Obama Suggests He’ll Include Social Security, Medicare, and Medicaid Cuts in 2014 Budget Due in April

obama_cuts

Thanks to Susie Madrak and Joseph Cannon for catching this White House trial balloon–naturally floated right before a long holiday weekend. From The Wall Street Journal:

The White House is strongly considering including limits on entitlement benefits in its fiscal 2014 budget—a proposal it first offered Republicans in December. The move would be aimed in part at keeping alive bipartisan talks on a major budget deal.

Such a proposal could include steps that make many Democrats queasy, such as reductions in future Medicare, Medicaid and Social Security payments, but also items resisted by Republicans, such as higher taxes through limits on tax breaks, people close to the White House said.

These measures would come as President Barack Obama continues his courtship of the Senate GOP in an effort to thaw tax-and-spending talks. The White House’s delayed annual budget is scheduled to be released April 10, the same day Mr. Obama plans to dine with a group of Senate Republicans to discuss the budget and other issues….

People close to the White House believe a proposal to slow the growth rate of such benefits would use a variant of the Consumer Price Index to measure inflation. The new inflation indicator would cut overall spending by $130 billion, according to White House projections, and raise $100 billion in tax revenue by slowing the growth of tax brackets. The White House earlier called for an additional $800 billion or so in cuts on top of those resulting from the inflation adjustments.

“We and all of the groups engaged on this are starting to feel it may well be in the budget,” said Nancy LeaMond, executive vice president at AARP, an advocacy group for seniors that opposes such changes.

According to the WSJ article, the White House would “insist” that if cuts to safety net programs are included, the entire budget package would have to get an up or down vote. I’m not sure how they would enforce that.

From Susie’s post at Crooks and Liars:

Get your dialing fingers ready. There’s a reason they let this story out on Good Friday, they’re counting on you not noticing or being too busy to do anything about it. The White House switchboard is 202-456-1414, the comments line is 202-456-1111 (be prepared to hold) or you can email here.

ChainedCPI


Thursday Reads: Banks Reopen in Cyprus; An End to “Too Big to Fail” Banks (?); Vagina-Phobia; and Much More

Banks reopen in Cyprus and media jostle to get the best view - posted by Joe Parkinson (@JoeWSJ)

Banks reopen in Cyprus and media jostle to get the best view – posted by Joe Parkinson (@JoeWSJ)

Good Morning!!

The banks have opened in Cyprus with controls on how much depositors can withdraw.

Joe Weisenthal posted updates at his Business Insider blog:

At 6:00 AM ET, banks in Cyprus reopened their doors for the first time since March 16.

Wall Street Journal’s Joe Parkinson reports that only eight people are being allowed in at a time at one Bank of Cyprus branch.

However, the crowds have been orderly.

Everyone is wondering whether there will be a huge run on the banks.

So far? Not yet.

This is likely due to a set of capital controls that have been imposed on the banks.  Specifically, Cypriot depositors cannot withdraw more than 300 euros per day from any one bank.  Also, checks cannot be cashed.

These controls will be in place for seven days.

See more Twitter updates and photos at the link. International Business Times has some details about the capital controls that are supposed to prevent bank runs. In addition to the withdrawal limit, depositors can’t cash checks unless they come from another country.

In the meantime, non-cash payments or money transfers are banned unless they are related to a number of conditions.

These conditions include commercial transactions, payroll, living expenses and tuition fees.

If commercials transactions are less than €5,000, there are no restrictions, but payments above this amount and up to €200,000 will be subject to a 24-hour decision making process, in order to determine whether the liquidity of the bank would be able to incur such a withdrawal.

Transfers for paying employees will also still be allowed but relevant documents would have to be presented in order to prove the money is being used to pay staff.

Transactions on credit or debit cards are also capped at €5,000 euros per month.

According to the Wall Street Journal, some large depositors seemingly had advance knowledge of what was going to happen in Cyprus and moved their money out of the country weeks before the crisis.

The chairman of the Committee for Institutions in the Cypriot Parliament, Deputy Dimitris Syllouris, said he had submitted a letter to the Central Bank of Cyprus demanding an investigation into account holders who moved large sums of cash out of the country in the weeks ahead of Cyprus’s chaotic bailout talks…

He said he had received information about individuals and businesses moving money out of Cyprus weeks ahead of the bailout deal—a move that wouldn’t be illegal but could imply that some depositors had warning that negotiations for a bailout could, for the first time in the financial crisis that has rattled the euro zone, take a cut out of regular bank deposits.

Asked whether his suspicions focused on one specific group of depositors, he said “politicians, all sorts of people, and bankers themselves are no better.”

That figures…

Outflows from Cyprus were increasing from moderate levels from January until March 15, the officials said. Last week—especially after March 19, when the Cypriot Parliament rejected the first bailout deal that would have imposed a one-time levy on large deposits—the outflows under the central bank’s exemptions went up significantly, they said.

Several hundred million euros, but less than a billion euros, left the country despite the bank closures, according to one official.

At Bloomberg, Clive Crook says Cyprus’ Plan B is Still a Disaster.

The new deal has removed the craziest part of the agreement reached March 16 — the plan to default on deposit insurance. Let’s not dwell any further on that insanity. But the new plan still has features that, seen in any other context, would surely arouse surprise.

For instance, the so-called troika of the European Commission, the European Central Bank and the International Monetary Fund wanted to be sure that the new debt Cyprus is about to take on will be sustainable — meaning, presumably, that Cyprus will be able to repay it. Yet, by writing down high- value deposits, the revised plan will also cause a sudden contraction of the Cypriot banking system, and thus of the whole Cypriot economy, which depends on banking to an unusual degree.

He concludes that,

Bailout fatigue says: “The Cypriots got themselves into this mess, and they should get themselves out. We’ll lend them a bit more, but only if we’re sure they’ll pay us back.” Cyprus didn’t get itself into this mess. It joined the euro system in 2008 with low public debt and a clean bill of health from EU governments (back then, not a word was said about shady Russians). Its banks are in trouble not because they accepted too many overseas deposits but because they bought too many Greek bonds — an investment sanctified by international banking rules (which called such investments riskless) that was destroyed by the EU’s ham-fisted resolution of Greece’s threatened default.

Europe’s sense of “we’re all in this together” seems to have evaporated entirely. Now one has to ask not merely what the euro is for, but what the EU itself is for.

Back in the U.S.A.,

too-big-to-fail

Simon Johnson has an interesting post at the NYT’ “Explaining the Science of Everyday Life” blog: The Debate on Bank Size Is Over.

While bank lobbyists and some commentators are suddenly taken with the idea that an active debate is under way about whether to limit bank size in the United States, they are wrong. The debate is over; the decision to cap the size of the largest banks has been made. All that remains is to work out the details.

To grasp the new reality, think about the Cyprus debacle this month, the Senate budget resolution last week and Ben Bernanke’s revelation that — on too big to fail — “I agree with Elizabeth Warren 100 percent that it’s a real problem.”

Policy is rarely changed by ideas alone and, in isolation, even stunning events can sometimes have surprisingly little effect. What really moves the needle in terms of consensus among policy makers and the broader public opinion is when events combine with a new understanding of how the world works. Thanks to Senator Sherrod Brown, Democrat of Ohio; Senator Warren, Democrat of Massachusetts, and many other people who have worked hard over the last four years, we are ready to understand what finally defeated the argument that bank size does not matter: Cyprus.

I can’t briefly summarize the gist of Johnson’s piece, so if you’re following this story, please read the whole thing. Could he really be right about limits on “to big to fail or prosecute banks.” I sure hope so!

In other news,

Read the rest of this entry »


Thursday Reads: Crisis in Cyprus, The End of the “Creative Class” Dream, the Grand Betrayal, and Other News

coffee break

Good Morning!!

There’s quite a bit of news on the Cyprus crisis this morning. But first, last night Joe Weisenthal posted this assessment of how bad things had already gotten: In Just Days A Modern Economy Has Been Set Back 50 Years, And It May Never Be The Same Again. That’s a quote from Ciaran O’Hagan of Société Générale in Paris. Weisenthal writes:

According to reports, Cyprus will try again tomorrow to cobble together some kind of bank bailout bill that can pass parliament.

Cyprus needs to raise another 5.8 billion euros, which it could do from some combination of deposit taxes, Russian money, and pension nationalization.

None of the options are good, but until it’s done, banks will likely have to remain closed, a situation that can’t go on much longer.

This is a stunning turn of events for a modern Eurozone nation.

This morning, the news broke that the European Central Bank (ECB) has given Cyprus an ultimatum. Bloomberg reports:

The European Central Bank said it will cut Cypriot banks off from emergency funds after March 25 unless the Mediterranean island agrees on a bailout with the European Union and International Monetary Fund.

“The Governing Council of the European Central Bank decided to maintain the current level of Emergency Liquidity Assistance, ELA, until Monday, 25 March 2013,” the Frankfurt- based ECB said in an e-mailed statement today. “Thereafter, ELA could only be considered if an EU/IMF program is in place that would ensure the solvency of the concerned banks.”

The Cypriot parliament this week rejected a proposed levy on bank deposits to raise 5.8 billion euros ($7.5 billion), which euro-area finance ministers backed as a condition for the country’s bailout. A bank holiday in Cyprus has been extended to March 25, giving policy makers until Monday to find a compromise to prevent a collapse of the country’s banks.

“With this statement, the ECB put even more pressure on European finance ministers and the Cypriot government to come up with a deal,” said Juergen Michels, chief euro-area economist at Citigroup Inc. in London. “But we’ll have to see whether they’ll actually follow through with their threat if there’s no deal by Monday and policy makers decide to further extend the bank holiday.”

Read the rest of this entry »


New Stage in Eurozone Crisis: Cyprus Forced to Cover Bailout from Individual Bank Deposits

Lines formed at ATMs in Cyprus after news of bank levy broke

Lines formed at ATMs in Cyprus after news of bank levy broke

This is a topic on which I know very little, but I thought we should have a thread on it anyway.

On Saturday morning, news broke that the terms of a bailout of banks in Cyprus would require a levy on individual depositors–including those holding small accounts. People immediately rushed to ATMs to withdraw as much cash as possible before the deal was voted on. The most accessible article I found on this is by Edward Harrison of Credit Writedowns blog, posted at Alternet: Hell Breaks Loose in Europe as Banking Crisis Unfolds: Depositors’ Money May Be Seized.

Saturday morning we learned that after hours of tense negotiation, Europe has hammered out a 10bn euro “bailout” of Cyprus. I put the term bailout in quotes because the key feature of this deal is the bail-in of Cypriot depositors to the tune of 5.8bn euros, about a third of Cyprus’ GDP. This means that depositors went to sleep on Friday night and woke up Saturday to find that their money, deposited safely in Cypriot banks, had been seized and used to “bail out” the country. While the bail-in became official EU bank rescue policy during the Spanish crisis last summer, bank depositors were never mentioned at that time. I see this as an extreme measure which, if the European banking crisis continues elsewhere, will have very negative implications for bank depositor confidence in other European periphery countries.

There has since been a revision in the amounts to be deducted–I’ll get to that later on.

Back to Harrison:

Cyprus’ finance minister Michalis Sarris said large deposit withdrawals would be banned. Jörg Asmussen, a German member of the ECB board and a key ally of Angela Merkel, added that the part of the deposit base equivalent to the actual bail-in levies would be frozen immediately so the funds could be used to pay for the “bailout”….

Some of the bailout lenders like the IMF had actually been calling for Cyprus to seize all deposits larger than 100,000 euros. So this falls well short of those demands. Nonetheless, a rubicon has been crossed. Not only are senior bank debt lenders now on the hook before a single penny of European Union loans or guarantees flow to busted eurozone countries, but so are subordinated debt holders and so are even depositors. As an EU citizen, you must now believe that any lending exposure you have to a bank whether as a bond lender or deposit lender can be seized and confiscated by government, no matter how small the exposure. The FT notes that “[e]ven Ireland, whose banking sector was about as large relative to its economy as Cyprus’ when it was forced into a bailout in 2010, never considered such a measure.

Read much more at the Alternet link.

Here’s an FAQ on the crisis published at Fortune earlier tonight. The scary introductory paragraphs after the jump:

Read the rest of this entry »


Saturday Late Morning Reads

groucho reading newspaper

Good Morning!!

Last night I watched an old Marx Brothers movie–Monkey Business. It’s been years since I’ve watched one of their movies, and I’d forgotten how much fun it can be. Laughter really is the best medicine. Wouldn’t it be great if we could see a movie with the Marx Brothers making people like Mitch McConnell, Paul Ryan, and David Gregory look like complete idiots?

Not that Republicans need Groucho, Chico, or Harpo to highlight their idiocy, as you can see from this story at TPM: CPAC Event On Racial Tolerance Turns To Chaos As ‘Disenfranchised’ Whites Arrive

The session, entitled “Trump The Race Card: Are You Sick And Tired Of Being Called A Racist When You Know You’re Not One?” was led by K. Carl Smith, a black conservative who mostly urged attendees to deflect racism charges by calling themselves “Frederick Douglass Republicans.”

Disruptions began when he started accusing Democrats of still being the party of the Confederacy — a common talking point on the right….Disruptions began when he started accusing Democrats of still being the party of the Confederacy — a common talking point on the right.

But “things really went off the rails” in the question and answer session.

Scott Terry of North Carolina, accompanied by a Confederate-flag-clad attendee, Matthew Heimbach, rose to say he took offense to the event’s take on slavery. (Heimbach founded the White Students Union at Towson University and is described as a “white nationalist” by the Southern Poverty Law Center.)

“It seems to be that you’re reaching out to voters at the expense of young white Southern males,” Terry said, adding he “came to love my people and culture” who were “being systematically disenfranchised.”

Smith responded that Douglass forgave his slavemaster.

“For giving him shelter? And food?” Terry said.

At this point the event devolved into a mess of shouting.

It sounds just like a Marx Brothers movie, without the jokes. There’s much more at the link–you have to read it to believe it.

More on CPAC from Gay activist and talk radio host Michaelangelo Signorile: Brian Brown, NOM Leader, At CPAC: Prop 8 Challenge Is ‘Biggest Strategic Mistake’ of Gay Rights Movement

A day before GOP Sen. Rob Portman of Ohio reversed his position and came out for marriage equality, Brian Brown, president of the National Organization for Marriage (NOM), insisted conservatives are rallying against gay marriage and that “if the Republican Party abandons traditional marriage, there is no Republican Party.” He also predicted that California’s Proposition 8 will be upheld by the Supreme Court, which is hearing arguments on the case later this month, calling the decision by gay advocates to challenge Prop 8 “the biggest strategic mistake the supporters of same-sex marriage ever have made.”

“I think people are excited [about traditional marriage],” Brown said in an interview on my SiriusXM OutQ radio program, speaking at the Conservative Political Action Conference in National Harbor, Md., on Thursday. “[Florida Senator] Marco Rubio just stood up there and said, ‘Just because I’m for traditional marriage doesn’t make me a bigot.’ And everyone stood up and cheered. The grass roots of conservatism are absolutely united behind traditional marriage. Folks I’m seeing here are absolutely committed.”

You can listen to the whole interview at the HuffPo link.

marx bros reading1

I liked TBogg’s rude comment on Portman’s overnight conversion: Honey, I’m Homo.

If you think the rapidity with which a Republican politician, who was previously against equal rights for gays, suddenly switches sides once he discovers that Teh Ghey has invaded his happy All-American home is impressive, you should see how quickly they embrace abortion as a God-given right the moment their daughter announces that she has been knocked up.

By a black guy.

Jonathan Chait has a longer, more carefully reasoned discussion of Portman’s hypocrisy. Here’s the conclusion:

It’s pretty simple. Portman went along with his party’s opposition to gay marriage because it didn’t affect him. He thought about gay rights the way Paul Ryan thinks about health care. And he still obviously thinks about most issues the way Paul Ryan thinks about health care.

That Portman turns out to have a gay son is convenient for the gay-rights cause. But why should any of us come away from his conversion trusting that Portman is thinking on any issue about what’s good for all of us, rather than what’s good for himself and the people he knows?

Exactly.

As for Paul Ryan, he claims that “Democrats’ budget puts US on path ‘straight into debt crisis.'” From The Hill:

Ryan used the weekly GOP address to promote the budget plan bearing his name, saying it will benefit Americans worried about jobs and the cost of living, those trying to keep up with the cost of healthcare and younger workers hoping for a secure retirement. “And for taxpayers fed up with the status quo, we will cut wasteful spending,” he said….

Ryan took aim at President Obama and Senate Democrats, saying the tax increases in a proposal from Sen. Patty Murray (D-Wash.) only “fuel more spending.”

“We know where this path leads—straight into a debt crisis, and along the way, fewer jobs, fewer opportunities, and less security,” Ryan said, painting a desperate image of rising interest rates and inflating debt payments.

“Our finances will collapse,” he warned. “You think this can’t happen here? Just look at Europe.”

harpo-gookie

WTF?! Europe’s problems are being exacerbated by austerity! Is this guy for real? Here’s what the Tax Policy Center has to say about Mr. Ryan’s “budget.”

House GOP Would Need $5.7 Trillion in Tax Hikes to Offset Ryan Rate Cuts

House Budget Committee Chair Paul Ryan’s (R-WI) fiscal plan promises to balance the federal budget in 10 years, make major cuts in income tax rates for both individuals and corporations, and raise the same amount of revenue as current law. If House Republicans want to do all three, they will have to eliminate trillions of dollars in popular tax preferences.

The Tax Policy Center estimates that cutting individual rates to 10 percent and 25 percent, repealing the Alternative Minimum Tax and the tax increases included in the Affordable Care Act, and cutting the corporate rate from 35 percent to 25 percent would add $5.7 trillion to the deficit over the next decade. Thus, if House Republicans want to cut these taxes and still collect the revenues they promise, they’d have to raise other taxes by $5.7 trillion.

The tax cuts described in Ryan’s budget would generate a huge windfall for high-income taxpayers. On average, households would get a cut of $3,000. But those in the top 0.1 percent of income, who make $3.3 million or more, would get a whopping $1.2 million on average–a 20 percent increase in their after-tax income.

By contrast, middle-income households would get an average tax cut of about $900. Those in the bottom 20 percent (who make $22,000 or less) would get $40 and one-third of them would get no tax cut at all.

Some important caveats here: TPC did not estimate the revenue effects of a Ryan tax proposal since the budget does not include an actual plan. Rather, it modeled generic tax cuts that follow the outline of what his budget describes. And because his plan does not identify any tax increases, TPC modeled only the tax cuts.

Some budget. Here’s Matthew O’Brien at The Atlantic: Paul Ryan’s $5.7 Trillion Magic Trick

I’m not really a fan of magic, but I’m even less of one when it’s politicians doing the tricks.

That’s why I’ve had some less-than-nice things to say about Paul Ryan’s latest budget. Like its previous iterations, it explicitly says how he wants to cut taxes, but says nothing about how he wants to pay for it. Instead, Ryan uses a magic asterisk. He merely waves his hand, and says he’ll cut enough tax expenditures to pay for all of his tax cuts. He just can’t tell us what any of these tax expenditures are. Not a single one.

This is some pretty expensive hand-waving….this magic asterisk is worth about $1 trillion more than before. Ryan keeps the same tax cuts he had last year, but he assumes these same cuts will raise an extra 0.5 percent of GDP in revenue. In other words, it’s the same magical budgeting we’ve come to know from Ryan — but now with even more magic!

It’s particularly magical for the top 1 percent of households. The chart below from the Tax Policy Center shows the percent change in after-tax incomes for each income group from Ryan’s tax cuts. That’s what comforting the comfortable looks like.

There’s much more (with charts) at the link.

Now here’s some good news–if it holds up: Federal Judge Finds National Security Letters Unconstitutional, Bans Them. From Wired:

Ultra-secret national security letters that come with a gag order on the recipient are an unconstitutional impingement on free speech, a federal judge in California ruled in a decision released Friday.

U.S. District Judge Susan Illston ordered the government to stop issuing so-called NSLs across the board, in a stunning defeat for the Obama administration’s surveillance practices. She also ordered the government to cease enforcing the gag provision in any other cases. However, she stayed her order for 90 days to give the government a chance to appeal to the Ninth Circuit Court of Appeals.

“We are very pleased that the Court recognized the fatal constitutional shortcomings of the NSL statute,” said Matt Zimmerman, senior staff attorney for the Electronic Frontier Foundation, which filed a challenge to NSLs on behalf of an unknown telecom that received an NSL in 2011. “The government’s gags have truncated the public debate on these controversial surveillance tools. Our client looks forward to the day when it can publicly discuss its experience.”

The telecommunications company received the ultra-secret demand letter in 2011 from the FBI seeking information about a customer or customers. The company took the extraordinary and rare step of challenging the underlying authority of the National Security Letter, as well as the legitimacy of the gag order that came with it.

The national security letters are one of those holdovers from Bush that the Obama administration has defended in court. Please read the whole article if you have time–there’s a lot of good background info. Here’s the press release from the EFF. Who knows what will happen on appeal or if the case makes it to the Supreme Court, but this is very good news.

chico marx reading

Finally, we can look forward to some more insanity from the CPAC crowd today–Ted Cruz will be closing out the conference with his keynote speech–and before that there’ll be a whole assortment of mixed Republican nuts. From NPR:

It’s the last day of the annual Conservative Political Action Conference in Maryland, which will culminate in a keynote address by up-and-coming Sen. Ted Cruz of Texas. As NPR’s David Welna reports,

“Though he’s only been a senator since January, this will be the third year Texas Republican Sen. Ted Cruz is addressing CPAC. This former Texas solicitor general and Tea Party favorite got top billing at the conference after aggressively questioning former GOP senator Chuck Hagel during Hagel’s confirmation hearing to be secretary of defense.”

Also scheduled to speak are Wisconsin Gov. Scott Walker, Newt Gingrich, Rep. Michele Bachmann and Sarah Palin. (CPAC has the full schedule on its website.)

Sorry this post is so late–I hope everyone hasn’t given up on me already. If anyone is out there, please share your recommended links in the comments. I look forward to clicking on them!

Have a great weekend!