Although the Fed expects to keep reducing the program “in measured steps” next year, the timing and the course isn’t preset. “Continued progress [in the economy] is by no means certain,” Mr. [Ben] Bernanke said. “The steps that we take will be data-dependent.”

If the Fed proceeds at the pace he set out, it would complete the bond-buying program toward the end of 2014 with holdings of nearly $4.5 trillion in bonds, loans and other assets, nearly six times as large as the Fed’s total holdings when the financial crisis started in 2008.

Still, officials””worried that investors would quake at the thought of less Fed support””went to lengths to demonstrate that they would keep interest rates low for years to come, even after the bond-buying program ends.
Read it all.

But there’s a problem. [Charles] Lindblom’s common-sense insight has a giant exception: crises. Change, forced by outside events, then happens by “leaps and bounds.” The recent financial crisis caused Congress and two presidents to embrace measures (the rescue of big banks, General Motors and Chrysler) that were unthinkable a few months earlier. In the 1960s, civil rights demonstrations pushed Congress to pass the Civil Rights Act of 1964 that, in outlawing most public racial discrimination, wasn’t “incremental.” History offers other examples, including the Civil War, the New Deal and both World Wars. Small changes won’t suffice when big changes are required.

On the budget, muddling through comes with a crucial assumption. It is that continuous deficits won’t provoke a crisis that compels political leaders to take harsh steps that they would otherwise not take. This optimism may be justified. For decades, “experts” have warned of the dire consequences of unchecked deficits. Yet no great crisis has occurred. But this conviction also could be complacency. Government debt is in territory that, except for wartime debt, is unprecedented. We don’t know the consequences. Someday, we may no longer have the luxury of muddling through.

Read it all.

House and Senate negotiators have reached agreement on an $85 billion package to fund the government past Jan. 15, avoid another federal shutdown and end the cycle of budget crises that have dominated Washington for much of the past three years.

The deal did not include a key priority of House Democrats who wanted an extension of long-term benefits for the unemployed. But Democrats said they would continue to press Republicans on the issue in hopes of preventing more than 1 million people from losing their unemployment checks at the end of the month.

Read it all.

No one wants to be against Grandma, who ”” as portrayed in the media ”” is kindly, often suffering from some condition, usually financially precarious and somehow needy. But projecting this sympathetic portrait onto the entire 65-plus population is an exercise in make-believe and, frequently, political propaganda. The St. Louis Fed study refutes the stereotype. Examining different age groups, it found that since the financial crisis, incomes have risen for the elderly while they’ve dropped for the young and middle-aged.

The numbers are instructive. From 2007, the year before the financial crisis, to 2010, median income for the families under 40 dropped 12.4 percent to $39,644. For the middle-aged from 40 to 61, the comparable decline was 11.9 percent to $56,924. Meanwhile, those aged 62 to 69 gained 12.3 percent to $50,825. For Americans 70-plus, the increase was 15.6 percent to $31,512. (All figures adjust for inflation and are in 2010 “constant” dollars. The “median income” is the midpoint of incomes and is often considered “typical.”)

There has been a historic shift in favor of today’s elderly. To put this in perspective, recall that many family expenses drop with age. Mortgages are paid off; work costs vanish; children leave. Recall also that incomes typically follow a “life cycle”: They start low in workers’ 20s, peak in their 50s, and then decline in retirement, as wages give way to government transfers and savings. Against these realities, the long-term gains of the elderly and losses of the young are astonishing. From 1989 to 2010, median income increased 60 percent for those aged 62 to 69 while falling 6”‰percent for those under 40 and 2”‰percent for those 40 to 61.

Read it all.

The bishops might have been promoting a strictly Democratic line, but U.S. Senate Chaplain Barry Black was more ecumenical. Amid the shutdown, Rev. Black offered a daily prayer in the Senate chamber asking God to “save us from the madness. We acknowledge our transgressions, our shortcomings, our smugness, our selfishness, and our pride.” Later he condemned the “hypocrisy of attempting to sound reasonable while being unreasonable.” His listeners in one party no doubt assumed he was talking about the other side.

It is one thing to spiritually shame politicians, as Rev. Black did. Trying to do their jobs is another. The bishops and other clergy in the Circle of Protection go well beyond their competencies when they make such policy prescriptions. Speaking about the moral issues of the day is certainly within their pastoral purview, but the bishops’ calls to raise revenues (aka taxes), for instance, or eliminate “unnecessary” military spending are not.

Bishops routinely assert their authority as “pastors and teachers,” as Bishops Blaire, Gomez and Pates did, but according to the tradition of their own church, they have no teaching authority when it comes to politics.

Read it all.

2–At its root Social Security is, and always has been, an inter-generational transfer of wealth….

4–…since 2010 Social Security’s cash expenses have exceeded its cash receipts; negative cash flow last year was about $55 billion, according to the latest report from the system’s trustees. While credited interest is still more than enough to cover the deficit, that will only be true until 2020. After that, Social Security will begin redeeming its hoard of Treasuries for cash to continue paying benefits ”” as was the plan all along.

Read it all.

Stan Druckenmiller makes an unlikely class warrior. He’s a member of the 1%””make that the 0.001%””one of the most successful money managers of all time, and 60 years old to boot. But lately he has been touring college campuses promoting a message of income redistribution you don’t hear out of Washington. It’s how federal entitlements like Medicare and Social Security are letting Mr. Druckenmiller’s generation rip off all those doting Barack Obama voters in Generation X, Y and Z.

“I have been shocked at the reception. I had planned to only visit Bowdoin, ” his alma mater in Maine, he says. But he has since been invited to multiple campuses, and even the kids at Stanford and Berkeley have welcomed his theme of generational theft. Harlem Children’s Zone President Geoffrey Canada and former Federal Reserve Governor Kevin Warsh have joined him at stops along the tour.

Mr. Druckenmiller describes the reaction of students: “The biggest question I got was, ‘How do we start a movement?’ And my answer was ‘I’m a 60-year-old washed-up money manager. I don’t know how to start a movement. That’s your job. But we did it in Vietnam without Twitter and without Facebook and without any social media. That’s your job.’ But the enthusiasm””they get it.”

Read it all.

Read it all.

Standard & Poor’s is only raising half a cheer at the deal:

“We believe that to date, the shutdown has shaved at least 0.6 per cent off of annualised fourth-quarter 2013 GDP growth, or taken $24bn out of the economy.

“The short turnround for politicians to negotiate some sort of lasting deal will probably weigh on consumer confidence, especially among government workers that were furloughed. If people are afraid that the government policy brinkmanship will resurface again, and with it the risk of another shutdown or worse, they’ll remain afraid to open up their cheque books. That points to another Humbug holiday season.”

Read it all (if necessary another link is there).

Is the US dollar’s position as the reserve currency of the world imperiled as a result of the debt limit showdown in Washington?

Read it all.

“We took some bread crumbs and left an entire meal on the table,” said Senator Lindsey Graham, Republican of South Carolina. “This has been a really bad two weeks for the Republican Party”–From the online version of last night’s New York Times

I will take comments on this submitted by email only to KSHarmon[at]mindspring[dot]com.

With just two days to go before an Oct. 17 deadline to raise the nation’s debt limit, 51% of the public views a rise in the nation’s debt limit as “absolutely essential” in order to avoid an Half View Debt Limit Increase as Essential, More than a Third Say it is Noteconomic crisis, while 36% think the country can go past the deadline without major problems.

Public concern over breaching the debt limit deadline has risen only slightly from a week ago, when 47% said a rise in the debt limit was essential and 39% said it was not.

Those who see no dire economic consequences resulting from going past Thursday’s deadline are not only skeptical about the timing ”“ most say there is no need to raise the debt limit at all. Nearly a quarter of all Americans (23%) ”“ including 37% of Republicans and 52% of Tea Party Republicans ”“ believe the debt limit does not need to be raised at all.

Read it all.

Looks like it will go through Jan 15, and there will be a panel create to work on deficit reduction.

One of many tweets:

”@j_strong
“It’s all over. We’ll take Senate deal” … “People are thinking about primaries, they really are”

Top Senate leaders on Monday said they were within striking distance of a deal to sidestep a looming debt crisis and reopen the federal government two weeks after a partisan deadlock forced it to close.

Fourteen days after a partial government shutdown began, senators signaled a bipartisan resolution could come soon.

“I’m very optimistic we will reach an agreement that’s reasonable in nature this week to reopen the government, pay the nation’s bills and begin long-term negotiations to put our country on sound fiscal footing,” Senate Majority Leader Harry Reid (D., Nev.) said on the Senate floor.

Read it all.

…it is still foolish to ignore the leverage that the individual mandate gives opponents of Obamacare. America’s healthcare system for the elderly (Medicare, plus Medicaid for nursing-home care) is already edging the country toward generational war because Washington will sooner or later be forced to choose between drastic limitations on coverage in those programs or drastic increases in taxes on the decreasing portion of working Americans. Now we’re adding a parallel obligation on younger workers to subsidize healthcare for fiftysomethings.

What to do? The path of least political resistance is to tough it out, hoping younger households will be unable to figure out what’s happening, or simply unwilling to throw in their lot with opponents of gay marriage, marijuana reform and the like. Alternatively, we could start paying attention to the building crisis as younger households scramble ever harder for a middle-class living standard.

And none too soon, because the signs of generational conflict are already appearing.

Read it all.

What started as a mad dash to strike a deal to lift the federal debt limit slowed to a crawl over the weekend as stalemated Senate leaders waited nervously to see whether financial markets would plunge Monday morning and drive the other side toward compromise.

Republicans seemed to think they had more to lose. After talks broke down between President Obama and House leaders, GOP senators quickly cobbled together a plan to end the government shutdown ”” now entering its third week ”” and raise the $16.7 trillion debt limit. Senate Minority Leader Mitch McConnell (R-Ky.) then asked Majority Leader Harry M. Reid (D-Nev.) to elevate negotiations to the highest level.

On Sunday ”” with the Treasury Department due to exhaust its borrowing power in just four days ”” Reid was wielding that leverage to maximum advantage. Rather than making concessions that would undermine Obama’s signature health-care initiative, as Republicans first demanded, Democrats are now on the offensive and seeking to undo what has become a cherished prize for the GOP: deep agency spending cuts known as the sequester.

Read it all.

Asthma ”” the most common chronic disease that affects Americans of all ages, about 40 million people ”” can usually be well controlled with drugs. But being able to afford prescription medications in the United States often requires top-notch insurance or plenty of disposable income, and time to hunt for deals and bargains.

The arsenal of medicines in the Hayeses’ kitchen helps explain why. Pulmicort, a steroid inhaler, generally retails for over $175 in the United States, while pharmacists in Britain buy the identical product for about $20 and dispense it free of charge to asthma patients. Albuterol, one of the oldest asthma medicines, typically costs $50 to $100 per inhaler in the United States, but it was less than $15 a decade ago, before it was repatented.

“The one that really blew my mind was the nasal spray,” said Robin Levi, Hannah and Abby’s mother, referring to her $80 co-payment for Rhinocort Aqua, a prescription drug that was selling for more than $250 a month in Oakland pharmacies last year but costs under $7 in Europe, where it is available over the counter.

Read it all.

The Senate’s top two leaders have asserted control over budget negotiations with the White House for a deal to reopen the federal government and avoid a default on the nation’s debt.

Senate Majority Leader Harry Reid, D-Nev., and Senate Minority Leader Mitch McConnell, R-Ky., met Saturday morning with Sen. Lamar Alexander, R-Tenn., and Sen. Charles Schumer, D-N.Y., to begin preliminary discussions.

“I hope that our talking is some solace to the American people and to the world,” Reid said. “This should be seen as something very positive, even though we don’t have anything done yet.”

Read it all.

….the Federal Disability Insurance Program…serves nearly 12 million people — up 20 percent in the last six years — and has a budget of $135 billion. That’s more than the government spent last year on the Department of Homeland Security, the Justice Department, and the Labor Department combined. It’s been called a “secret welfare system” with it’s own “disability industrial complex,” a system ravaged by waste and fraud. A lot of people want to know what’s going on. Especially Sen. Tom Coburn of Oklahoma.

Tom Coburn: Go read the statute. If there’s any job in the economy you can perform, you are not eligible for disability. That’s pretty clear. So, where’d all those disabled people come from?

The Social Security Administration, which runs the disability program says the explosive surge is due to aging baby boomers and the lingering effects of a bad economy. But Sen. Tom Coburn of Oklahoma, the ranking Republican on the Senate Subcommittee for Investigations — who’s also a physician — says it’s more complicated than that. Last year, his staff randomly selected hundreds of disability files and found that 25 percent of them should never have been approved — another 20 percent, he said, were highly questionable.

Read it all or better still watch the video.

A proposal from Sen. Susan Collins is emerging as one potential way to dig lawmakers out of a government shutdown and possibly also avoid a potentially catastrophic debt default.

The moderate Maine Republican, whose vote will be essential to any fiscal deal, is circulating a rough plan to reopen the government, repeal the medical device tax and provide agencies with greater flexibility in implementing the sequester. The initial reception has been positive and may be the beginnings of a bipartisan solution to end the intractable impasse between House Republicans and Senate Democrats.

Collins said Sens. Kelly Ayotte (R-N.H.) and Lisa Murkowski (R-Alaska), who are also being watched as potential GOP votes to end the fiscal standoff, have signed onto the proposal. And Collins said she has spoken to “several Democrats” about her plan, which she hopes “at least provides concepts that could be the basis for us reopening government.”

Read it all.

As the government shutdown enters its second week, some religious groups are starting to feel the pinch, and they’re also finding ways to reach out.

More than 90 Catholic, evangelical and Protestant leaders have signed a statement rebuking “pro-life” lawmakers for the shutdown, saying they are “appalled that elected officials are pursuing an extreme ideological agenda at the expense of the working poor and vulnerable families” who won’t receive government benefits.

Starting Wednesday, evangelical, Catholic and mainline Protestant leaders will hold a daily “Faithful Filibuster” on Capitol Hill with Bible verses on the poor “to remind Congress that its dysfunction hurts struggling families and low-income people.”

Read it all.

A senior Chinese official has warned that the “clock is ticking” to avoid a US default that could hurt China’s interests and the global economy.

China, the US’s largest creditor, is “naturally concerned about developments in the US fiscal cliff”, vice finance minister Zhu Guangyao said.

Washington must agree a deal to raise its borrowing limit by 17 October, or risk being unable to pay its bills.

Read it all.

The work that Shaun O’Connell does is required by law, yet now he’s sidelined by the government shutdown.

O’Connell reviews disability claims for the Social Security Administration in New York, checking that no one’s gaming the system, while ensuring people with legitimate medical problems are compensated properly.

Billions of dollars are at stake with this kind of work, yet O’Connell is considered a nonessential employee for purposes of the partial government shutdown.

“If you stick with the semantics of essential and nonessential, you could easily be offended,” says O’Connell, who has worked for Social Security for 20 years.

Read or listen to it all.

The Episcopal bishop of Washington is inviting any couples who had to cancel their weddings on federal property due to the government shutdown to have their ceremonies in a garden at Washington National Cathedral.

Bishop Mariann Edgar Budde said Thursday that the Bishop’s Garden at the cathedral would be offered free of charge to any couples who wanted to hold wedding ceremonies outdoors.

Read it all.

On the eve of a possible shutdown of the U.S. government, religious leaders denounced the political brinkmanship prevailing in Congress today.

“Shutting down the government will do real damage,” said Rev. David Beckmann, president of Bread for the World, speaking at a press conference today. “Risking our nation’s creditworthiness will do even more damage. Most clearly, the disruption and uncertainty will put the brakes on our economy.”

Unless our nation’s leaders come to an agreement on appropriations for the coming months, the U.S. government will close on Oct. 1, the start of the 2014 fiscal year. If no agreement is reached by Oct. 17 on increasing the debt limit, the country’s creditworthiness will be compromised.

Read it all and follow the link at the bottom to the letter to see the actual signatories.

Biologist Louis Burnett had to move his lab students to a conference room across the parking lot at Fort Johnson. His federal lab, animals and cell cultures are under lock and key.

Burnett’s dilemma is a case example of the ripple effect of the ongoing federal shutdown. As the shutdown enters its third day, the clock keeps ticking insistently for any number of people who don’t work for the federal government but find themselves on the outs because of the political standoff.

Burnett is a research professor at the College of Charleston. But like others in a cadre of college and state researchers, he collaborates on studies, shares office space and makes use of the equipment at the Hollings Marine Lab and the Center for Coastal Environmental Health and Biomolecular Research.

Read it all.

The federal government moved closer to a partial shutdown Sunday as Republican and Democratic lawmakers showed no signs of negotiating through a standoff over the implementation of President Barack Obama’s health law.

The standoff left little prospect that Congress could reach agreement on terms for funding the government by midnight Monday, when the current fiscal year expires. A shutdown would leave essential services operating but prompt federal agencies to suspend many functions and furlough hundreds of thousands of workers.

Early Sunday morning, after a late night of votes, the House passed a bill delaying the health law by one year and attached it to a plan to fund the government through Dec. 15. It also includes a provision repealing a tax on medical devices that is intended to help finance the health law. That legislation now goes back to the Senate.

Read it all.

The federal government on Sunday morning barreled toward its first shutdown in 17 years after the Republican-run House, choosing a hard line, voted to attach a one-year delay of President Obama’s health care law and a repeal of a tax to pay for it to legislation to keep the government running.

The votes, just past midnight, followed an often-angry debate, with members shouting one another down on the House floor. Democrats insisted that Republicans refused to accept their losses in 2012, were putting contempt for the president over the good of the country and would bear responsibility for a shutdown. Republicans said they had the public on their side and were acting to protect Americans from a harmful and unpopular law that had already proved a failure.

Read it all.

Between 2000 and 2012, the number of people in Penobscot County [Maine] receiving Social Security disability benefits skyrocketed, rising from 4,475 to 7,955 ”” or nearly one in 12 of the county’s adults between the ages of 18 and 64, according to Social Security statistics.

The fast expansion of disability here is part of a national trend that has seen the number of former workers receiving benefits soar from just over 5 million to 8.8 million between 2000 and 2012. An additional 2.1 million dependent children and spouses also receive benefits.

The crush of new recipients is putting unsustainable financial pressure on the program. Federal officials project that the program will exhaust its trust fund by 2016 ”” 20 years before the trust fund that supports Social Security’s old-age benefits is projected to run dry.

Read it all.

There’s plenty of fodder for deficit hawks in a new report from the nonpartisan Congressional Budget Office. In short, the future looks grim….

First, the good news: The CBO projects the deficit will shrink to $378 billion in 2015, or 2.1 percent of the size of the overall U.S. economy. Compared with just a few years ago when the budget gap ballooned as a result of the recession, this marks a nearly unprecedented improvement in the deficit picture. It’s a rapid decline in budget shortfalls not seen since the end of World War II. The national debt will bottom out in 2018, at 68 percent of GDP.

The bad news: From there, the picture gets decidedly less rosy. Budget deficits gradually rise, “mainly because of increasing interest costs and growing spending for Social Security and the government’s major health care programs (Medicare, Medicaid, the Children’s Health Insurance Program, and subsidies to be provided through the health insurance exchanges),” says the report. By 2038, the national debt will reach 100 percent of GDP….

Read it all and follow the link to the actual report.