The Atlantic provides a useful overview of the state of budget negotiations now that the Obama-McConnell plan, nebulous though it may be at this point, is the only budget plan (apart from the Gang of Six’s much maligned “Back in Black”) on the table in Congress. [The Atlantic]
More details are emerging about the Obama-McConnell debt reduction plan, including increased powers being granted to “Super Congress,” a bipartisan, bicameral council of 12 lawmakers who will have to make spending cut recommendations by Thanksgiving or face automatic, across-the-board spending cuts. This body has been demanded by Republican lawmakers, though Democratic leadership has only recently agreed to its existence. Neither the Tea Party nor the left wing of the Democratic Party is fond of the notion, as Tea Party factions believe it raises the possibility of increasing the debt whilst some Democratic groups balk at the notion that its actions may lead to deep, even automatic, cuts in Medicare, Medicaid, and Social Security. [Huffington Post]
The Reid plan for debt reduction failed in the Senate, leaving the fate of the Obama-McConnell plan somewhat in question, especially given Speaker Boehner’s difficulty in rallying his caucus behind previous plans. [Talking Points Memo]
According to Gene Sperling, Director of the National Economic Council, there are three provisions that must be in a final budget deal for President Obama to support it: That the bill include a “significant down payment” on the US’s debt, that revenues be part of a final plan, and that uncertainty be removed from the market. Although the plan as it is believed to exist includes only spending cuts, Obama Administration officials, most notably David Plouffe, insist that any recommendations by the “Super Congress” will be their nature have to include revenue raisers. [Roll Call]
Tea Party activists are exhibiting increasing displeasure at the House Republicans’ willingness to compromise on debt and budget concerns, with some taking issue with the fact that a debt ceiling increase has been approved at all. As in 2009, many of these groups have threatened incumbent lawmakers, even those who were elected with Tea Party support, with primary challenges. [Politico]
Although the Senate is technically in recess at the moment, Majority Leader Harry Reid has told Senators not to stray too far from the chambers, indicating the possibility that they will vote on the Obama-McConnell plan in the near future. In a tongue-in-cheek move, the Nevada Democrat said “I would not suggest a ball game” (Nationals Park is barely a mile from the Capitol). [The Hill]
Possibly in an effort to assuage liberal activists, President Obama and his administration have said that they will continue to push for revenue raisers, including repealing the Bush tax cuts, in spite of the fact that the Obama-McConnell plan does not explicitly include anything other than spending cuts. The administration’s plan includes using the cuts’ 2012 expiration as a sort of trigger to increase revenue increases, with the President possibly utilizing a veto after the election even if he loses. [Washington Post]
Appearing on CNN Sunday morning, Mitch McConnell said that he and President Obama were “very close” to reaching an agreement on the debt ceiling. According to the Kentucky Senator, the deal would be a two-step process involving an immediate increase in the debt ceiling, a vote on the Balanced Budget Amendment, and a bipartisan committee to recommend spending cuts. [CNN] and [Washington Post]
According to former Moody’s Analytics economist Mark Zandi, the debt deal supposedly being worked out by the President and Republican members of Congress should be sufficient to avoid a credit downgrade for the United States. He did, however, admonish that if this deal breaks apart, it would plunge the country back into recession. [Politico]
Even as the House and Senate rejected or tabled each other’s bills Friday and Saturday, talks on Sunday rekindled hopes that a substantive bipartisan deal may still be possible. In particular, Chuck Schumer, Democrat of New York and Senate Majority Whip, said that while a final deal has not been worked out yet, there was a sense of “relief” in the Capitol Sunday morning. Recognizing that Democrats had compromised on some aspects of a budget bill, Schumer took pride from the fact that the Senate had kept at bay more drastic Republican measures, namely Paul Ryan’s budget. [Huffington Post]
Senior adviser to President Obama David Plouffe has said that, while there is no final deal in place between the President and Congressional leaders, a final deal could include provisions for $4 trillion in debt reduction by 2013. He has also said that, while there are no revenue increases in the first stage of the deal, the bipartisan committee charged with cutting further money from the deficit would have to include such measures in their recommendation. [Politico]
South Carolina Republican Senator Lindsey Graham, who himself has said he will not vote for the bill being worked on by President Obama and Congressional leaders, does not believe that more than about half of the House Republican Caucus will vote for that plan. Citing the possibility of increasing the country’s debt by $7 trillion, Graham expressed skepticism that Speaker Boehner would be able to sell the plan to House Republicans. [The Hill]
The Atlantic, as always, has some of the best quick analysis of what the rumored deal means, the pros and the cons: [Atlantic Wire]
After a provision for the Balanced Budget Amendment was added at the last minute, the third iteration of Speaker Boehner’s debt bill passed the House 218-210, with all Democrats and 22 Republicans voting against it. Within only two hours, the Democratically-controlled Senate tabled the measure in a 59-41 vote that saw all 51 Democrats, 2 Democratically-aligned Independents, and 6 conservative Republicans vote against the measure. The Senate returned to session at 1 p.m. Today and a vote on Majority Leader Reid’s plan is expected around 1 a.m. Sunday morning. [Washington Post]
Among the 28 Republican “nays” between the two houses of Congress, seven came from the entirety of the South Carolina delegation. (Of the state’s six Representatives and two Senators, only House Assistant Minority Leader James Clyburn is a Democrat.) This move came as a result of the conservative lawmakers pushing for a Balanced Budget Amendment and deeper spending cuts than had been provided in the Boehner bill. [National Journal]
As of Friday morning July 29, Apple Computer has more cash on reserve than the Federal government- Apple’s $75.88 billion to the Treasury’s $73.77 billion. [MarketWatch]
Skipping Social Security payments has been floated as a possible response if Congress fails to come to a final deal on the debt ceiling. Outside analysis, however, has shown the possibility that doing so will unleash a “domino effect” of missed payments and pursuant interest rate hikes, especially among elderly women. [Huffington Post]
In a plan sent to Talking Points Memo, Senate Majority Leader Harry Reid put together what may be his final debt deal to Senate Republicans, designed to bring as many as possible on board to convince the House to pass the bill. Included are deeper spending cuts, to approximately $2.4 billion, and a provision, drawn from Minority Leader Mitch McConnell’s plan, to give President Obama the authority to raise the debt ceiling subject to Congressional disapproval. [Talking Points Memo]
Using evidence from budget impasses and government shutdowns from the 1980s and 1990s, some veteran lawmakers and experts on the Congressional process are skeptical about the possibility that any debt deal will be reached within that body by August 2. In particular, former Senate Majority Leader Tom Daschle has come out saying the thinks a deal may not arise in time. [NY Times]
Thanks to his internationally (!) well-received piece in The Huffington Post, “Debt Ceiling for Dummies,” the RP has been on a virtual international tour of radio and TV talk shows.
Today, he appeared on CTV News, Canada’s version of CNN, making Mrs. RP (a native Canuck) very happy. Click here or on the logo below to watch the interview:
Last night, he appeared as the primary guest on the Wall Street Journal’s “The Daily Wrap” with Michael Castner. The subject — of course — was the ongoing debt ceiling crisis.
Click here or on the icon below to listen to the interview:
Just when we bragged about last week being the most trafficked since Opening Week, we’ve already surpassed it this week by more than 10%.
Thanks for your support and a hearty welcome to all of our new readers.
We will keep you updated over the weekend on all matters concerning the budget crisis, and unfortunately expect to be railing about it next week as we quickly approach the August 2 default deadline.
And don’t forget tonight the RP will appear on Wall Street Journal radio. Here are the details to listen in online or on your transistor. (Do they still make transistors?)
Have a great weekend!
The United States Supreme Court should invalidate patents for software. [Forbes]
Day-traders: how to trade a potential U.S. bond downgrade. [The Street]
Blackberry, once the status symbol of the business world is now fighting for its life. [CNBC]
The Forbes family’s dealings could spell disaster for their famous media brand. [Fortune]
Deficit cutting will widen the retirement gap for minorities. [Reuters]
While our government struggles to get its financial house in order, perhaps there is a lesson for all of us from what is happening in Washington.
I do not think any of us really ever want to reach the point where we say, “How did it get this way? How did it get this bad?” So what to do – just a few simple steps to make sure your financial house is in order:
1. Risk Management
(B) Life Insurance – this discussion may depend on your family situation. But even if you are single, but plan to have a family, getting coverage while you are young and healthy may be an advantage. Too many times, a person waits and then later has a medical issue that either prevents them from getting coverage or makes it more expensive. With a family, life insurance is a must. A great rule of thumb here is that for every $1,000 of after tax monthly income you want to provide to a surviving spouse, you need $250,000 of death benefit in place. And when factoring in inflation, this sum will typically last the survivor about 20 years. So calculate the after tax monthly needs for your family and make sure you have adequate life insurance in place.
Lastly, don’t discount the value of a non-working spouse. Imagine the expenses if a stay at home Mom or Dad were not around. Non-working spouses need coverage too. A rule of thumb here – $250,000 of coverage on the non working spouse for each child.
(C) Cash – build up a reserve of about 3 months income and keep it in readily accessible cash. Use a money market or similar account that is safe and secure.
2. Wealth Accumulation
(A) Retirement Planning – Utilize your company 401(k) plans or pensions. If there is a matching contribution on behalf of your company, then at least contribute enough to maximize the company match. If there is a Roth option, use it. Conventional wisdom tells us that tax rates have nowhere to go but UP. If you believe this, then the old paradigm of straight tax deferral must be changed. You need to move as much as possible from Tax Deferred vehicles into Tax Free vehicles. Roth 401(k)’s provide this regardless of income level. Roth IRA’s do as well. For those that make too much to contribute on their own to Roth IRA’s (single – $122,000 of Adjusted Gross Income, and Married filing jointly – $179,000 of Adjusted Gross Income), the tax laws currently allow a non-deductible contribution to a traditional IRA and then the ability to convert it into a Roth IRA (regardless of your income level).
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