October 7th, 2010 18:05:24 GMT

US Budget Group Tries To Shift Fiscal Debate To Specifics

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–Think Tank Launches ‘Getting Specific’ Initative To Sharpen Debate
–Center For Responsible Federal Budget Says Generalities Don’t Help

By John Shaw

WASHINGTON (MNI) – The U.S. fiscal debate, when viewed from the
proverbial 30,000 feet, has some encouraging signs.

After all, almost everyone agrees that spending controls are
central to fixing the nation’s fiscal mess and that entitlement reform
is necessary for long-term budget health.

Likewise on the revenue side of the ledger, almost everyone
participating in the budget debate says that fundamental tax reform is
critical to the long-term health of the American economy. And most, save
the far right of the Republican party, agree that some additional
revenues will be needed to pay for the government that most Americans
appear to want.

But when the budget debate moves closer to the ground much of this
consensus seems to dissipate.

While everyone seeks entitlement reform in the abstract, few agree
on the particulars. Should Social Security be revamped? If so, how? Is
the Medicare program fiscally viable over the longer-term? If not, how
should you scale-it back?

Almost everyone agrees our current tax code is a mess. But there is
no agreement on what alternative should replace it. And every proposal
to boost revenues is derided by its opponents as being confiscatory and
job crushing.

The Center for a Responsible Federal Budget, a fiscal watchdog
group, has recently launched a policy debate called, “Getting Specific:
How To Fix the Budget.”

The budget group argues that policymakers need to rise above
platitudes, cliches and soundbites to tackle the U.S.’s ominous fiscal
challenge.

“Policymakers and voters recognize that the growing debt is a major
issue that must be addressed,” the budget group says in its Web site.

“Now our leaders must move beyond paying lip service and toward
producing results. Only by offering and discussing explicit proposals
can we move forward,” it adds.

The Center has released two policy papers to highlight the type of
options that have to be considered

For example, its paper on Social Security reform notes that the
program is running a cash flow deficit this year and starting in 2015,
is projected to run deficits “for every year in the future.”

It says that the program’s outlays will grow by more than 1.2% of
GDP by 2030 while revenues will fail to keep up pace and will actually
decline after 2030.

“We need to act quickly to put the program on a sustainable path,
and the longer we wait the more painful the changes will be,” it says.

It then walks through several suggested reforms such as raising the
early and normal retirement ages to 63 and 68 and index them to
longevity, use a more accurate measure of inflation to calculate cost of
living adjustments, slow the growth of benefits for middle and high
income earners and reform the payroll tax to make it more progressive.

Another paper deals with the continued growth of federal health
care programs which it calls “the single largest threat to the nation’s
fiscal health.”

The paper notes that the Congressional Budget Office has estimated
that direct federal health care costs will reach almost 10% of GDP by
2030 and almost 14% by 2050.

It outlines a number of options to tackle this problem including
medical malpractice liability reform, increase the Medicare eligibility
age to 67, and limiting the tax exclusion on employer provided health
care.

“Health care cost growth continues to present the single largest
threat to the country’s fiscal future,” the report says.

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MFU$$$,MCU$$$]

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October 7th, 2010 17:40:31 GMT

March of the hawks…

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Now Tom Hoenig, the Fed’s hawk of hawks, is on the wires, saying he understands the the economy is not growing fast enough and that unemployment is too high but a quick fix (like QE) could have unintended consequences.

Hoenig still wants to raise rates to 1% and opposes expanding the Fed’s balance sheet. He’s all alone on the Fed Board in holding the former view and in a small minority i holding the latter view.

Also crossing the wires is news that Portugal’s UGT union will join the November 24 general strike.

EUR/USD’s bounce is finding sellers in the low 1.3880s and trades now at 1.3877.

3 Comments

October 7th, 2010 17:25:33 GMT

Fed hawk Fisher: Not clear crisis-like use of Fed’s arsenal needed

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  • Risk of double-dip receding but recovery sub-par
  • Impulse to try and boost jobs understandable but efficacy of more easing not established
  • targeted aid to small business may be more appropriate than broad easing
  • Fiscal, regulatory policies holding back recovery
  • Removing tax and regulatory uncertainty more desirable than bloating Fed’s balance sheet
  • BOJ move raises concerns of “competitive quantitative ease”
  • Worried about central banks moving beyond government and mortgage debt (like Japan id doing)

1 Comment

October 7th, 2010 16:41:15 GMT

China starts to nibble but bounces modest

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Traders say there has been some buying of EUR/USD by China here in the 1.3860s but so far there has not been much of a bounce. That tells me the market needs the bids and if we don’t bounce soon we’re headed a good deal lower.

7 Comments

October 7th, 2010 16:39:02 GMT

AUD/USD slides back below 0.9820

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Trailing stops are being triggered all over the stop as AUD/USD tumbles below the 0.9820, the 2008 high that was taken out after strong Aussie employment data this morning.

The market is giving increased signs that we had a dollar-selling climax today and we are in for a period of retracement.

0.9780/90 is support on the hourly charts in AUD…more stops are eyed below…

2 Comments

October 7th, 2010 16:34:29 GMT

Squeezing through the exits

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EUR/USD is in a full-scale retreat after losing support around 1.3900, quickly sprinting through smaller stops just below that level and the larger stops perched “safely” below that level.

Most of the selling is of the “trailing stop” variety, so traders are booking profits, just smaller profits than they would have liked.

Not much in the way of support intraday now until the 1.3800 level but I would not be surprised to hear of Chinese buying, taking back some of the EUR/USD sold to defend 1.4000. Even when they lose they win!

3 Comments

October 7th, 2010 16:19:59 GMT

“Euro used to be Germany; now it is Greece or Spain”

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Former hedge fund manager Raoul Pal is on CNBC and he has a very downcast view of the European sovereign debt situation. He sees a very real risk of a sovereign default from one or more of the highly indebted members of the euro.

He sums the view up nicely by saying that it used to be when you bought the euro you were buying Germany. Today you are buying Greece and Spain.

EUR/USD is getting another shove to the downside, likely in these comments.

Small stops lie below the 1.3900 level while larger seller orders are seen at 1.3880. Bids lie ahead of 1.3900. We trade now at 1.3904.

11 Comments

1 11,732 11,733 11,734 11,735 11,736 11,737 11,738 11,739 11,740 11,741 11,742 15,573

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