The New Budget Demands Financialization and AntiCapitalism

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The New Budget DemandsFinancialization and
Anti-Capitalism

• Professor Sacco, George Mason, and H.A. Sauer,
  Former Deputy Director for the Budget Committee,
  U.S. House of Representatives
• Research Assistants
• Sunitha Thummala
• Liang Li
• April 22nd 2009

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Purpose of this Handout

• The primary purpose of the this handout is to set
  the theme
• Show data to support the theme
• Reflect on the future
• The slides used in the presentation will use
  spreadsheets and graphs to more clearly
  represents the numbers

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New Budget Challenges for the Republic,
Representative Governments in the US

• Traditional budget concerns
• War
• Role of the banks
• Budgeting for electoral districts and special
  interest
• Infrastructure
• Add The Entitlements for elderly and safety net
• Social security, 1935 and Medical, 1965
• For example, Earned Income Tax Credit
• Add International Financialization (1990s) and
  Terrorism, 9/11/09
• Add Government as insurance agent for failure

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1974 Budget and Impoundment Control Act

• Remains the key guide for Congressional budgeting
• The Act strengthened the congressional role over
  the President in the making the budget
• The instrument created to coordinate the budget
  was the concurrent budget resolution, a form of
  congressional decision that can, but not
  necessarily, bind congressional action
• Reconciliation results in one budget package that
  often ignores the concurrent resolution

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Budget Outlays and Reciepts

• The next three slides show trends
• A general picture of budget outlays
• A more detailed view of budget outlays
• Sources of Revenue

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India overview US Budget vs. GDP

• See spreadsheet India overview US Budget vs GDP
• Most file names have India as the first term to
  identify it with the 4/22/09 presentation

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US Budget Expenditure Trends

• See spreadsheet India US Budget Expenditures

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India Sources of Revenue

• See India Sources of Revenue spreadsheet
• Most file names have India as the first term to
  identify it with the 4/22/09 presentation

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Budget Financialization

• Financialization means seeking profit by
  leveraging for future monetary outcomes rather
  than future production
• Global Financialization is greater the nation
  states budget
• Financial intermediaries are political more
  powerful and regulations

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US Debt Picture
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International Theories and Budgeting Demands

• Neo-liberalism
• Free trade, international cooperation (WTO), less
  militarism, protection of private property and
  limited government spending the economic piece
  gets larger for a better global life
• Realism
• Coercive power to raise money, military spending,
  international mistrust and coalitions based on
  electoral favors zero sum
• Marxism
• Implosion of capitalism as profit margins are
  reduced below zero the Republic attempts to save
  industry with bailout after bailout
• Anti-globalization
• global attacks on capitalism, huge debts to build
  electoral coalitions and address environmental
  and poverty demands

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Percent US Debt Held by Other Countries
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Percent US Debt Held by Other Countries
Spreadsheet

• See India debt held by foreigners 1970 to 2007

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Financing US Debt and Deficits

• Foreign ownership of US debt
• Taxes
• Surplus in Social Security goes to Treasury to
  pay government non SS bills
• Surplus in Medicare goes to Treasury to pay
  government non Medicare bills
• Raising retirement age
• Larger Medicare co-pays

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The New GDP Challenge BRIC
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The Budget Crimp in Economic Rationality

• How Negative NPV becomes law
• Lower the discount rate
• Log rolling
• Off budget financing

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US Budget Process and Rules formal and pay-go

• Formal rules restrict how much can be spent for
  discretionary and the size of the deficit as set
  by the Budget Committees
• Pay go (pay as you go) says that any times
  revenues are decreased expenditures must decrease
  by an equal amount
• Practice of waiving formal rules and pay go

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US Budget and Too Big to Fail History
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Budgets, Fraud and Corruption

• Jack Abramoff lobbyist convicted
• Illinois Governor Bovankovich under investigation
• San Diego city, US, took money from employee
  pension and lost in the market and covered it up

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Budgets, Financialization and Black Winter
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Taking Away Black Winter

• Reduce arms war
• Industrial policy?
• Energy
• Clear water
• education
• Enforce moderate investment leveraging
• Transparency with Risk levels

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The New Black Winter

• Explosion of Arms Trade

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Replacing the 1974 Budget and Impoundment Act

• Budgets sensitive to debt ceilings
• Reduce arms war
• Regular Fed and SEC presentations to Congress
• Coordination among GAO, CBO, OMB and OECD
• District and special interest spending is
  published

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Readings on Global Currency and Regulatory Changes

• A 'Copper Standard' for the world's currency
  system? Telegraph.com.uk By Ambrose
  Evans-PritchardLast Updated 241PM BST 16 Apr
  2009
• Chinas Dollar Trap, Paul Krugman. NYT. 4/2/09
• In Europe, Obama Faces Calls for Rules on
  Finances. NYT. 4/2/09
• Pentagon preps for economic warfare. Politico.
  4/9/09
• India US Budget history.pdf from 2009 Presidents
  Budget