Bernanke warns on deficits as Treasury rates rise

[Kangaroo]

Cough cough this was being preached way before all this spending to save the to big to fail :bang2::bang2:

http://www.reuters.com/article/ousiv/idUSTRE5523SI20090603

WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke warned on Wednesday that rising U.S. debt was contributing to a spike in longer-term interest rates, and said now was the time to start working on reining in deficits.
He gave no clue as to whether the U.S. central bank would step up its purchases of government debt or mortgage-backed securities to offset the rising borrowing rates, something investors have been watching for.
"Maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance," Bernanke said in testimony prepared for delivery to the House of Representatives' Budget Committee.
"Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth," he said.
Bernanke gave a relatively upbeat assessment of the economy, saying he still expected the recession to bottom out and growth to resume later this year.
He said financial markets had improved, thanks in part to the Fed's efforts to restore lending, but he noted the recent spike in yields on longer-term Treasury debt and fixed-rate mortgages.
"These increases appear to reflect concerns about large federal deficits but also other causes, including greater optimism about the economic outlook, a reversal of flight-to-quality flows, and technical factors related to the hedging of mortgage holdings," Bernanke said.

[JBond]

Little late isn't it? Obama has committed us to huge deficits for decades to come. Add in the unfunded liabilities and it is not a pretty picture.

[Doomsday101]

Little late isn't it? Obama has committed us to huge deficits for decades to come. Add in the unfunded liabilities and it is not a pretty picture.

The spending is not done yet on big projects

[ABQCOWBOY]

The spending is not done yet on big projects

Wait till Universal Health Care hits the books. It will of course fail and like so many other failed experiments, the current Administration will refuse to accept it and so, we will throw away Billions more. It will be very ugly and rather then realizing that it's the things done in the first 120 days that have lead to most of this, the American people will look to the Government more and more. It will eventually culminate in failure of the U.S Economy and somebody else will take there turn at bat as World Leader. We will be assigned a footnote in History.

See, I've presented the footnotes version and condensed 10 pages down to a few lines.

:D

[Doomsday101]

Wait till Universal Health Care hits the books. It will of course fail and like so many other failed experiments, the current Administration will refuse to accept it and so, we will throw away Billions more. It will be very ugly and rather then realizing that it's the things done in the first 120 days that have lead to most of this, the American people will look to the Government more and more. It will eventually culminate in failure of the U.S Economy and somebody else will take there turn at bat as World Leader. We will be assigned a footnote in History.

See, I've presented the footnotes version and condensed 10 pages down to a few lines.

:D

And that will be the big one that is the one that will put most of us in the so called wealthy bracket because it is going to cost and there is no way around a major tax increase to pay for it and it will take more than just those making 250K a year to pay for it.

[Kangaroo]

And that will be the big one that is the one that will put most of us in the so called wealthy bracket because it is going to cost and there is no way around a major tax increase to pay for it and it will take more than just those making 250K a year to pay for it.

You mean like this article I posted about months ago

http://online.wsj.com/article/SB123561551065378405.html

The 2% Illusion
Take everything they earn, and it still won't be enough.


President Obama has laid out the most ambitious and expensive domestic agenda since LBJ, and now all he has to do is figure out how to pay for it. On Tuesday, he left the impression that we need merely end "tax breaks for the wealthiest 2% of Americans," and he promised that households earning less than $250,000 won't see their taxes increased by "one single dime."
[Review & Outlook] AP

This is going to be some trick. Even the most basic inspection of the IRS income tax statistics shows that raising taxes on the salaries, dividends and capital gains of those making more than $250,000 can't possibly raise enough revenue to fund Mr. Obama's new spending ambitions.

Consider the IRS data for 2006, the most recent year that such tax data are available and a good year for the economy and "the wealthiest 2%." Roughly 3.8 million filers had adjusted gross incomes above $200,000 in 2006. (That's about 7% of all returns; the data aren't broken down at the $250,000 point.) These people paid about $522 billion in income taxes, or roughly 62% of all federal individual income receipts. The richest 1% -- about 1.65 million filers making above $388,806 -- paid some $408 billion, or 39.9% of all income tax revenues, while earning about 22% of all reported U.S. income.

Note that federal income taxes are already "progressive" with a 35% top marginal rate, and that Mr. Obama is (so far) proposing to raise it only to 39.6%, plus another two percentage points in hidden deduction phase-outs. He'd also raise capital gains and dividend rates, but those both yield far less revenue than the income tax. These combined increases won't come close to raising the hundreds of billions of dollars in revenue that Mr. Obama is going to need.
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But let's not stop at a 42% top rate; as a thought experiment, let's go all the way. A tax policy that confiscated 100% of the taxable income of everyone in America earning over $500,000 in 2006 would only have given Congress an extra $1.3 trillion in revenue. That's less than half the 2006 federal budget of $2.7 trillion and looks tiny compared to the more than $4 trillion Congress will spend in fiscal 2010. Even taking every taxable "dime" of everyone earning more than $75,000 in 2006 would have barely yielded enough to cover that $4 trillion.

Fast forward to this year (and 2010) when the Wall Street meltdown and recession are going to mean far few taxpayers earning more than $500,000. Profits are plunging, businesses are cutting or eliminating dividends, hedge funds are rolling up, and, most of all, capital nationwide is on strike. Raising taxes now will thus yield far less revenue than it would have in 2006.

Mr. Obama is of course counting on an economic recovery. And he's also assuming along with the new liberal economic consensus that taxes don't matter to growth or job creation. The truth, though, is that they do. Small- and medium-sized businesses are the nation's primary employers, and lower individual tax rates have induced thousands of them to shift from filing under the corporate tax system to the individual system, often as limited liability companies or Subchapter S corporations. The Tax Foundation calculates that merely restoring the higher, Clinton-era tax rates on the top two brackets would hit 45% to 55% of small-business income, depending on how inclusively "small business" is defined. These owners will find a way to declare less taxable income.

The bottom line is that Mr. Obama is selling the country on a 2% illusion. Unwinding the U.S. commitment in Iraq and allowing the Bush tax cuts to expire can't possibly pay for his agenda. Taxes on the not-so-rich will need to rise as well.

On that point, by the way, it's unclear why Mr. Obama thinks his climate-change scheme won't hit all Americans with higher taxes. Selling the right to emit greenhouse gases amounts to a steep new tax on most types of energy and, therefore, on all Americans who use energy. There's a reason that Charlie Rangel's Ways and Means panel, which writes tax law, is holding hearings this week on cap-and-trade regulation.

Mr. Obama is very good at portraying his agenda as nothing more than center-left pragmatism. But pragmatists don't ignore the data. And the reality is that the only way to pay for Mr. Obama's ambitions is to reach ever deeper into the pockets of the American middle class.