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Despite Oil Prices Plummeting, S&P Not Downgrading Alaska, Yet

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Photo credit: roger4336

Photo credit: roger4336

Alaska has built up layers of budgetary reserves that allow it to absorb one or two years of large operating deficits — just outside of our outlook time horizon –at its current rating level. But in order for it to avert credit quality deterioration, we believe the state must make material progress in reducing the deficit in its fiscal 2016 budget.

Although the rapid decline in oil prices exacerbates Alaska’s existing fiscal budget deficit, whether it will weaken the state’s credit quality will depend on the state’s budgetary response. For fiscal 2015, the state assumed oil prices would average $105.06 per barrel, giving rise to about 495,900 barrels
per day of production on Alaska’s North Slope. Based on more recent price and production information, the state has revised its estimates to $76 per barrel and 509,500 barrels per day for fiscal 2015.

The state’s assumptions regarding oil prices and production are integral to its budget condition because oil-related revenues made up 88% of its estimated revenue for the 2014 fiscal year and 79% of fiscal 2015. At enactment, the state’s budgeted general fund expenditures for fiscal 2015 exceeded its unrestricted revenues by $1.4 billion. Weaker oil prices and production resulted in an updated budget gap of $3.5 billion, equal to 57% of general fund expenditures. For most states, an operating deficit of this magnitude would likely result in immediate negative rating consequences. In Alaska’s case, however, extraordinarily large budget reserves effectively buy the state time to deal with its structural misalignment.

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Deficit To Soon Skyrocket To Historic World War II Heights

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Photo Credit: REUTERS / Jonathan Ernst

Photo Credit: REUTERS / Jonathan Ernst

The Congressional Budget Office’s (CBO) latest report says that although the federal deficit this year is the lowest of the Obama era, in the near future, it is expected to skyrocket to World War II heights.

The years between 2009 and 2012 saw the largest recorded federal government deficits since 1946, based on percentage of the economy. And although the White House also reported that the deficit this year is the lowest of the Obama administration, there is little reason for celebration.

Currently, the amount of federal debt is exactly 74 percent of the economy, and if measures aren’t taken to reign in the deficits, the CBO projects that by 2039 the U.S. will see a debt to GDP ratio of 106 percent. According to the CBO, the rate of debt growth is expanding at an undeniably unsustainable rate.

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Tax Revenues Hit Record in First 5 Months of FY14; 5-Month Deficit Still $377B

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Photo Credit: APInflation-adjusted federal tax revenues hit a record $1,104,947,000,000 in the first five months of fiscal 2014, but the federal government still ran a $377,379,000,000 deficit during that time, according to the Monthly Treasury Statement for February.

Each month, the Treasury publishes the government’s “total receipts,” including all revenue from individual income taxes, corporate income taxes, social insurance and retirement taxes (including Social Security and Medicare taxes), unemployment insurance taxes, excise taxes, estate and gift taxes, customs duties, and “miscellaneous receipts.”

In constant 2014 dollars, the $1,104,947,000,000 that the federal government collected from October through February in fiscal 2014 was $90,193,750,000 more than the $1,014,753,250,000 it collected in October through February in fiscal 2013.

After the current fiscal year, the second highest federal tax intake in the first five months of a fiscal year occurred in the first five months of fiscal 2007, when the government collected $1,076,721,860,000 in 2014 dollars—or $28,225,140,000 less than in the first five months of this fiscal year.

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U.S. Deficit Falls to $680 Billion

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Photo Credit: Treasury The federal government’s latest annual deficit is the smallest it’s been since 2008, according to Treasury Department data released Wednesday.

At $680 billion, the fiscal 2013 deficit is 51% less than it was in 2009, when it hit a record high nominally of $1.4 trillion.

As a percent of the economy, it’s also considerably smaller than it’s been in the past five years, coming in at 4.1% of gross domestic product. By contrast, the annual deficit in 2009 topped 10% of GDP. And last year it was 6.8%.

Overall, Treasury said higher receipts accounted for 79% of the decline in the deficit from last year.

Several factors have contributed to the strong improvement in the nation’s near-term fiscal picture. They include an improving economy and a mix of fiscal restraint — primarily, the expiration of stimulus measures, the imposition of across-the-board budget cuts known as the sequester, and tax increases on high-income households during the 2013 fiscal year, which ended September 30.

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True Size of the Deficit? Try $106 Trillion

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Photo Credit: National Review

…Obama officials came into the initial meetings on the Hill [regarding the long term budget deficit] reiterating the president’s position that $4 trillion in deficit reduction would basically solve the problem for now.

But according to GOP deficit projections … the true size of the problem is staggering, and surprised even many of the seasoned budget negotiators involved.

$4 trillion? Try $106 trillion, the medium estimate. That’s $106,954,000,000,000. Even the lowest, extremely conservative estimate comes in at $72 trillion; the highest is over $120 trillion.

The amounts are so large that some controversial reforms appear inconsequential in comparison. Take Obama’s “chained CPI” proposal: it would save an estimated $89 billion over ten years, or 1.3 percent of the total deficit over those same ten years…

The Senate GOP’s projections are based on CBO’s cost projections and generally conservative.

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Chicago To Close 54 Schools To Address $1B Deficit

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Photo Credit: gingerbydesign

Tens of thousands of Chicago students, parents and teachers learned Thursday their schools were on a long-feared list of 54 the city plans to close in an effort to stabilize an educational system facing a huge budget shortfall.

Mayor Rahm Emanuel says the closures are necessary because too many Chicago Public School buildings are half-empty, with 403,000 students in a system that has seats for more than 500,000. But opponents say the closures will further erode troubled neighborhoods and endanger students who may have to cross gang boundaries to attend school. The schools slated for closure are all elementary schools and are overwhelmingly black and in low-income neighborhoods.

CPS officials say money being spent to keep underutilized schools open could be better used to educate students elsewhere as the district deals with a $1 billion budget deficit. About 30,000 students will be affected by the plan, with about half that number moving into new schools.

“Every child in every neighborhood in Chicago deserves access to a high quality education that prepares them to succeed in life, but for too long children in certain parts of Chicago have been cheated out of the resources they need to succeed because they are in underutilized, under-resourced schools,” said district CEO Barbara Byrd-Bennett. “As a former teacher and a principal, I’ve lived through school closings and I know that this will not be easy, but I also know that in the end this will benefit our children.”

As word of the closures trickled out, parents and teachers reacted with anger and shock, some even crying. Sandra Leon said she got a tearful call from her grandchildren’s kindergarten teacher saying the school was on the list to be closed. Her two grown children also attended the school, and Leon wiped her eyes as she waited outside for her grandchildren.

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CBO: ‘Fiscal cliff’ Deal Carries $4 Trillion Price Tag Over Next Decade

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The Senate deal to avoid the “fiscal cliff” will add roughly $4 trillion to the deficit when compared to current law, according to new numbers from the Congressional Budget Office (CBO).

The CBO determined Tuesday that the package, hammered out late Monday evening by Vice President Biden and Senate Minority Leader Mitch McConnell (R-Ky.) would — over the next decade — come with a $3.9 trillion price tag.

The agreement, which is pending before the House after passing in a 89-8 Senate vote early Tuesday, would extend lower tax rates on annual household income under $450,000 and postpone automatic spending cuts for two months.

The extension of lower tax rates for a bulk of the nation’s taxpayers and the addition of a permanent patch to the alternative minimum tax would add roughly $3.6 trillion to the deficit over the next decade, the CBO said. Other individual, business, and energy tax extenders would add another $76 billion. The extension of unemployment benefits would cost roughly $30 billion, and the so-called “doc fix” would tally another $25 billion through fiscal 2022.

The CBO says the budget agreement will lead to an overall increase in spending of about $330 billion over 10 years.

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Video: Ruling Class on Track to Destroy Middle America in 2013

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It’s time for us in the middle class to get smart – the debt is going to destroy us. And both parties are making sure of this.

I met with Senator Tom Coburn two weeks ago. He suggests that the American experiment could collapse within the next two years. Why? Because the debt bomb is going to explode and destroy every dollar you and I own.

Who suffers? The middle class. We will be destroyed and along with us, the Republic.

Will our millionaire federal masters get real in 2013? Probably not.

Social Security Ran $47.8B Deficit in FY 2012; Disabled Workers Hit New Record in December: 8,827,795

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(CNSNews.com) – The Social Security program ran a $47.8 billion deficit in fiscal 2012 as the program brought in $725.429 billion in cash and paid $773.247 for benefits and overhead expenses, according to official data published by Social Security Administration.

The Social Security Administration also released new data revealing that the number of workers collecting disability benefits hit a record 8,827,795 in December–up from 8,805,353 in November.

The overall number of Social Security program beneficiaries—including retired workers, dependent family members and survivors and disabled workers and their dependent family members—also hit a record in December, climbing from 56,658,978 in November to 56,758,185 in December.

In 2011, according to the Bureau of Labor Statistics, there was an average of 112.556 million full-time workers in the United States, of whom 17.806 million worked full-time for local, state or federal government. That left an average of only 94.750 million full-time private sector workers in the country.

That means that for every 1.67 Americans who worked full-time in the private sector in 2011, there is now 1 person collecting benefits from the Social Security administration.

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Bernie Sanders: Multinational Corporations Raping the US Treasury, Outsourcing Hundreds of Thousands of Jobs

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After a group of CEO’s wrote an opinion piece today in the Wall Street Journal about the country’s deficit and the need to rein in social security, medicare, and other programs, Leftist Senator Bernie Sanders went on the offensive:

There really is no shame. The Wall Street leaders whose recklessness and illegal behavior caused this terrible recession are now lecturing the American people on the need for courage to deal with the nation’s finances and deficit crisis. Before telling us why we should cut Social Security, Medicare and other vitally important programs, these CEOs might want to take a hard look at their responsibility for causing the deficit and this terrible recession.

Sander’s Senate website went on to note that

Many of the CEOs who signed the deficit-reduction letter run corporations that, in total, evaded at least $34.5 billion in taxes by setting up more than 600 subsidiaries in the Cayman Islands and other offshore tax havens since 2008. As a result, at least a dozen of the companies avoided paying any federal income taxes in recent years, and even received more than $6.4 billion in tax refunds from the IRS since 2008.

Several of the companies received a total taxpayer bailout of more than $2.5 trillion from the Federal Reserve and the Treasury Department.

Many of the companies also have outsourced hundreds of thousands of American jobs to China and other low wage countries, forcing their workers to rely on unemployment insurance and other federal benefits.

“In other words,” Sanders said, “these are some of the same people who have significantly caused the deficit to explode over the last four years.”

Sanders then documented the CEO’s and their companies’ outsourcing, tax credits, and other benefits in a document that can be seen here.

Although Sanders and Restoring Liberty have little in common, he has identified a real problem: we have increasingly powerful multinational corporations in the United States that have absolutely no loyalty to our Constitution or nation. Many are not only actively involved in subverting national sovereignty but are also milking the treasury through corrupt relationships with political insiders in DC. Crony capitalism is not free market economics.