is possible to do both, but this will require more thoughtful policy-making and greater bipartisanship than we have seen in Washington recently.”

• Choices over tax policy, account for the bulk of the difference between the CBO baseline and the more plausible scenarios within the 10-year budget window. Extending the 2001 and 2003 tax cuts, along with fixes to the Alternative Minimum Tax (AMT) and debt service costs would add $5.2 trillion to deficits over 10 years.
• In CBO’s baseline projections, mandatory spending will increase from 13.3 percent of GDP in 2013 to 14.4 percent in 2022. Nearly all of that increase would be due to the growth of just Social Security and Medicare — representing the effect of the baby boom generation entering retirement. CBO projects that by 2022 over half of the entire federal budget will be spent on just Medicare, Medicaid, and Social Security.
• For Medicare specifically, baseline growth is not attributable to health care inflation but instead to demographics.
• The mandatory spending category of income security, now higher than normal because of the recession, would drop by over 60 percent over the budget window (from 2.1 percent of GDP to 1.3 percent).
• Interest payments under the Concord Plausible Baseline would more than double, growing from 1.4 percent of GDP this year to 3.6 percent in 2022, and would cost over $5 trillion during the 10-year period.
• If the caps included in the Budget Control Act are adhered to, CBO projects that discretionary spending would decrease from 8.3 percent of GDP in 2012 to 5.6 percent by 2022 — the lowest level in the last 50 years.

For more about our plausible baseline visit:

http://www.concordcoalition.org/concord-coalition-plausible-baseline

Image Courtesy of  Third Way

The article CBO Projections Show Candidates Face Difficult Decisions appeared first on The Toonari Post - News, Powered by the People!.

In parts one through four of our series on the Affordable Care Act, we have examined a few of the benefits that are seen as the most desirable provisions of the law, things like no pre-existing condition, no-cost birth control, and the ability for children to remain on their parents’ plans. There are other benefits, like cash subsidies to assist in the purchase of the ACA health care plans that will be examined later in the series. For part five, we will skip ahead and discuss the law as it relates to small business and corporate America.

Who Must Comply with Obamacare?

Under the ACA law, any business with more than 50 full-time employees must offer health insurance to its employees. This health insurance plan must be compliant, meaning the benefits of the plan must meet or exceed the minimum benefit thresholds in the ACA law. If a company does not offer a plan or has a plan that does not meet the minimum standards, then the employer will be assessed a tax fine of $2,000 per employee. This provision is not quite as straightforward, however, because technically the company is only supposed to pay the fine for employees who are eligible to receive subsidized health care costs.

Since everyone is mandated to have coverage, that means the fine would apply to all employees, not just the ones receiving government subsidies. In addition, the first 30 employees are exempted from the fine. For example, a company of 51 workers would pay a $2,000 fine on 21 workers (51-30=21) or $42,000. A good guide for explaining different scenarios can be found at the National Federation of Independent Business website.

If you have fewer than 50 employees, you are not required to provide health insurance. However, if you have up to 25 employees, the government will provide a tax credit if you have employees earning at least $50,000 per year and offer health insurance. In 2013, the tax credit amount is 35% of your annual cost for health insurance premiums and goes up to 50% after 2014.

However, that is only if your average employee salary is $20,000 or less. If the average salary is higher than $20,000, then the tax credit will be reduced by a factor determined by how much the average salary is above $20,000. In addition, if the company has more than 10 employees, regardless of salary average, the tax credit will be reduced. Lastly, there are no tax credits allowed for employees considered “highly compensated.”

For the ACA law, highly compensated is considered anyone making over $80,000 a year. If you noticed how the first sentence in this paragraph contradicts with the numbers in the third sentence, that is not a typo. It is contradictory, but that is what is written in the ACA law. You can find this information at the healthcare.gov and on page 319 of the ACA law.

Implications

The number one implication of the small business and employer provision is the flooding of potential ACA recipients into the system, resulting from employers dropping coverage. Most proponents of the ACA law have dismissed this idea as conservative scaremongering at best and corporate greed at worst. That, however, is because they are not the ones writing the checks. This is a simple math equation. The increase in required ACA benefits increases the costs of the health insurance premiums, because more items are covered.

At current levels, the Kaiser Family Foundation puts the average cost of employee health insurance at $15,073. Only $4,129 of that is paid by the employee, meaning close to 11,000 of the costs is paid by the employer. The ACA coverage mandates will increase those premiums, but even at current levels, paying a $2,000 per person fine is better than $11,000. This is simple math, and as you move into companies that have 5,000 or more employees, you are now talking about saving hundreds of millions of annual costs. Make no mistake, many companies will take this option.

For the companies that bite the bullet and provide health insurance, their costs will increase. This will be because of higher premiums charged by the insurance companies for having to cover more health care benefits and for costs related to keeping up with the regulations that come with the law. There is no definitive way to determine the costs accurately ahead of time, but the Congressional Budget Office projects the costs of ACA to be double what they originally projected.

To be fair, the CBO estimates were for the first 10 years. New projections that go out 11 years have the cost down 0.64%. Why the CBO would go out just one year on their projections is a little strange, especially given the paltry reduction in costs it would show. More telling is that the projection is based on additional revenue provisions that would pay for the law. This is always the problem with the CBO; it only answers questions based on the paper and assumptions put in front of them.

If any of those figures are wrong, if something is left out (like payments to doctors left out by Democrats when the bill was originally submitted), or the revenue gathered is less then projected, then the whole analysis is thrown off. Garbage in, garbage out is the old saying. The primary common sense question to this is simple: When has any government program ever cost less than promised? The answer is never.

The other implication is that the country may see an increase in temporary agency usage. Companies on the cusp of going past 50 employees and either wish to expand or have no choice to can avoid that employee threshold by going through temp agencies. This will alleviate some added costs to them, but only marginally as the temp agencies will also be charging a higher fee per employee supplied.

Lastly, small businesses will not get near the benefit from the tax credit. As discussed above, employers cannot have more than a $20,000 in average salary to receive the full tax credit. If you have higher salaries, the tax credit percentage goes down. Any company that can only afford to pay an average salary of $20,000 or less, in all likelihood, cannot afford to pay for health insurance regardless. Look at the numbers: With an average employer cost of $11,000, an employer could get a $5,500 tax credit, and they pay the other half.

However, $5,500 dollars is a quarter of a $20,000 salaried employee’s pay. A business that small cannot afford to pay that. They cannot afford to risk going under just to satisfy some politician’s belief that paying for health insurance is the right thing to do–no matter the cost. Also, this tax credit does nothing for large employers because they are not eligible. If you have 51 or more employees, you cannot get a tax credit at all. Because of this, there is no incentive.

The primary problem is political and social philosophy intruding on policy and business. Things like health care, time off, vacations, etc., used to be called fringe benefits. They were there to create greater employee loyalty and a way to compete for better employees. They were, in short, extra benefits. Today, they are seen as items that are owed to employees.

The President and the Democrats have determined that health insurance is a right, and if the government cannot get a bill through for single payer, then employers are responsible for paying for that right. Whether this is true (health insurance as a right) is an argument for a different day. The point here is when you approach policy that way, then you end up with bills that have consequences far beyond what is written or intended. Businesses exist to provide a product or service, and make a profit. That is all. They are not smaller surrogates for government to be enlisted in the care and feeding of the population.

The article Part Five: Affordable Care Act appeared first on The Toonari Post - News, Powered by the People!.

The 21st century witnessed one of the most perilous and unethical alliances of mankind’s biggest foes: greed and capitalism. A system where the will or self interest emerges as a master of all human actions in the economic sphere.

There has been a change in the way organisations do businesses and there has been a change in the way businesses are being managed. With the passage of time, businesses have become more isolated from the basic idea of self-interest and more fascinated with profits, expanding their wealth based on what they see as most lucrative rather then on ethical foundations.

There is contamination of capitalism in every corner of the imagination, through the unscrupulous pursuit of profits, selfishness, and through an incorrect comprehension of the idea of economic freedom.

It is true that a farmer in the fertile English midland produces potatoes not to make consumers happy, but for his self-interest and survival. But it may also be true that if the farmer regularly exceeds his need, greed might lead to consumer concerns elsewhere, such as unjustified price movements or supply barriers.

Many illustrations, mathematically and not, can demonstrate how this system becomes contaminated. When capitalism was introduced it was hailed has a unique path to prosperity, opportunity, and more importantly, an end to inequality.

Over the years the urge to make money has killed morality. Now we are trapped in a net which was earlier believed to be a liberator from material discomfort. Greed became epidemic at all levels of commercial existence in the world.

We are living in a society where wealth commands, and those who posses wealth command the world — often in a way that only benefits themselves. The ideals of capitalism to provide opportunities that benefit everybody are contaminated by self interest, and this transition from self-interest to greed in recent years proved fatal. If the bottom line of business is profits, then it is cultivating greed and no benefit at all.

The outburst of protests across the world primarily addressed income inequality and unethical behaviour on part of entrepreneurs. Over the years, the divide between rich and poor deepened in the US, according to the Congressional budget office. Between 1979 and 2007 the incomes of the top 1% grew by a whoping 275% average, and during the same time 60% of the American middle class income grew by just 40%.

Economist and Noble Laureate Paul Krugman wrote in the New York Times that the ‘we’re the 99%’ slogan correctly defines the issue as “being the middle class versus the elite.” He also noted that the movement debunked the wrong notion that rising inequality is “mainly about the well-educated doing better than the less educated.” True enough, economic injustice is not just about education, but to fully comprehend the deep-rooted cause requires organizes and collective study.

Under an Islamic economic system we will not find any of these character-based problems or growing inequality. The Islamic economic system is primarily based on Islamic laws and principles, while capitalism is constructed upon morality. Ideally, if something is based on religion there is no danger of greed and malice, because no religion has ever preached greed. The Islamic economic system considers greed as a grave sin, so if the system tried to bring in something which is based on faith, people might refrain from evil deeds. But unfortunately Islamic economic system is hardly prevalent.

What we need is to find ways to resolve inefficiencies of the system through religious methodologies rather than criticism of capitalism.

The article The Contamination of Modern Capitalism appeared first on The Toonari Post - News, Powered by the People!.

Generation Opportunity President Paul T. Conway, former Chief of Staff of the U.S. Department of Labor under Secretary Elaine L. Chao, responds to the January 2012 jobs numbers report released by the Bureau of Labor Statistics:

“Young Americans, including young veterans who have honorably served their nation, are being told by President Obama and his administration to settle for a new economic status quo where the lack of jobs, high unemployment, a record high number of people dropping out of the labor force, and limited economic opportunity are considered normal.

Instead of being allowed to pursue their dreams and careers through meaningful work, regular paychecks, and new skills gained on the job, the ongoing poor economy is forcing young adults to delay their plans, delay their lives, and scramble to simply make ends meet.

“Despite thirty-six consecutive monthly jobs reports with unemployment over eight percent and a new CBO forecast of higher unemployment in the year to come, the message from the Obama administration to young Americans is to expect more of the same — higher taxes, more regulations, and more federal interference targeted at private sector job creators.

Young adults pay dearly for this administration’s disregard and diminishment of private employers. Their level of aloofness and lack of empathy for the daily concerns of young Americans is as astounding as it is unacceptable.”

January’s 8.3 percent overall jobless rate fails to reflect the significant and ongoing challenges faced by young Americans in the continually poor economy. Joblessness among Millennials ages 18-29 is already at historic levels since the end of World War II, and hidden behind January’s numbers is the fact that many Americans have either accepted short-term, seasonal work or simply given up looking for work and are, therefore, not factored into the unemployment rate.

Even worse, the long-term U.S. job growth picture remains grim based on an official report released this week by the Congressional Budget Office (CBO). CBO’s January 31, 2012 report concluded “a large portion of the economic and human costs of the recession and slow recovery remains ahead.”

CBO is also forecasting that the U.S. unemployment rate could reach 8.9 percent by the end of 2012, and could potentially increase to 9.2 percent in the year 2013. Finally, the report forecasts that the unemployment rate could remain as high as seven percent through the end of 2015, and that economic activity may remain “below the economy’s potential until 2018.”

The article Poor Economy Sends a Double Punch to Young Americans in January appeared first on The Toonari Post - News, Powered by the People!.

With the failure of the Obama administration to extend its fiscal policy and redeem the American economical illness, people have now fervently placed their hopes in the lap of the Federal Reserve Bank. The American economy is currently going through a rough phase riddles with unfortunate events that has infused pessimism in the system.

Americans are believed to be as pessimistic about the U.S economy as they were during the Great Depression; this shows in key readings of the consumer confidence data. In august the consumer confidence index plunged to its lowest level since April 2009. Consumer confidence index is the degree of optimism consumers have about the overall state of the economy.

It generally indicates the financial situation of the people and their confidence about their future earnings. In a situation like this where rising unemployment and mild lob losses on a constant basis lowers the probability of stability in future income, consumers eventually lose buoyancy and start reducing their spendings.

The consumer confidence index, also sometimes referred to as the expectation index, that dropped 23 point from 74.9 to 51.9 in July. The month of August saw the steepest fall since the heydays of the early recession in 2007.

Jobs in crisis

The darkening outlook of US economy is due to the debt ceiling debates, falling employment, irregular stocks and the downgrade by S&P. With spending cuts and the gloomy jobs outlook, the chances of a sooner-than-expected recovery remains a distant dream.

In a top job-killing list, prepared by CNN Money, Goldman Sachs, the Wall Street giant, took second place; Goldman recently axed 1000 jobs as a part of their cost-cutting effort. Technology giant Cisco Systems also announced a cut of 6500 employees. Top defense supplier to pentagon, The Lockheed Martin said it has laid off 6500 employees and counting.

Research in Motion, maker of Blackberry, also slashed 2000 employees or nearly 10 percent of its workforce. Once the leader in North America Smartphone market, the company finds that sales are waning since Apple launched its new iPhone. With fiscal alternatives drying up there has been a diversion of attention towards the Federal Reserve (FED).

At the two-day FED annual forum at Jackson Hole, Wyoming, Bernanke did not give any hints about another round of economic stimulus, but said that the central bank would do all to help boost recovery. Jesse Cole, head of Merlin Institutional group, said “Bernanke really indicated that the central bank has a lot more tools and weapons at its disposal to stimulate the economy.”

Hopes are sky high since the FED chief used his Jackson Hole speech last year to lay the groundwork for a second round of bond purchases. Earlier in December 2008, the FED chief expanded the meeting for two days and lowered the benchmark interest rate to near zero from 1%

Roller-coaster ride

Recent budget outlooks from the Congressional Budget Office (CBO) provided further proof that the U.S. should be serious about dealing with debt. CBO wants to make about about striking a balance in the efforts to tamp down the debt burden and tanking economic growth.

Not surprisingly, Bernanke echoed a similar voice when he said policymaker should be more careful with current economic recovery and fiscal headwinds that may come up in time. The macro economic situation is difficult with the current high unemployment rates, the high gasoline prices,the  debt mountain, and shrinking alternatives.

The article American Economy on a Roller Coaster Ride appeared first on The Toonari Post - News, Powered by the People!.

In an interesting turn of events, the Congressional Budget Office rating Senator Harry Reid (D-NV)’s debt ceiling plan. Just one day after the CBO scored Speaker John Boehner’s plan, the non partisan congressional scorekeeper released their findings on Reid’s plan.

On Tuesday, the CBO stated that the Speaker’s plan would save $850 billion over the course of 10 years. Reid’s plan would reduce the deficit by $2.2 trillion over the next decade, the nonpartisan Congressional Budget Office said. The Speaker was already forced to pull his bill over the low score from the CBO and stated that he was going to “rework” it. Reid’s plan also included no tax hikes or increases in revenue, a demand of the Republican Party.

Two major differences account for the conflicting scores. In Reid’s plan, the very expensive wars in Iraq and Afghanistan will completely end. Also, Boehner’s plan only raised the debt ceiling by one trillion dollars and was only trying to find a trillion cuts to match the amount of raising the debt ceiling. Under Reid’s plan, the debt ceiling would be raised until 2013.

Rep. Boehner defends his plan, calling the CBO results “misleading.” Boeher spokesman Michael Steele explained why the report was misleading.

This report shows the Senate plan for what it is: a grab-bag of gimmicks that gives the President a blank check. In contrast to the bill House Republicans have offered, the Senate Democratic bill counts as ‘savings’ a trillion dollars in war money that would never have been spent — and on top of that, slashes the defense budget in a manner that would hurt our men and women in uniform in a time of war.

It relies on smoke and mirrors for half of its ‘savings,’ yet still cuts $500 billion less than promised. In reality, the Reid plan would only save taxpayers about $1 trillion while giving the President the largest debt limit increase in history. Despite previous claims, it significantly falls short of the requirement that we cut more than we increase in the debt limit.

President Obama and other Democrat leaders are supporting Reid’s plan. Reid has hinted that Congress may be working on a compromise. “Magic things can happen here in Congress in a very short period of time under the right circumstances,” said Reid, the Senate majority leader.
Image Courtesy of  http://www.flickr.com/photos/americanprogressaction/

The article Reid’s Plan Saves More Money Than Boehner’s Plan appeared first on The Toonari Post - News, Powered by the People!.