January 27, 2021

Essay: Applying Washington’s Budget Lessons at Home

Like almost everyone else, I’m thrilled by the way things are going in our nation’s capital, and wish that I could fashion myself to more closely resemble those paragons of —

What? You don’t agree? Let me check the polling data.

Whoa.

Well, well. It seems that almost nobody agrees with me. Last month, Gallup measured the approval rating of Congress at 13 percent; for all of last year, the average was 15 percent. Gallup oh-so-politely notes that such figures “leave little room for a further drop.” We believers in Congress don’t much outnumber those who believe the moon landings were faked.

So maybe it’s just me — and, apparently it is — but I just love what these folks in Washington have done with the budgetary process. Especially the sequestration part! You know how it happened: the White House and Congress were deadlocked on ways to reduce budget deficits, so they agreed to a way to break the logjam. Across-the-board spending cuts would go into effect this year if they couldn’t finally get to Yes. The idea was that such cuts would be unthinkable — so dire a threat that the players would eventually come to some kind of agreement.

But, of course, they didn’t. So the unthinkable became the unstoppable, because, apparently, nothing is unthinkable in Washington any more. Or maybe nothing is thought through. It’s hard to say.

Today, the effects of this so-called sequester are being felt in big and small ways nationwide. Some 70,000 children could be bounced from the Head Start program. White House tours have been suspended. The Blue Angels and other military demonstration teams have been ordered to stand down, causing many air shows to be canceled.

Not everyone agrees with all decisions made under sequestration. Representative Louie Gohmert, a Texas Republican, was so angry about the suspension of White House tours that he tried to amend a measure to keep the president from spending federal money on his golf outings unless the tours were restored. The idea didn’t succeed, but you have to admire the statesmanship.

This sequestration business is boldness. This is leadership. It’s like a taste of the raw excitement of being ruled by Kim Jong-un.

That’s why I’ve decided to take the logical next step, by applying the wonders of sequestration to my own life and home. I want that kind of boldness in my own finances.

As any investment adviser will tell you, it can be more profitable to limit what you spend than to increase your income by a moderate amount, since you’ve already paid taxes on the money you spend. And our spending, especially on the family equivalent of entitlements, is certainly out of control. Between college loans and a mortgage, we may not be in the hole for trillions, the way the government is, but it sure feels close to us.

Still, rather than planning, budgeting and carefully balancing income against expenses, I’ve decided to live like Washington and just drive the family car along the edge of the fiscal cliff, unilaterally imposing cuts on almost everything we do.

First things first: I canceled tours of our home. It’s no White House — it’s actually kind of beige — and nobody has ever asked for a tour. But our little home has always drawn a fair amount of interest in the neighborhood. (People ask, “You actually bought that house?”) If they want to see it now, they’ll have to wait till the end of the fiscal year.

To please Representative Gohmert, I’ve also canceled all golf outings. (I’ve never played golf, but it’s the principle of the thing.)

Then I called Bank of America, to unilaterally inform it that we would pay less on our mortgage. I ended up speaking with Dan Frahm, a senior vice president at the company. But he did not seem impressed with my genius plan.

“If somebody is experiencing hard times, and that can be documented, then there are options available to help them potentially reduce their payments,” he explained. To him, though, what I was proposing sounded different. “If somebody is just making an across-the-board decision that they are going to make a lower payment than they have a contractual agreement to do,” he said, “that leads down another path, potentially leading to foreclosure.”

That didn’t sound much like the patriotic spirit I had been hoping to encounter. After all, Washington had made decisions and commitments on all of its spending, and was now cutting back. Why couldn’t I? Where was my ability to wave some kind of fiscal magic wand? Clearly, there’s more to this sequester business than I have understood.

I went back to my abacus. So much for the easy cuts. It was time to get serious. I explained the situation to my younger son, Joseph, and told him, “You’re going to have to find a way to be 18 percent shorter.”

“Good plan,” Joseph smirked. He is 17, and about 5-foot-10. He declined to take part in the Procrustean initiative I had devised. “I so enjoy towering over you,” he said.

Next, I tried to make the cats understand that they’d have to make sacrifices via kibble and a less luxurious litter, but they ignored me. I might as well have tried herding them, the spendthrifts.

Then I told my wife that there would have to be some changes in our spending habits. She recently noted that the top rack in the dishwasher was broken, and had considered calling a repair service. Instead, I figured out exactly which part of the dishwasher was broken — an oddly shaped piece of plastic that kept the rack on its sliding track — ordered a replacement online and installed it myself. Budget preserved!

This won’t work for Washington, of course, because that piece of plastic, if ordered by the Pentagon, would cost several hundred thousand dollars. But I felt good about making a dent in our own spending habits. Besides, we already try to live frugally. We go by my wife’s rule on spending: “We can’t afford things unless I really want them.”

I WAS getting frustrated, though. The real savings have not emerged. Where was our cooperative resolve? Why weren’t we moving forward? Why couldn’t we be more like Washington?

That’s when I realized the truth: we’re already a lot like Washington.

Maybe the whole country

is.

Article source: http://www.nytimes.com/2013/04/07/business/mutfund/applying-washingtons-budget-lessons-at-home.html?partner=rss&emc=rss

Bucks Blog: Settling Questions About Taxes

In his Wealth Matters column this week, Paul Sullivan writes about the bill passed by Congress that permanently sets the estate and gift tax exemptions at $5 million. The action ends more than a decade of flux for the estate tax and, with it, more than a decade of uncertainty among the wealthy on how best to set up their finances to benefit heirs.

While most of us do not have to worry about either the estate or gift taxes, since our savings fall far short of the limits, the bill did resolve other tax issues, including setting new tax rates and permanently indexing the alternative minimum tax for inflation. While it is true that the changes mean we will probably be paying higher taxes this year, at least the worries about potentially larger increases are over.

Or do you disagree? Tell us your thoughts about the new tax legislation below.

Article source: http://bucks.blogs.nytimes.com/2013/01/04/settling-questions-about-taxes/?partner=rss&emc=rss

Traders Take Profits After Rally

Opinion »

Editorial: Fiscal Battles Ahead

The unwillingness of House Republicans to work for the common good suggests that the 113th Congress will be bitterly unproductive.

Article source: http://www.nytimes.com/2013/01/04/business/daily-stock-market-activity.html?partner=rss&emc=rss

American Airlines and Pilots Agree on a New Contract

Opinion »

Editorial: A Test on the Right to Vote

The Supreme Court will reckon with Congress’s power to address persistent discrimination.

Article source: http://www.nytimes.com/2012/11/10/business/american-airlines-and-pilots-agree-on-a-new-contract.html?partner=rss&emc=rss

Cuts by Postal Service Cuts Will Slow First-Class Mail

Delivery delays will result from the postal service’s decision to shut about half of its 487 mail processing centers across the nation. 

This would cause the postal service to reduce delivery standards for first-class mail for the first time in 40 years, substantially increasing the distance that mail travels between post offices and processing centers.

Current standards call for delivering first-class mail in one to three days within the continental United States. Under the planned cutbacks, those delivery times would increase to two or three days, potentially creating problems for companies like Netflix that rely heavily on next-day delivery.

The agency announced in September that it would begin studying plans to close 252 out of 487 mail processing centers, and on Monday it said it would “move forward” with that plan, with closings to begin as early as March. Heavy pressure from Congress or the public could still cause the postal service to scale back the plan, at least somewhat.

Patrick Donahoe, the postmaster general, has repeatedly said that by 2015 he hopes to cut $20 billion from the agency’s annual costs, which are now about $75 billion. He has called for closing up to 3,700 of the nation’s 32,000 post offices, while reducing deliveries to five days a week from six, and cutting the agency’s work force of 653,000 employees by more than 100,000.

“We’re in a deep financial crisis today because we have a business model that’s tied to the past,” he said at a news conference last month. “We are expected to operate like a business, but don’t have the flexibility to do so. Our business model is fundamentally inflexible. It prevents the postal service from solving its problems.”

Mr. Donahoe has urged Congress to act with more urgency to allow the postal service to cut costs. In recent months, he has complained repeatedly that his agency needs permission from Congress to take the actions he says it needs in an era when mail volume has plunged largely because of the explosion of e-mail and electronic bill-paying. Mail volume has dropped more than 20 percent — by more than 40 billion pieces — over the last five years.

According to The Associated Press, about 42 percent of first-class mail is currently delivered the following day, while 27 percent is delivered in two days. Thirty-one percent arrives in three days and less than 1 percent is delivered in four to five days.

According to postal officials, after processing centers are closed in the spring, slightly more than half of all first-class mail is expected to be delivered in two days, with most of the rest arriving in three days.

The postal service previously announced a 1-cent increase in first-class postage, to 45 cents, starting Jan. 22.

The postal service said there would still be opportunities for companies that properly prepare and enter mail at the destination processing center so their mail could be delivered the following delivery day.

David Williams, the vice president for network operations, said, “The proposed changes to service standards will allow for significant consolidation of the postal network in terms of facilities, processing equipment, vehicles and employee work force, and will generate projected net annual savings of approximately $2.1 billion.”

Article source: http://feeds.nytimes.com/click.phdo?i=2b05b39eeecafd1a428a66913541d928

Economix Blog: The Golden Age of Republican Deficit Hawks

I’ve written a few pieces in the last several days about the history of deficit reduction packages, and how Republicans used to be on board for tax increases. I suggested that at the very least, Republicans were more willing to compromise on using tax increases to cut deficits, even if they preferred to balance the budget wholly through the spending side.

Several readers wrote in, asking whether Republicans were ever really pro-tax, or if they merely put up with higher taxes in the name of fiscal discipline.

The answer is that once upon a time, Republicans did indeed advocate leaving taxes alone, opposing tax cuts.

In the 1950s and 1960s, federal deficits were relatively small compared to the size of the economy, but even during those flush years, Republican leadership was reluctant to advocate tax cuts. In 1953, for example, Dwight Eisenhower said the country “cannot afford to reduce taxes, reduce income, until we have in sight a program of expenditures that shows that the factors of income and of outgo will be balanced.”

And when his successor, John F. Kennedy, proposed sharp tax cuts in 1963, the more conservative Republicans in Congress initially opposed them because the cuts would expand the deficit.

The legislation eventually passed (after Kennedy’s assassination), but over the objections of about a third of the Republicans voting. Here’s the House vote, and here’s the Senate vote.

Article source: http://feeds.nytimes.com/click.phdo?i=3fdd1e790c04be04c4fbc5bfb6bcce90

Economix Blog: Washington, Capital of Economic Optimism

CATHERINE RAMPELL

CATHERINE RAMPELL

Dollars to doughnuts.

In case you’re wondering why Congress spent so much time twisting itself in knots over the long-term deficit, instead of over the current jobs crisis, this might help explain things: Washington, D.C., is the most economically optimistic area in the nation, according to Gallup.

Every day Gallup polls Americans across the country about whether they think current economic conditions are good (or “excellent,” “only fair” or “poor”), and whether the economy is getting better or worse. For each question, Gallup subtracts the percentage of people answering negatively from the percentage of people answering positively. Then the two results are averaged to come up with a value that Gallup calls the Economic Confidence Index.

If the index value is above zero, that means that people are generally confident about the economy. If the index value is below zero, then people are more pessimistic about the economy.

And guess what? Not only does Washington have the highest index value of any state or district in the country, it’s also the only place where the index value is positive.

Here are the top 10 states in terms of overall economic confidence:

Source: Gallup

These results are based on telephone interviews with 87,634 employed adults, 18 or older, conducted from January to June 2011 as part of Gallup Daily tracking. For each state, the margin of sampling error ranges from plus or minus 1 percentage point (for large states such as California), to plus or minus 8 percentage points (for the District of Columbia).

The biggest gap between the District of Columbia and the rest of the country is created by the second question used to create the Economic Confidence Index, on whether the economy is getting better or worse.

In every state, a majority of residents think the economy is getting worse. In the nation’s capital, however, a full 60 percent of people think the economy is getting better.

This may be good evidence for those arguing that Washington exists in its own disconnected bubble. At the very least, Gallup’s results show that the District of Columbia thinks very differently about the state of the economy than the rest of the country does.

Article source: http://feeds.nytimes.com/click.phdo?i=ad03bb7fa93fb1f8c3eefe806c2e6388

Business Briefing | FINANCE: Quarterly Profit Rises at Berkshire Hathaway

Opinion »

Bloggingheads: Obama’s Undoing?

Glenn Loury of Brown University and Megan McArdle of The Atlantic debate the relationship between Obama and Congress.

Article source: http://feeds.nytimes.com/click.phdo?i=f89c2dcd8132929c0eda9336202cc1c4

More Reserves May Be Asked of Top Banks

Opinion »

Editorial: Blame Congress

Congress has failed to enact climate change legislation that would have encouraged innovation.

Article source: http://feeds.nytimes.com/click.phdo?i=c3fdb870c0c00a6690d834622dc3d1b4