CBO: Reid bill a bigger reduction in spending … barely

posted at 11:25 am on July 27, 2011 by Ed Morrissey
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The Washington Times reports today that the duel of spending reduction bills may be won by Harry Reid.  The CBO scored Reid’s proposal better than John Boehner’s on actual reductions in spending, although neither takes a machete to the budget.  In fact, the difference is almost indistinguishable:

    The Congressional Budget Office said the plan by Senate Majority Leader Harry Reid would raise the government’s borrowing limit by $2.7 trillion, and cut $2.2 trillion from future spending, chiefly by limiting the amount of money spent on the wars in Iraq and Afghanistan. …

    The CBO analysis could give momentum to Mr. Reid’s plan, though the GOP says spending on the wars in Iraq and Afghanistan was going to drop anyway, and so shouldn’t be considered as future savings. …

    The CBO said the Senate bill’s discretionary spending cuts would result in $840 billion in lower authorized spending, and $750 billion in actual lower outlays over the next decade. The Senate bill also capped spending on the two wars at $450 billion over the next decade, which would mean spending authority is $1.2 trillion lower, and actual outlays would be $1 trillion lower.

Reid’s advertising his proposal as authorizing $2.2 trillion in cuts for a $2.7 trillion debt-ceiling increase, but most of those cuts would happen anyway.  Reid counts dollars spent on the war at current rates as part of the savings when the drawdowns occur, savings that are already in place.  Instead, his bill cuts in 10 years roughly half of the annual budget deficit, averaging $75 billion a year, which is roughly nineteen days of borrowing at current deficit rates.

That’s an improvement over Boehner’s bill, but not by much.  Boehner would save $710 billion over the next decade, averaging $71 billion a year, which accounts for 17.3 days of borrowing at the current rate of deficit spending.  That’s more of a distinction without a difference.  Boehner’s bill would only authorize a $900 billion hike in the debt limit, however, which would force a new round of cuts before next year’s election.  Unlike Reid’s proposal, Boehner assumes that the savings in war funding have already taken place.

Boehner promised to go back and rewrite the House bill to get more savings out of it.  Given these figures, that shouldn’t be a terribly difficult task.  However, at this point, it looks like the two chambers are close enough in figures and approaches to pass their bills and get a conference committee to deal with the differences, which is probably what will happen by the end of the week.

CBO: Reid bill a bigger reduction in spending … barely

posted at 11:25 am on July 27, 2011 by Ed Morrissey
printer-friendly

The Washington Times reports today that the duel of spending reduction bills may be won by Harry Reid.  The CBO scored Reid’s proposal better than John Boehner’s on actual reductions in spending, although neither takes a machete to the budget.  In fact, the difference is almost indistinguishable:

    The Congressional Budget Office said the plan by Senate Majority Leader Harry Reid would raise the government’s borrowing limit by $2.7 trillion, and cut $2.2 trillion from future spending, chiefly by limiting the amount of money spent on the wars in Iraq and Afghanistan. …

    The CBO analysis could give momentum to Mr. Reid’s plan, though the GOP says spending on the wars in Iraq and Afghanistan was going to drop anyway, and so shouldn’t be considered as future savings. …

    The CBO said the Senate bill’s discretionary spending cuts would result in $840 billion in lower authorized spending, and $750 billion in actual lower outlays over the next decade. The Senate bill also capped spending on the two wars at $450 billion over the next decade, which would mean spending authority is $1.2 trillion lower, and actual outlays would be $1 trillion lower.

Reid’s advertising his proposal as authorizing $2.2 trillion in cuts for a $2.7 trillion debt-ceiling increase, but most of those cuts would happen anyway.  Reid counts dollars spent on the war at current rates as part of the savings when the drawdowns occur, savings that are already in place.  Instead, his bill cuts in 10 years roughly half of the annual budget deficit, averaging $75 billion a year, which is roughly nineteen days of borrowing at current deficit rates.

That’s an improvement over Boehner’s bill, but not by much.  Boehner would save $710 billion over the next decade, averaging $71 billion a year, which accounts for 17.3 days of borrowing at the current rate of deficit spending.  That’s more of a distinction without a difference.  Boehner’s bill would only authorize a $900 billion hike in the debt limit, however, which would force a new round of cuts before next year’s election.  Unlike Reid’s proposal, Boehner assumes that the savings in war funding have already taken place.

Boehner promised to go back and rewrite the House bill to get more savings out of it.  Given these figures, that shouldn’t be a terribly difficult task.  However, at this point, it looks like the two chambers are close enough in figures and approaches to pass their bills and get a conference committee to deal with the differences, which is probably what will happen by the end of the week.

Euro Posts Weekly Gain After Two Weeks of Losses

EuroThis week was “a mixed blessing” for the euro. For the most part, the currency showed a good performance as worries about the debt crisis subsided, but by the end of the week concerns returned.

The summit of the European Union leaders caused optimism among Forex traders, who anticipated some cohesive plan for dealing with the sovereign-debt crisis. The summit ended, a plan was presented, but traders didn’t look very happy about the outcome. Surely, some market participants were pleased by the plan of the EU leaders, but most investors aren’t sure that suggested measures would help to deal with the problems in the longer run, not to mentions concerns about expected Greek default.

The shared 17-nation European currency also get boost from the US, where politicians aren’t able to reach agreement about measures to battle the US debt crisis, making the dollar less appealing than the euro. But the decline of the euro against some currencies on Friday made traders feel uncertain about the euro. Was that drop just a minor correction or a first step in a long way down? It’s hard to tell as currently the euro, along with the dollar, is one of the worst currencies to trade because of its unpredictability.

EUR/USD jumped from 1.4109 to 1.4356 and EUR/JPY advanced from 111.58 to 112.75 over this week. EUR/CHF, unlike the previous two currency pairs, hasn’t declined on Friday, rose from 1.415 to 1.768 during this week and posted a weekly high of 1.1891.

If you have any questions, comments or opinions regarding the Euro, feel free to post them using the commentary form below.

Earlier News About the Euro:

    Euro Drops as Optimism Caused by EU Summit Wanes (2011-07-22)
    Euro Jumps as EU Leaders Make Plan to Help Greece (2011-07-21)
    Is Agreement Among European Leaders Attainable? Perhaps (2011-07-19)
    Bad Monday for Euro (2011-07-18)
    Euro Recovers on US Trade Balance, Threatened By Ireland (2011-07-13)

econd Week of Gains for Yen, Will BOJ Intervene?

Japanese yenThe Japanese yen posted a second week of gains as concerns the debt problems in the US and Europe made the currency more appealing as a safe haven.

Worries about the sovereign-debt crisis intensified after the major rating agencies warned that the rollover of the Greek debt would be considered a default and spoke about possibility of the US credit rating downgrade. The yen climbed against the greenback on the speculation that the Federal Reserve will embark on a next round of the quantitative easing.

The fundamentals in Japan are positive for the yen too. The Bank of Japan said that the economy is recovering from the earthquake:

    After declining sharply following the earthquake, production has recently shown clear signs of picking up with the easing of supply-side constraints. This has resulted in an upturn in exports. Domestic private demand has also begun to pick up, with some improvement in household and business sentiment.

On the negative side, the strength of the Japanese currency is a danger by itself as a strong currency may cause an intervention of the central bank to support the nation’s exporters.

USD/JPY fell from 80.53 to 79.12 this week and posted a weekly low of 78.46. EUR/JPY slumped from 114.41 to 112.00, while GBP/JPY dropped from 128.98 to 127.63.

If you have any questions, comments or opinions regarding the Japanese Yen, feel free to post them using the commentary form below.

Earlier News About the Japanese Yen:

    Yen Declines as Chinese Economy Grows (2011-07-13)
    Growing China's Economy Saps Demand for Safety of Yen (2011-06-14)
    Yen Falls on Anticipation of Stimulus (2011-06-13)
    Yen Profits from Fears of European Crisis (2011-06-08)
    Yen Loses Strength on Poor GDP, Rebound of Stocks & Commodities (2011-05-19)

Dollar, Stocks Slide, Default Risk Rises Amid Debt-Limit Fight

 July 26, 2011, 12:46 PM EDT
By Stephen Kirkland and Nikolaj Gammeltoft

July 26 (Bloomberg) -- The dollar slid to a record low versus the Swiss franc, stocks fell and the cost of insuring U.S. debt rose to a 17-month high as President Barack Obama dueled with House Speaker John Boehner over the U.S. debt limit. Commodities recovered from earlier losses.

The dollar depreciated against all 16 major peers at 12:13 p.m. in New York and dipped below 80 centimes versus the franc. The Standard & Poor’s 500 Index lost 0.2 percent to 1,335.35 and the Stoxx Europe 600 Index fell 0.4 percent. Credit- defaults swaps on U.S. debt increased two basis point to 58 basis points. The S&P GSCI Index of 24 commodities climbed 0.6 percent, rebounding from a 0.7 percent drop, as zinc, cotton and copper added at least 1.5 percent.

Obama said yesterday the U.S. may experience a “deep economic crisis” if leaders fail to reach a deal and the nation defaults, while Boehner said the president “wants a blank check” to keep spending. Stocks were also pressured after home prices fell the most in 18 months, 3M Co. forecast earnings that trailed analyst estimates and United Parcel Service Inc. said the third quarter will be “fairly slow.”

“We have multiple sources of uncertainty, including what’s happening in Washington with the debt ceiling,” Mark Freeman, co-chief investment officer at Westwood Management Corp. in Dallas, said in a telephone interview. His firm oversees $14 billion. “The longer the uncertainty goes on, the greater the risk is that it will negatively affect businesses.”

‘Theme of the Day’

The Dollar Index, which tracks the U.S. currency against those of six trading partners, declined 0.6 percent for the fifth decline in the past six days. South Africa’s rand, Sweden’s krona and the Norwegian krone rose more than 1 percent to lead gains against the U.S. currency.

“The theme of the day is once again sell the dollar,” said Kathleen Brooks, research director at Forex.com, a unit of Gain Capital Holdings Inc., an online currency-trading company. “Playing this argument out in public, rather than trying to iron out differences behind closed doors, is causing shock waves in the markets. Every public spat is a step back from reaching an agreement by the Aug. 2 deadline.”

Obama delivered his message yesterday in a prime-time television address from the White House, while Boehner spoke afterward from the Capitol. Earlier in the day, Boehner, an Ohio Republican, and the Democratic leader in the Senate, Harry Reid of Nevada, unveiled competing plans to raise the $14.3 trillion debt limit.

Two-Step Plan

Boehner said today that his two-step plan to raise the nation’s debt limit and cut spending can pass both chambers of Congress, and he hopes Obama would sign it.

“To think about the fact that we’re a week away from a default, or a pseudo default, is a reflection of the fact that Washington is less than a place of great intellectual wisdom,” Michael Steinhardt, whose hedge funds returned more than 20 percent a year for almost three decades, said on Bloomberg Television’s “InBusiness with Margaret Brennan.”

The S&P 500 extended losses after yesterday slumping 0.6 percent. All 12 stocks in a gauge of homebuilders declined after home prices in 20 U.S. cities dropped in the year ended in May by the most in 18 months, adding to evidence the housing market is struggling. The S&P/Case-Shiller index of property values in 20 cities fell 4.5 percent from May 2010. Other data showed sales of new homes unexpectedly declined for a second month in June.

Consumer Confidence

Stocks pared losses in the U.S. after confidence among American consumers unexpectedly rose in July from an eight-month low, led by a rebound in the outlook for jobs over the next six months. The Conference Board’s index climbed to 59.5 from a revised 57.6 reading in June that was lower than previously estimated.

3M slid 4.6 percent after projecting full-year earnings that trailed analysts’ estimates after lower demand for LCD televisions curbed sales in its display and graphics business, the company’s third-biggest unit. United Parcel Service Inc. retreated 4.4 percent as the shipping company said it expects a continued “extremely sluggish” U.S. business environment.

Gains in technology companies helped limit losses in stocks. Broadcom Corp., the supplier of communications chips for Apple Inc.’s mobile devices, surged 9.5 percent after also forecasting sales that topped estimates. Netflix Inc., the mail- order and online film-rental service, tumbled 9.2 percent after its forecasts missed projections.

Baidu, India

The MSCI Emerging Markets Index climbed 0.7 percent, led by a rally in technology companies after Baidu Inc. reported earnings. India’s Bombay Stock Exchange Sensitive Index dropped 1.9 percent, the most in two weeks, as the central bank raised its benchmark interest rate more than economists estimated.

The New Zealand dollar climbed as much as 1.2 percent to a record versus the greenback as investors sought alternatives to the U.S. currency. China’s yuan advanced as much as 0.1 percent against the dollar to its strongest level in 17 years after the central bank placed the currency’s reference rate at a record high.

Copper advanced 1.6 percent as a strike at BHP Billiton Ltd.’s Escondida copper mine in Chile, the world’s biggest, entered a fifth day. Corn for December delivery rose 0.2 percent on the Chicago Board of Trade and soybean futures climbed 0.9 percent as dry weather in the Midwest worsened crop conditions in the U.S. Gold for immediate delivery was little changed at $1,613.50 an ounce following yesterday’s rally to a record $1,624.07.

--With assistance from Shiyin Chen in Singapore, John Deane, Michael Patterson, Andrew Rummer, Michael Shanahan, Garth Theunissen and Daniel Tilles in London and Jimi Corpuz and Margaret Brennan in New York. Editors: Michael P. Regan, Nick Baker

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

Rand Near Monthly High vs. USD on Rate Difference, US Uncertainty

South African randThe South African rand rose to its highest level in more than two weeks against the US dollar today, as the rate difference attracted speculators, while they shunned uncertainty of the States.

While President Obama continues to press the Congress for the debt ceiling compromise, there’s no end seen to these prolonged debates. Next Tuesday can become one of the worst days in dollar’s history if nothing changes until that. As the global investors have the fact in mind, many of them a reluctant to keep their assets in USD. The recent behavior of the South African rand is showing an elevated interest in this currency.

On the other hand, there’s another attractive advantage in the ZAR for the foreign currency traders — its interest rate (5.5 percent compared to almost zero in the US). Being the Africa’s biggest economy, South Africa is also considered a fiscally and financially stable region, closely tied to the commodity prices (especially gold), which makes it a near-perfect target for short-term currency investments. Five days ago, the South African Reserve Bank has left the rates unchanged, signaling that the period of high rates may continue further.

USD/ZAR fell from 6.7619 to 6.6744 as of 14:53 GMT today, reaching as low as 6.6658 intraday — the maximum level since July 8th.

If you have any questions, comments or opinions regarding the South African Rand, feel free to post them using the commentary form below.

Earlier News About the South African Rand:

    Rand Weakened by Credit Rating Outlook for Greece (2011-07-05)
    Rand Weakens with Commodities on US Growth Forecast (2011-06-23)
    South African Rand Falls on Greek Crisis, Trims Losses (2011-06-20)
    South African Rand Climbs vs. Dollar on Greece's Bailout (2011-06-02)
    Rand Advances vs. Dollar on Economic Growth (2011-05-27)


This entry was posted on TopForexNews on Tuesday, July 26th, 2011 at 2:56 pm and is filed under South African Rand. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

CAD Sets New Multi-Year Record on US Crisis Expectations

Canadian DollarThe Canadian dollar expanded today, reaching a new 3-year maximum level versus the US currency, as the President of the United States warned of a serious “economic crisis”.

The loonie (as the CAD is nicknamed) reached its new record level against the US dollar today — the highest since November 2007. While there aren’t many supporting news for the Canadian dollar (except for persistently high levels of oil price), the loonie wins as an alternative to the greenback, which suffers from the debt ceiling crisis in the United States.

Sentiment for the US currency weakened after US President Barack Obama warned that a heavy economic crisis is threatening the world’s largest economy (and, consecutively, the global economy too) if no compromise is reached before August 2.

USD/CAD fell from 0.9474 to 0.9424 as of 12:47 GMT today, setting its new yearly record low at 0.9406. CAD/JPY rose from 82.56 to 82.77, while EUR/CAD went up from 1.3620 to 1.3646 today.

If you have any questions, comments or opinions regarding the Canadian Dollar, feel free to post them using the commentary form below.

Earlier News About the Canadian Dollar:

    Canadian Inflation Slows, Loonie Retreats (2011-07-22)
    CAD Reaches Three-Year High vs. USD (2011-07-22)
    BOC Rate Statement Invigorates Loonie (2011-07-19)
    Canadian Dollar Looks More Attractive After EU Stress Tests (2011-07-15)
    Loonie Declines vs. Greenback, Remains Strong vs. Majors (2011-07-12)


This entry was posted on TopForexNews on Tuesday, July 26th, 2011 at 12:53 pm and is filed under Canadian Dollar. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

Reid: I have an exciting new compromise debt deal for you radical right-win

posted at 6:00 pm on July 25, 2011 by Allahpundit
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The Corner has a rundown of Boehner’s two-step short-term proposal — lots o’ buck-passing to a commission plus some procedural chicanery a la Mitch McConnell’s proposal plus a vote on a balanced-budget amendment down the line — but I think it’s a nonstarter. The Cut, Cup, and Balance coalition has already rejected it, which, if all members abide by that, means Boehner’s bill would start without 39 GOP votes in the House and 12 Republican votes in the Senate. Maybe the CCB crowd is playing good cop/bad cop with Boehner, trying to frighten the White House and Reid into agreeing to more concessions as the deadline looms, but eyeball their membership roster. Usually they mean what they say.

As for Reid’s plan: $2.7 trillion in cuts and no tax hikes — but no entitlement reform either, and fully $1 trillion of those “cuts” are merely the savings the feds have already been counting on from winding down the wars in Iraq and Afghanistan. Obama endorsed it about an hour ago, notwithstanding his weeks-long demand for new revenue, because it ensures that the next debt-ceiling debate won’t happen until 2013 and thus achieves his main/only goal of helping him get reelected. In fact, per Ed’s post this morning, remember that as of this weekend Boehner’s short-term plan was Reid’s plan. They were going to present it as a bipartisan compromise until The One intervened and reminded Dingy Harry what’s truly important to America, namely, another four years of Barack Obama. So Reid caved, even though Obama surely would have signed Boehner’s plan, and threw this thing together as quickly and haphazardly as he could. How haphazardly? Feast your eyes.

And that’s where we are at right now. Check back in an hour or two and we’ll probably have another 15-20 new proposals to fill you in on. Via Greg Hengler, here’s Dingy’s salute to the CCB coalition, which inexplicably makes it even harder for moderate Republicans in the House and Senate to vote for his plan. Which GOPer would want to take sides against the tea party with a guy who’s dumping on them as “extremists”? Exit question: Doesn’t Reid have the upper hand on Boehner right now? We already know that the GOP caucus is split over Boehner’s proposal whereas the Democrats might support Reid’s plan fairly uniformly, especially in the Senate. It’ll be a tough sell to progressives in the House, but the fact that it doesn’t touch entitlements and that Obama’s backing it (and sure to talk it up during his speech tonight) makes things somewhat easier. If Pelosi/Hoyer can deliver 100 Democrats in the name of averting default, Boehner might be able to deliver 120 Republicans, especially now that some righties are half-praising Reid’s bill as not so bad

GOP lawmakers officially announce “imperfect” plan, in which “no side gets

posted at 5:20 pm on July 25, 2011 by Tina Korbe
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House GOP leaders were perfectly candid in their assessment of the deficit-reduction-and-debt-limit-increase plan they put before the House today.

“It’s not ‘Cut, Cap and Balance,’” House Speaker John Boehner (R-Ohio) said. “But it is built on the principles of ‘Cut, Cap and Balance’ that can pass the United States Senate, as well as the United States House.”

House Majority Leader Eric Cantor (R-Va.) echoed Boehner.

“The plan we just introduced is a well-thought-out and reasoned plan in which no side gets what it wants,” Cantor said.

As rumored, the short-term plan provides for a last-minute debt limit increase offset by even greater spending cuts with no tax increases. It also requires a vote on a balanced budget amendment — but doesn’t require that the amendment pass. The debt limit increase doesn’t carry the country through 2012, either. That means another politically-motivated round of debt limit negotiations — precisely what the president has said he doesn’t want.

“This plan is not perfect,” House GOP Whip Rep. Kevin McCarthy (R-Calif.) said. “But it shows a great contrast to what the president has put forward. The president continues to pick politics over people. His only concern when you listen to him is, he brings up the election. We’re more concerned about policies, with the direction this country is going.”

The president is scheduled to respond to Boehner’s plan at 9 p.m. tonight and the Speaker will likely respond to the president’s response.

The plan is not dreadful for a short-term deal. As many have pointed out, the no-tax part, in particular, represents a significant victory for Republicans. But the nature of the cuts aren’t clear and the debt limit increase will be upfront. The deal has already engendered fierce opposition from the “Cut, Cap and Balance” coalition. Realists might suggest time is running out for a reworked “Cut, Cap and Balance” to make its way through the House and Senate — but conservatives counter that “more of the same” in terms of a short-term deal that does nothing to ensure a balanced budget in the future betrays the American people, who sent Tea Partier after Tea Partier to Congress to combat “business as usual.”

In case anyone else has as severe a case of whiplash as I do from the this-is-the-plan, no-that-is-the-plan back-and-forth, it’s helpful to remember no plan is “the” plan until it’s written down, passed and signed. This short-term deal very well could be that, but, until it is, I’m still in the “Cut, Cap and Balance” camp. Of course, Republicans are just looking for a deal that will pass (and that’s understandable) — but, like Erick Erickson, I refuse to offer absolution to tired GOP-ers who’ve abandoned the plan. Too many Democrats have opposed a debt limit increase in the past and too many have expressed openness to a balanced budget amendment to dismiss “Cut, Cap and Balance” as extreme or to pronounce it “over, done and dead,” as Senate Majority Leader Harry Reid has tried to do. Perhaps a short-term deal will relieve the pressure of the negotiations momentarily, but it won’t solve the fundamental problems like “Cut, Cap and Balance” would. CCB is still the best plan on the table — one worth reviving and one worth fighting for.

Obama: I wish I could bypass Congress and change things on my own

posted at 4:02 pm on July 25, 2011 by Allahpundit
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Via National Journal. He’s quick to add, “But that’s not how our system works.” Doesn’t it? Bypassing Congress to whatever extent possible has been his strategy for more than a year, culminating in an unauthorized war in Libya that even his own lawyers believe is illegal. (FYI: According to Mike Mullen, that war is now indeed a “stalemate.”) Scarcely a day passes without a new op-ed by some lefty law professor arguing that the Fourteenth Amendment lets Obama raise the debt ceiling unilaterally, despite decades of congressional precedent to the contrary. And ICE has already decided to go ahead and consider factors championed by the DREAM Act in immigration cases despite the fact that the Act hasn’t passed. O may say “no we can’t” here to the suggestion of executively-imposed amnesty, but in light of the above, can you blame the La Raza crowd for thinking (and chanting) “yes we can”?

George Will, describing The One as “Huey Long with a better tailor,” has had enough:

    Inordinate self-regard is an occupational hazard of politics and part of the job description of the rhetorical presidency, this incessant tutor. Still, upon what meat doth this our current Caesar feed that he has grown so great that he presumes to command leaders of a coequal branch of government? He once boasted (June 3, 2008) that he could influence the oceans’ rise; he must be disabused of comparable delusions about controlling Congress.

    When he was a lecturer on constitutional law, he evidently skipped the separation-of-powers doctrine. But, then, because this doctrine impedes the progressives’ goal of unleashing untrammeled government, they have long loathed it: Woodrow Wilson, the first president to criticize the American founding, considered the separation of powers the Constitution’s “radical defect.”

    It has, however, rescued the nation from Obama’s preference for a “clean” debt-ceiling increase that would ignore the onrushing debt tsunami. There are 87 reasons for Obama’s temporary conversion of convenience to the cause of spending restraint — the 87 House Republican freshmen. Their inflexibility astonishes and scandalizes Washington because it reflects the rarity of serene fidelity to campaign promises.

The true stupidity of this clip, of course, is that — as with everything else — his constitutional faux-modesty is motivated by getting reelected. It’s not that he has some profound separation-of-powers objection to an executive amnesty; it’s that he knows independents would seethe at the power grab, especially on an issue as sensitive as immigration, and it’d end up hurting him badly at the polls. He’s already got the Latino vote locked up. Better, then, to play it safe with indies by paying lip service to La Raza about how his hands are tied or that he “needs a dance partner,” etc. Whatever excuse works.