Thursday, May 07, 2009

$17 Billion Not As Much As It Used To Be


Millions... billions... trillions. All of those "illions" are confusing because we normally don't deal with such large numbers. You hear a number like 500 million and that seems like a lot. And you hear 17 billion and that seems pretty big, too. And then someone talks about 1.94 trillion and that could be big, as well.

We don't process the fact that 17 billion is 34 times larger than 500 million. And we glaze over at the idea that 1.94 trillion is 114 times as much as 17 billion and 3,880 times as much as 500 million. That "1.94" kind of masks the issue.

So when President Obama talks about savings of $17 billion... which isn't chump change... we need to put that into perspective.

Image from

The scary part is that the $1.94 trillion is halfway through the 2009 fiscal year. Hopefully, the rate of spending will decrease, but hoping that will change may not yield the change we hoped for.

There are more charts and data in the article below, but here is one to keep in mind as you plow through all of the rest. It's good perspective when you hear about how much the President is doing to control spending.

From CNN:
Obama will slice budget by $17 billion

White House will propose cutting or reducing funding for more than 100 federal programs in latest salvo in 2010 budget fight.

By Jeanne Sahadi, senior writer


NEW YORK ( -- The White House on Thursday will detail a proposal to save $17 billion next year by eliminating or reducing 121 federal programs, according to a senior administration official.

Roughly $11.5 billion of the savings would come from the discretionary side of the fiscal 2010 budget -- that is, for programs whose funding is not automatic. And roughly half of the savings would come from non-defense programs, the official said Wednesday.

"In many cases we have multiple programs that do the same things," the official said in a briefing call with reporters. "Duplication can be the enemy of efficiency."

In other cases, the results of the targeted programs didn't justify the expense, the official said.

Among the programs on the president's chopping block:

  • A long-range navigation system now made obsolete by the GPS. Cost: $35 million.
  • An early education program called Even Start, the performance of which had been poor. Cost: $66 million.
  • A Department of Education attaché position in Paris. Cost: $632,000.
  • The Christopher Columbus Fellowship Foundation, which only pays out 20% of its funds in awards every year. Cost: $1 million.
  • A program that pays states to clean out abandoned mines even after the mines have been cleaned out. Cost: $142 million.

The proposed program eliminations and reductions will be part of the release Thursday of the president's 2010 budget request.

The cuts are likely to be the first of many to come, the official said. "This is an important step, but it's just the first step. We will continue to search for additional savings and efficiencies."

A few weeks ago, the president announced that he had asked his cabinet members to cut $100 million from their agencies' expenses, a number budget analysts characterized as symbolic at best.

Whether or not lawmakers adopt the president's recommended cuts is unclear. They are likely, however, to come up with their own cost-saving proposals. House Speaker Nancy Pelosi, D-Calif., for instance, has given her House committee chairmen until June 2 to provide a list of ways they can reduce expenses.

Deficit on the horizon

Fiscal discipline is among the pillars of the new economic foundation Obama has said he wants to build.

But it was unclear Wednesday whether the $17 billion in savings in 2010 would be used to fund other federal programs or to reduce the country's growing deficit.

The House and Senate have agreed to amore than $3.5 trillion budget outline for fiscal 2010, which begins Oct. 1. That's roughly the size of the president's budget request. The proposals Congress and the president are making, however, would push long-term deficits significantly higher.

While few suggest the government retract its spending largesse while the economy is still struggling, deficit hawks caution that lawmakers must do more than pay lip service to the long-term debts situation.

Thanks to the financial crisis, tax receipts are down sharply this year while spending demands have grown to record levels. Forecasts of a slow recovery and estimates of a large price tag for Obama's proposed health care, energy and education initiatives have worsened somewhat the already tough fiscal outlook.

The Government Accountability Office estimates that all federal revenue will be eaten up by government costs for Medicare, Medicaid, Social Security and public debt interest by 2025. Last year, the estimate was 2030, said Charles Konigsberg, an expert on the federal budget at deficit watchdog group the Concord Coalition.

The official reiterated the administration's position that the biggest deficit-cutting efforts will come from curbing the growth in health care costs.

The White House budget office's cost-saving proposals are part of a two-stage release on the final details of Obama's budget request. Next week, the OMB will release more analysis on the country's fiscal policies, along with "minor updates and changes" to the administration's summary tables of budget forecasts, first put out in February.

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There is always an easy solution to every human problem—neat, plausible, and wrong.
Henry Louis Mencken (1880–1956)
“The Divine Afflatus,” A Mencken Chrestomathy, chapter 25, p. 443 (1949)
... and one could add "not all human problems really are."
It was beautiful and simple, as truly great swindles are.
- O. Henry
... The Government is on course for an embarrassing showdown with the European Union, business groups and environmental charities after refusing to guarantee that billions of pounds of revenue it stands to earn from carbon-permit trading will be spent on combating climate change.
The Independent (UK)

Tracking Interest Rates

Tracking Interest Rates


SEARCH BLOG: FEDERAL RESERVE for full versions... or use the Blog Archive pulldown menu.

February 3, 2006
Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!
August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007
The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.

July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.
September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said.

"Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."

December 11, 2007 Somehow the Fed misses the obvious.
[Image from:]
December 13, 2007 [from The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...

What should the Federal Reserve do now? Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?

About Me

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Michigan, United States
Air Force (SAC) captain 1968-72. Retired after 35 years of business and logistical planning, including running a small business. Two sons with advanced degrees; one with a business and pre-law degree. Beautiful wife who has put up with me for 4 decades. Education: B.A. (Sociology major; minors in philosopy, English literature, and German) M.S. Operations Management (like a mixture of an MBA with logistical planning)