Economy Watch: Opening Salvos in Budget Wars
- Apr 18, 2011
The House of Representatives voted for a symbolic federal budget on Friday afternoon, one which purports to cut the deficit by $6 trillion or so over the next decade and upend Medicare and Medicaid, previously considered (with Social Security) the third rail of federal spending. No Democrat voted for it, and nothing close to this version of the budget–especially in terms of upending the Great Society–is expected to emerge from the Senate, much less get past President Obama’s veto pen.
Rep. Ron Paul (D-Tex.) was among the four Republicans who voted against the plan, saying in a speech later in the day, “I did not vote for the budget because I don’t think it will do anything.” (Such as abolish the Federal Reserve, an oft-stated dream of Paul’s?)
Meanwhile, though he has no vote in Congress regarding tax policy, former Fed Reserve Chairman Alan Greenspan–who may be missing the days when the economy hung on his every pronouncement–chimed in on the subject on “Meet the Press” on Sunday. “This crisis is so imminent and so difficult that I think we have to allow the so-called Bush tax cuts all to expire,” he said. “That is a very big number,” meaning the amount of revenue that the federal government would realize if tax rates reverted to 1990s levels.
Back in the day, Greenspan supported the tax cuts, but no more. The U.S. Department of the Treasury has estimated that permanently extending the cuts, first passed back in 2001, would cost the government about $3.6 trillion in unrealized revenue over the course of a decade.
Consumer sentiment ticks upward
According to the latest Thomson Reuter/University of Michigan Consumer sentiment index, which was released on Friday, U.S. consumers are feeling a little better than before, though sentiment is still near six-month lows. The mid-month April reading for the index was 69.6, compared with the final March index of 67.5.
What’s still worrying consumers? Inflation. Maybe not disco-era double-digit inflation, but nevertheless more inflation than the nation has had to deal with since the last commodity bubble in 2008. Consumers are expecting an inflation rate of 4.6 percent for the year.
Still, consumers evinced a moderate amount of optimism, despite the fact that gas has topped $4 a gallon in a number of states (an unpleasant fact reported over the weekend). The recent gains in employment drove the uptick in consumer sentiment, according to the survey of 500 households used to calculate the index.
IMF chief warns of food crisis
At the spring meeting of the International Monetary Fund and a gathering of G-20 finance ministers in Washington D.C. over the weekend, various panjandrums of the world economy admonished the wealthy nations of the world to do more about the pending food crisis in the poor nations of the world. The wealthy nations, a bit fatigued themselves these days, may or may not put much stock in the warnings.
Such as: the world is “one shock away from a full-blown crisis.” That was Robert Zoellick, president of the World Bank, speaking at the end of the conference. He also said that rising food prices pose the risk of poor nations “losing a generation.”
Wall Street experienced a moderately positive day on Friday, with the Dow Jones Industrial Average gaining 56.68 points, or 0.46 percent. The S&P 500 moved into positive territory to the tune of 0.39 percent and the Nasdaq edged up 0.16 percent.