Monday, November 30, 2009

The U.S. Needs an Emergency Jobs Program

In his November 30, 2009 New York Times editorial "The Jobs Imperative," Nobel laureate Paul Krugman argues for an emergency jobs program to reduce the relatively large level of unemployment:
If you’re looking for a job right now, your prospects are terrible. There are six times as many Americans seeking work as there are job openings, and the average duration of unemployment — the time the average job-seeker has spent looking for work — is more than six months, the highest level since the 1930s.

You might think, then, that doing something about the employment situation would be a top policy priority. But now that total financial collapse has been averted, all the urgency seems to have vanished from policy discussion, replaced by a strange passivity. There’s a pervasive sense in Washington that nothing more can or should be done, that we should just wait for the economic recovery to trickle down to workers.

This is wrong and unacceptable.

Yes, the recession is probably over in a technical sense, but that doesn’t mean that full employment is just around the corner. Historically, financial crises have typically been followed not just by severe recessions but by anemic recoveries; it’s usually years before unemployment declines to anything like normal levels. And all indications are that the aftermath of the latest financial crisis is following the usual script. The Federal Reserve, for example, expects unemployment, currently 10.2 percent, to stay above 8 percent — a number that would have been considered disastrous not long ago — until sometime in 2012.

And the damage from sustained high unemployment will last much longer. The long-term unemployed can lose their skills, and even when the economy recovers they tend to have difficulty finding a job, because they’re regarded as poor risks by potential employers. Meanwhile, students who graduate into a poor labor market start their careers at a huge disadvantage — and pay a price in lower earnings for their whole working lives. Failure to act on unemployment isn’t just cruel, it’s short-sighted.

So it’s time for an emergency jobs program.

How is a jobs program different from a second stimulus? It’s a matter of priorities. The 2009 Obama stimulus bill was focused on restoring economic growth. It was, in effect, based on the belief that if you build G.D.P., the jobs will come. That strategy might have worked if the stimulus had been big enough — but it wasn’t. And as a matter of political reality, it’s hard to see how the administration could pass a second stimulus big enough to make up for the original shortfall.

So our best hope now is for a somewhat cheaper program that generates more jobs for the buck. Such a program should shy away from measures, like general tax cuts, that at best lead only indirectly to job creation, with many possible disconnects along the way. Instead, it should consist of measures that more or less directly save or add jobs.

One such measure would be another round of aid to beleaguered state and local governments, which have seen their tax receipts plunge and which, unlike the federal government, can’t borrow to cover a temporary shortfall. More aid would help avoid both a drastic worsening of public services (especially education) and the elimination of hundreds of thousands of jobs.

Meanwhile, the federal government could provide jobs by ... providing jobs. It’s time for at least a small-scale version of the New Deal’s Works Progress Administration, one that would offer relatively low-paying (but much better than nothing) public-service employment. There would be accusations that the government was creating make-work jobs, but the W.P.A. left many solid achievements in its wake. And the key point is that direct public employment can create a lot of jobs at relatively low cost. In a proposal to be released today, the Economic Policy Institute, a progressive think tank, argues that spending $40 billion a year for three years on public-service employment would create a million jobs, which sounds about right.

Finally, we can offer businesses direct incentives for employment. It’s probably too late for a job-conserving program, like the highly successful subsidy Germany offered to employers who maintained their work forces. But employers could be encouraged to add workers as the economy expands. The Economic Policy Institute proposes a tax credit for employers who increase their payrolls, which is certainly worth trying.

All of this would cost money, probably several hundred billion dollars, and raise the budget deficit in the short run. But this has to be weighed against the high cost of inaction in the face of a social and economic emergency.

Later this week, President Obama will hold a “jobs summit.” Most of the people I talk to are cynical about the event, and expect the administration to offer no more than symbolic gestures. But it doesn’t have to be that way. Yes, we can create more jobs — and yes, we should.

The Christmas Price Index measures inflation using the items in the song "The Twelve Days of Christmas."

In the November 20, 2009 article "'12 Days of Christmas' items' cost would top $87K," Associated Press writer Dan Nephin reports the 2009 update of the Christmas Price Index which measures inflation using the items mentioned in the famous song as the basket of goods.
PITTSBURGH – Making one's true love happy will cost a whopping $87,403 this year, a minuscule increase from last year, according to the latest cost analysis of the items in the carol "The Twelve Days of Christmas."

That's the grand total for the single partridge in a pear tree to the 12 drummers drumming, purchased repeatedly as the song suggests, according to the annual "Christmas Price Index" compiled by PNC Wealth Management. The price is up a mere $794, or less than 1 percent, from $86,609 last year.

The cost of buying each item just once is increasing this year to $21,466, up 1.8 percent from last year's $21,081.

Jim Dunigan, managing executive of investment for PNC Wealth Management, which has been calculating the cost of Christmas since 1984, attributed the modest increase to lower energy costs and fewer wage increases.

It's the smallest increase since 2002, when the cost actually decreased, according to PNC.

The main driver behind the higher cost is that the price of gold has increased 43 percent, bringing the five gold rings up $150 to $500.

Although wage increases were modest, nine ladies dancing, at $5,473 per performance, is the costliest item, surpassing that of any of the material goods.

The most expensive goods are the seven swans a-swimming at $5,250, but their cost decreased 6.3 percent from last year's $5,600. Dunigan said their cost tends to be the most volatile because of supply and demand; they were up 33 percent last year over 2007.

Costs for the 10 lords a-leaping ($4,414 per performance), 11 pipers piping ($2,285 per performance) and 12 drummers drumming ($2,475 per performance) remained the same as last year. Dunigan says that reflects the labor market in which the unemployment rate rose to near 10 percent after sitting below 5 percent for much of the decade.

And for those who would shop online, a word of caution.

PNC says you'll pay $31,435, which is down from last year's online price, but still about $10,000 more than in the traditional index.

"In general, Internet prices are higher than their non-Internet counterparts because of shipping costs for birds and the convenience factor of shopping online," Dunigan said.

PNC Financial Services Group Inc. checks jewelry stores, dance companies, pet stores and other sources to compile the list. While it is done humorously, PNC said its index mirrors real economic trends.

Besides putting out the list for fun, PNC makes it available to teachers across the country to teach economic trends.

While it's unlikely anyone would buy the items, Dunigan said one item is likely to please.

"We don't necessarily suggest picking just one, but it's hard to believe that gold rings wouldn't lead the list on a year-to-year basis," Dunigan said.
On The Net:
PNC Christmas Price Index:

Thursday, November 26, 2009

The Cost Of War

In the November 26, 2009 Forbes editorial "The Cost Of War," Bruce Bartlett makes the case that wars financed by deficits last longer than those paid for by taxation:
In recent years, Republicans have been characterized by two principal positions: They like starting wars and don't like paying for them. George W. Bush initiated two major wars in Iraq and Afghanistan, but adamantly refused to pay for either of them by cutting non-military spending or raising taxes. Indeed, at his behest, Congress actually cut taxes and established a massive new entitlement program, Medicare Part D.

Bush's actions were unprecedented. During every previous major war in American history, presidents demanded sacrifices from rich and poor alike. As Robert Hormats explains in his 2007 book, The Price of Liberty: Paying for America's Wars, "During most of America's wars, parochial desires--such as tax breaks for favored groups or generous spending for influential constituencies--have been sacrificed to the greater good. The president and both parties in Congress have come together … to cut nonessential spending and increase taxes."

During World War II, federal revenues roughly tripled as a share of the gross domestic product (GDP) and the number of people paying income taxes expanded tenfold, from 3% of the population in 1939 to 30% by 1943. In 1940, a family of four needed close to $80,000 of income in today's dollars before it paid any federal income taxes at all. By the war's end, it saw its effective tax rate rise from 1.5% to 15.1%. (Today such a family only pays a federal income tax rate of about 6%.) But taxes weren't the only way the war was paid for. Spending on nondefense programs was cut almost in half, from 8.1% of GDP in 1940 to 4.4% in 1945.

Even during wars closer in magnitude to those in which we are presently engaged, significant sacrifices were made. In 1950 and 1951 Congress increased taxes by close to 4% of GDP to pay for the Korean War, even though the high World War II tax rates were still largely in effect. In 1968, a 10% surtax was imposed to pay for the Vietnam War, which raised revenue by about 1% of GDP. And there was conscription during both wars, which can be viewed as a kind of tax that was largely paid by the poor and middle class--young men from wealthy families largely escaped its effects through college deferments.

However, Bush and his party, which controlled Congress from 2001 to 2006, never asked for sacrifices from anyone except those in our nation's military and their families. I think that's because the Republicans understood, implicitly, that the American people's support for the wars in Iraq and Afghanistan has always been paper thin. Asking them to sacrifice through higher taxes, domestic spending cuts or reinstatement of the draft would surely have led to massive protests akin to those during the Vietnam era or to political defeat in 2004. George W. Bush knew well that when his father raised taxes in 1990 in part to pay for the first Gulf War, it played a major role in his 1992 electoral defeat.

Consequently, Republicans resolved to fight our wars on the cheap and with deceptive cost estimates. On the eve of war in December 2002, Office of Management and Budget (OMB) director Mitch Daniels claimed that the war in Iraq could be fought at a total cost of $50 billion to $60 billion. Indeed, Bush even fired his top economic adviser, Lawrence Lindsey, for saying publicly that the war might cost between $100 billion and $200 billion.

Of course, both Daniels and Lindsey grossly underestimated the actual cost. According to a recent report from the Congressional Research Service (CRS), the wars in Iraq and Afghanistan have cost close to $1 trillion thus far. That is exactly what economists not on the White House payroll expected. (See this December 2002 report from the American Academy of Arts and Sciences.)

In his 2008 book, What a President Should Know, Lindsey said that lowballing the cost of the war was a "tactical blunder" because it allowed Bush's enemies to claim that he lied us into war. But at the same time, Lindsey acknowledges that the administration never rose to "Churchillian levels in talking about the sacrifices needed." He also says that asking for sacrifice in the form of spending cuts and tax increases would have served the important purpose of involving the American people in the war effort. As it is, war is largely out of sight and out of mind.

According to the CRS, the marginal cost of continuing the Iraq and Afghanistan wars is about $11 billion per month, with no end in sight. Although there has been some decline in spending for the Iraq war, it has been more than offset by the rising cost of the war in Afghanistan. According to OMB director Peter Orszag, it costs about $1 million per year per soldier in the field, so adding 30,000 additional troops in Afghanistan, as President Obama is expected to do next week, will cost another $30 billion per year.

The White House has given no indication of how it plans to pay for expanding the war in Afghanistan. More than likely, it will follow the Bush precedent and just put it all on the national credit card. But at least some members of Congress believe that the time has come to start paying for war. On Nov. 19, Rep. David Obey, D-Wis., introduced H.R. 4130, the "Share the Sacrifice Act of 2010." It would establish a 1% surtax on everyone's federal income tax liability plus an additional percentage on those with a liability over $22,600 (for couples filing jointly), such that revenue from the surtax would pay for the additional cost of fighting the war in Afghanistan.

It's doubtful that this legislation will be enacted. But that's not Obey's purpose. He will probably offer it as an amendment at some point just to have a vote. Republicans in particular will be forced to choose between continuing to fight a war that they started and still strongly support, or raising taxes, which every Republican in Congress would rather drink arsenic than do. If nothing else, it will be interesting to see those who rant daily about Obama's deficits explain why they oppose fiscal responsibility when it comes to supporting our troops.

Obey makes no secret of his motives. He knows that deficits need to be reduced at some point and this will put pressure on spending programs he supports. "If we don't address the cost of this war, we will continue shoving billions of dollars in taxes off on future generations and will devour money that could be used to rebuild our economy," Obey explained in a press statement.

He is not alone in his fear that war presents a threat to the Democratic agenda. As Boston University historian Robert Dallek told Obama at a White House meeting earlier this year, "war kills off great reform movements." He cited the impact of World War I in ending the Progressive Era, World War II in killing the New Deal, the Korean War in terminating Harry Truman's Fair Deal program and the Vietnam War in crushing Lyndon Johnson's Great Society.

At this point, Republicans are probably nodding in agreement. If it takes wars to end ill-conceived social programs, then that's another argument in favor of continuing the Iraq and Afghanistan campaigns. But that's a very short-sighted view because, as essayist Randolph Bourne once put it, "war is essentially the health of the State." Historians Robert Higgs and Bruce Porter, among others, have documented the pernicious effect of war on the size and scope of government. It creates a ratchet effect in which taxes and spending grow and civil liberties are restricted permanently, because when war ends, we never go back to the status quo ante.

If it takes the threat of a tax increase to get people to think seriously about whether it's worth continuing to fight wars far from home--wars that have only the most tenuous connection to the national interest--then it's a good idea. History shows that wars financed heavily by higher taxes, such as the Korean War and the first Gulf War, end quickly, while those financed largely by deficits, such as the Vietnam War and current Middle East conflicts, tend to drag on indefinitely.

If Americans aren't willing to follow John F. Kennedy and "pay any price, bear any burden, meet any hardship" to fight a war, then we shouldn't be fighting it.

Bruce Bartlett is a former Treasury Department economist and the author of Reaganomics: Supply-Side Economics in Action and Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy. Bruce Bartlett's new book is: The New American Economy: The Failure of Reaganomics and a New Way Forward. He writes a weekly column for Forbes.

Tuesday, November 24, 2009

GOP has little credibility on budget deficit

In the November 24, 2009 Nashua Telegraph editorial "GOP has little credibility on budget deficit," Froma Harrop points out the hypocrisy in Republican cries for greater fiscal responsibility since they created much of the current problems when they controlled the White House and Congress.
Nearly every Republican these days calls for tax cuts and lower deficits, and in the same sentence. Point out that these goals clash – that taxes pay for government and not paying for government causes deficits – and the Republican counters: “We must shrink government, instead.”

Sure. And you’re just the boys to do it.

There hasn’t been a balanced budget since the last Democratic administration. During the George W. Bush years of mindless tax cutting, the national debt doubled, and GOP claims to fiscal rectitude became a bizarre joke.

The last fig leaf fell off this summer when Republicans demagogued efforts to save more than $100 billion by ending subsidies for the private Medicare Advantage health plans.

Here was the lowest-hanging fruit in the fastest-growing government program. It was something most Medicare beneficiaries would barely notice was gone, yet Republicans hollered that Democrats were pulling the plug on grandma.

That dashed any residual Republican pretenses that Bush had led them astray on spending, and a lesson was learned. Clearly, they’re not changing a thing.

Bruce Bartlett, an economist in Ronald Reagan’s Treasury Department, has criticizing such inconsistencies for several years. Republicans could have embraced his 2006 book, “Imposter: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy,” as evidence that they truly regretted the fiscal wreckage of the Bush years. Instead, they turned Bartlett into a Republican pariah.

Bartlett has just come out with another book, “The New American Economy: The Failure of Reaganomics and a New Way Forward.” It has received an equally chilly reception from the right-wing media and associated think tanks. That is, they’re making no mention of it.

I asked Bartlett whether he feels beaten up by former fellow Republicans. (He’s now an independent.) No, he said, “One of the funny things since ‘Imposter’ came out is the refusal of people on the right to even debate me.” One can’t entirely blame them for trying to smother his book sales.

Democrats would be hard-pressed to find better talking points anywhere else – though Bartlett does find fault with them, too.

Bartlett’s main point is there’s almost no place to cut domestic discretionary spending. Subtract money going for defense, entitlements (such as Medicare) and payments on the debt, and there’s precious little left.

Domestic discretionary spending in fiscal 2008 last year totaled $485 billion, while the deficit was $459 billion. You would have had to kill nearly every domestic program to balance the budget. That would have meant nothing for education, agriculture, housing, border patrols, the FBI, highways.

Taxes must go up, and on that subject, Bartlett takes issue with the current president.

“You have to look at some other broad-based revenue raising,” he said, “but then you run up against the problem that Obama has made the promise not to raise taxes on anyone earning less than $200,000.”

He deems that approach “irresponsible.” The rich can’t bear all the costs of government.

The answer is a value-added tax, which is basically a national sales tax. The VAT would tax consum- ption, rather than income, and at low cost to economic growth. Europeans use a VAT to pay for their cushy benefits.

Bartlett thinks Congress should commit itself to a number, say $1 trillion, for deficit savings over 10 years. Then it should ask a commission to find a third of that money from higher revenues, a third from entitlement cuts and a third from discretionary spending.

Welcome to the world of grownups, where tax cuts don’t magically pay for themselves – and where middle-class people must pay more for middle-class benefits. When it comes to addressing deficits, Democrats may be lax adolescents, but Republicans are total babies.

Froma Harrop serves on the editorial board of The Providence Journal and is a syndicated columnist. E-mail her at

Consumer confidence improves slightly in November

In the November 24, 2009 article "Consumer confidence improves slightly in November," Associated Press retail writer Anne D'Innocenzio explains that economists look to consumers to reviving the lagging U.S. economy because their purchases account for about 70% of overall demand for newly produced goods and services:
NEW YORK – Americans' confidence in the economy improved slightly in November from October, but shoppers remain gloomy heading into the traditional start of the holiday shopping season amid a weak job market, according to a monthly survey.

The Conference Board, based in New York, said Tuesday that its Consumer Confidence Index edged up to 49.5, up from a revised reading of 48.7 in October. Economists surveyed by Thomson Reuters expected a reading of 47.7.

The index, which hit a historic low of 25.3 in February, had enjoyed a three-month climb from March through May, fueled by signs that the economy might be stabilizing. The road has been bumpier since June as rising unemployment has taken a toll on consumers. A reading above 90 means the economy is on solid footing. Above 100 signals strong growth.

One component of the Conference Board's confidence gauge that measures consumers' assessment of the current economy fell slightly to 21.0, compared with 21.1 in October. The other that measures shoppers' outlook over the next six months increased slightly to 68.5 from 67.0 in October.

"Income expectations remain very pessimistic and consumers are entering the holiday season in a very frugal mood," said Lynn Franco, director of The Conference Board Consumer Research Center in a statement.

Economists watch consumer sentiment because spending on goods and services for consumers accounts for about 70 percent of U.S. economic activity by federal measures.

While the reading doesn't always predict short-term spending, it does serve as a barometer of spending levels over time, especially for big-ticket items.

Retail sales showed some signs of life in September and October, with major merchants collectively posting two consecutive monthly gains in sales in more than a year, according to the International Council of Shopping Centers-Goldman Sachs Index.

That followed more than a year of declines as shoppers shut their wallets tight. But business still remains weak and shoppers are still focused on necessities like socks, coats and underwear.

Experts say depressed spending is likely to persist for several years amid stubbornly high unemployment. The unemployment rate is now at 10.2 percent, the highest in 26 years, and 15.7 million Americans out of work. Meanwhile, the housing market has showed signs of improvement, but overall the sector is still tepid.

A housing report announced Tuesday showed home prices improved for the fourth straight month in September, though only in 11 out of 20 major metropolitan areas.

The Standard & Poor's/Case-Shiller home price index, which tracks prices in 20 major metropolitan markets, rose 0.3 percent in September.

The Conference Board's confidence survey, which is based on a representative sample of 5,000 U.S households, showed that shoppers' assessement of the job market remains weak. The cutoff for the preliminary results wsa Nov. 17. Those claiming jobs are "hard to get" increased to 49.8 percent from 49.4 percent, while those claiming jobs are "plentiful" decreased to 3.2 percent from 3.5 percent.

Consumers' short-term outlook improved slightly in November, but that's because those expecting conditions to worsen decreased to 15.1 percent from 18.2 percent, Franco said. The percentage of consumers expecting an improvement in business conditions over the next six months decreased slightly to 20.0 percent from 20.8 percent.

Those anticipating more jobs in the months ahead declined to 15.2 percent from 16.8 percent. But those expecting fewer jobs declined to 23.1 perent from 26.1 percent. The proportion of consumers expecting an increase in their incomes decreased to 10.0 percent from 10.7 percent.

Monday, November 23, 2009

Florida Unemployment Now Up to 11.2%, Highest Since 1975

According to the November 21, 2009 article "Florida Unemployment Now Up to 11.2%, Highest Since 1975" by the News Service of Florida:

News Service of Florida - Nov 21st, 2009
Florida’s unemployment rate for October inched up to 11.2 percent,, a level not seen since it hit 11.9 percent in May 1975, the Agency for Workforce Development (sic) reported Friday.

The figure, up 0.1 percentage point from a revised September figure, translates into 1 million jobless out of a labor force of 9.2 million. October’s rate was 4.3 percent higher than October 2008.

The figure, however, does not include workers who have stopped looking. Adding the long-term unemployed and the under-employed, economists say the jobless rate tops 17 percent nationally and is likely higher in Florida, which in October exceeded the national unemployment rate of 10.2 percent.

Economists say recovery from the “Great Recession” may be slower than previous rebounds and double digit jobless rates may be a reality until 2012. Florida may not return to pre-recession employment levels until 2014, said Sean Snaith, a University of Central Florida economist.

In the meantime, Florida will continue to suffer from a bloated pool of underemployed workers and discouraged job seekers who have stopped searching after meeting with little success.

“Once production increases, businesses will be able to meet the needs with the people they have,” Snaith said. “There is no need to go out and hire when you have people already working for you part time.”

Snaith’s view is echoed by others and based on the severity of the recession and the fact that it appears to have especially targeted small businesses owners, who may be too shell-shocked to rehire quickly.

“Smaller businesses are struggling to obtain credit; their principal lenders, small banks, face intense pressure, while another key source, credit card lenders, have aggressively tightened underwriting standards,” said Mark Zandi, chief economist with Moody’s in an October market analysis. “As a result, a growing share of job losses are occurring at small businesses.”

Florida’s total nonagricultural employment in October 2009 was 7.3 million; a job loss of 339,600, or -4.4 percent compared to October 2008. Nationally, non-farm employment fell 4.0 percent during the same period.

The October 2009 figures continue a trend of annual declines that began in August 2007. Florida’s rate of job decline has moderated over the last few months, moving from -5.4 percent in March 2009 to -4.4 percent in October 2009, AWI reported.

The state’s lingering unemployment rate remains the grist in a continuing argument over whether the state should accept an additional $444 million in federal unemployment benefits. As unemployment compensation payouts have surged, the fund from which benefits are paid has dropped below a legal floor that triggers an automatic increase in unemployment taxes.

Democrats this week used the opportunity to again call on Republican leaders in the House to take the additional aid – there was support for accepting the money in the Senate and in Gov. Charlie Crist’s office.

“These dollars will be spent helping families buy food, pay rent and will generally boost economic activity and retail business throughout the state,” said House Democratic Leader Franklin Sands, D-Weston.

House Republicans have balked at the stimulus money, saying it would expand unemployment benefits to workers not now covered and place more of a burden on state resources when the federal money runs out – which they say would be very quickly, maybe a couple months. Those newly covered people, however, would still qualify for the benefits, meaning the state would have to find a new source for the money.

A state economist said this week that while employers would have faced a smaller employment tax increase had the state accepted the $444 million, it wouldn’t have eliminated the deficit in the unemployment fund, meaning employers would still face an automatic tax increase.

Saturday, November 21, 2009

Membership of the Board of Governors of the Federal Reserve System, 1914-Present

Appointive Members
Members | Chairmen | Vice Chairmen
Ex-Officio Members
Secretaries of the Treasury | Comptrollers of the Currency
Historical Notes
Appointive Members

Name and District Date of initial oath of office Other dates and information relating to membership
Charles S. Hamlin
Boston Aug. 10, 1914 Reappointed in 1916 and 1926. Served until Feb. 3, 1936.
Paul M. Warburg
New York Aug. 10, 1914 Term expired Aug. 9, 1918.
Frederic A. Delano
Chicago Aug. 10, 1914 Resigned July 21, 1918.
W.P.G. Harding
Atlanta Aug. 10, 1914 Term expired Aug. 9, 1922.
Adolph C. Miller
San Francisco Aug. 10, 1914 Reappointed in 1924. Reappointed in 1934 from the Richmond District. Served until Feb. 3, 1936.
Albert Strauss
New York Oct. 26, 1918 Resigned Mar. 15, 1920.
Henry A. Moehlenpah
Chicago Nov. 10, 1919 Term expired Aug. 9, 1920.
Edmund Platt
New York June 8, 1920 Reappointed in 1928. Resigned Sept. 14, 1930.
David C. Wills
Cleveland Sept. 29, 1920 Term expired Mar. 4, 1921.
John R. Mitchell
Minneapolis May 12, 1921 Resigned May 12, 1923.
Milo D. Campbell
Chicago Mar. 14, 1923 Died Mar. 22, 1923.
Daniel R. Crissinger
Cleveland May 1, 1923 Resigned Sept. 15, 1927.
George R. James
St. Louis May 14, 1923 Reappointed in 1931. Served until Feb. 3, 1936.
Edward H. Cunningham
Chicago May 14, 1923 Died Nov. 28, 1930.
Roy A. Young
Minneapolis Oct. 4, 1927 Resigned Aug. 31, 1930.
Eugene Meyer
New York Sept. 16, 1930 Resigned May 10, 1933.
Wayland W. Magee
Kansas City May 18, 1931 Term expired Jan. 24, 1933.
Eugene R. Black
Atlanta May 19, 1933 Resigned Aug. 15, 1934.
M.S. Szymczak
Chicago June 14, 1933 Reappointed in 1936 and 1948. Resigned May 31, 1961.
J.J. Thomas
Kansas City June 14, 1933 Served until Feb. 10, 1936.
Marriner S. Eccles
San Francisco Nov. 15, 1934 Reappointed in 1936, 1940, and 1944. Resigned July 14, 1951.
Joseph A. Broderick
New York Feb. 3, 1936 Resigned Sept. 30, 1937.
John K. McKee
Cleveland Feb. 3, 1936 Served until Apr. 4, 1946.
Ronald Ransom
Atlanta Feb. 3, 1936 Reappointed in 1942. Died Dec. 2, 1947.
Ralph W. Morrison
Dallas Feb. 10, 1936 Resigned July 9, 1936.
Chester C. Davis
Richmond June 25, 1936 Reappointed in 1940. Resigned Apr. 15, 1941.
Ernest G. Draper
New York Mar. 30, 1938 Served until Sept. 1, 1950.
Rudolph M. Evans
Richmond Mar. 14, 1942 Served until Aug. 13, 1954.
James K. Vardaman, Jr.
St. Louis Apr. 4, 1946 Resigned Nov. 30, 1958.
Lawrence Clayton
Boston Feb. 14, 1947 Died Dec. 4, 1949.
Thomas B. McCabe
Philadelphia Apr. 15, 1948 Resigned Mar. 31, 1951.
Edward L. Norton
Atlanta Sept. 1, 1950 Resigned Jan. 31, 1952.
Oliver S. Powell
Minneapolis Sept. 1, 1950 Resigned June 30, 1952.
Wm. McC. Martin, Jr.
New York Apr. 2, 1951 Reappointed in 1956. Term expired Jan. 31, 1970.
A.L. Mills, Jr.
San Francisco Feb. 18, 1952 Reappointed in 1958. Resigned Feb. 28, 1965.
J.L. Robertson
Kansas City Feb. 18, 1952 Reappointed in 1964. Resigned Apr. 30, 1973.
C. Canby Balderston
Philadelphia Aug. 12, 1954 Served through Feb. 28, 1966.
Paul E. Miller
Minneapolis Aug. 13, 1954 Died Oct. 21, 1954.
Chas. N. Shepardson
Dallas Mar. 17, 1955 Retired Apr. 30, 1967.
G.H. King, Jr.
Atlanta Mar. 25, 1959 Reappointed in 1960. Resigned Sept. 18, 1963.
George W. Mitchell
Chicago Aug. 31, 1961 Reappointed in 1962. Served until Feb. 13, 1976.
J. Dewey Daane
Richmond Nov. 29, 1963 Served until Mar. 8, 1974.
Sherman J. Maisel
San Francisco Apr. 30, 1965 Served through May 31, 1972.
Andrew F. Brimmer
Philadelphia Mar. 9, 1966 Resigned Aug. 31, 1974.
William W. Sherrill
Dallas May 1, 1967 Reappointed in 1968. Resigned Nov. 15, 1971.
Arthur F. Burns
New York Jan. 31, 1970 Term began Feb. 1, 1970. Resigned Mar. 31, 1978.
John E. Sheehan
St. Louis Jan. 4, 1972 Resigned June 1, 1975.
Jeffrey M. Bucher
San Francisco June 5, 1972 Resigned Jan. 2, 1976.
Robert C. Holland
Kansas City June 11, 1973 Resigned May 15, 1976.
Henry C. Wallich
Boston .Mar. 8, 1974 Resigned Dec. 15, 1986.
Philip E. Coldwell
Dallas Oct. 29, 1974 Served through Feb. 29, 1980.
Philip C. Jackson, Jr.
Atlanta July 14, 1975 Resigned Nov. 17, 1978.
J. Charles Partee
Richmond Jan. 5, 1976 Served until Feb. 7, 1986.
Stephen S. Gardner
Philadelphia Feb. 13, 1976 Died Nov. 19, 1978.
David M. Lilly
Minneapolis June 1, 1976 Resigned Feb. 24, 1978.
G. William Miller
San Francisco Mar. 8, 1978 Resigned Aug. 6, 1979.
Nancy H. Teeters
Chicago Sept. 18, 1978 Served through June 27, 1984.
Emmett J. Rice
New York June 20, 1979 Resigned Dec. 31, 1986.
Frederick H. Schultz
Atlanta July 27, 1979 Served through Feb. 11, 1982.
Paul A. Volcker
Philadelphia Aug. 6, 1979 Resigned August 11, 1987.
Lyle E. Gramley
Kansas City May 28, 1980 Resigned Sept. 1, 1985.
Preston Martin
San Francisco Mar. 31, 1982 Resigned April 30, 1986.
Martha R. Seger
Chicago July 2, 1984 Resigned March 11, 1991.
Wayne D. Angell
Kansas City Feb. 7, 1986 Served through Feb. 9, 1994.
Manuel H. Johnson
Richmond Feb. 7, 1986 Resigned August 3, 1990.
H. Robert Heller
San Francisco Aug. 19, 1986 Resigned July 31, 1989.
Edward W. Kelley, Jr.
Dallas May 26, 1987 Reappointed in 1990; resigned Dec. 31, 2001.
Alan Greenspan
New York Aug. 11, 1987 Reappointed in 1992; term expired Jan. 31, 2006.
John P. LaWare
Boston Aug. 15, 1988 Resigned April 30, 1995.
David W. Mullins, Jr.
St. Louis May 21 1990 Resigned Feb. 14, 1994.
Lawrence B. Lindsey
Richmond Nov. 26, 1991 Resigned Feb. 5, 1997.
Susan M. Phillips
Chicago Dec. 2, 1991 Served through June 30, 1998.
Alan S. Blinder
Philadelphia June 27, 1994 Term expired Jan. 31, 1996.
Janet L. Yellen
San Francisco Aug. 12, 1994 Resigned Feb. 17, 1997.
Laurence H. Meyer
St. Louis June 24, 1996 Term expired Jan. 31, 2002.
Alice M. Rivlin
Philadelphia June 25, 1996 Resigned July 16, 1999.
Roger W. Ferguson, Jr.
Boston Nov. 5, 1997 Reappointed in 2001; resigned April 28, 2006
Edward M. Gramlich
Richmond Nov. 5, 1997 Resigned August 31, 2005.
Susan S. Bies
Chicago Dec. 7, 2001 Resigned March 30, 2007.
Mark W. Olson
Minneapolis Dec. 7, 2001 Resigned June 30, 2006.
Ben S. Bernanke
Atlanta Aug. 5, 2002 Resigned June 21, 2005; reappointed Feb. 1, 2006.
Donald L. Kohn
Kansas City Aug. 5, 2002
Kevin M. Warsh
New York Feb. 24, 2006
Randall S. Kroszner
Richmond Mar. 1, 2006 Resigned January 21, 2009.
Frederic S. Mishkin
Boston Sept. 5, 2006 Resigned August 31, 2008.
Elizabeth A. Duke
Philadelphia Aug. 5, 2008
Daniel K. Tarullo
Boston Jan. 28, 2009

Chairmen Date of term
Charles S. Hamlin Aug. 10, 1914-Aug. 9, 1916
W.P.G. Harding Aug. 10, 1916-Aug. 9, 1922
Daniel R. Crissinger May 1, 1923-Sept. 15, 1927
Roy A. Young Oct. 4, 1927-Aug. 31, 1930
Eugene Meyer Sept. 16, 1930-May 10, 1933
Eugene R. Black May 19, 1933-Aug. 15, 1934
Marriner S. Eccles Nov. 15, 1934-Jan. 31, 19481
Thomas B. McCabe Apr. 15, 1948-Mar. 31, 1951
Wm. McC. Martin, Jr Apr. 2, 1951-Jan. 31, 1970
Arthur F. Burns Feb. 1, 1970-Jan. 31, 1978
G. William Miller Mar. 8, 1978-Aug. 6, 1979
Paul A. Volcker Aug. 6, 1979-Aug. 11, 1987
Alan Greenspan Aug. 11, 1987-Jan. 31, 20062
Ben S. Bernanke Feb. 1, 2006-
1. Served as Chairman Pro Tempore from February 3, 1948, to April 15, 1948. Return to text
2. Served as Chairman Pro Tempore from March 3, 1996, to June 20, 1996. Return to text
Return to top

Vice Chairmen Date of term
Frederic A. Delano Aug. 10, 1914-Aug. 9, 1916
Paul M. Warburg Aug. 10, 1916-Aug. 9, 1918
Albert Strauss Oct. 26, 1918-Mar. 15, 1920
Edmund Platt July 23, 1920-Sept. 14, 1930
J.J. Thomas Aug. 21, 1934-Feb. 10, 1936
Ronald Ransom Aug. 6, 1936-Dec. 2, 1947
C. Canby Balderston Mar. 11, 1955-Feb. 28, 1966
J.L. Robertson Mar. 1, 1966-Apr. 30, 1973
George W. Mitchell May 1, 1973-Feb. 13, 1976
Stephen S. Gardner Feb. 13, 1976-Nov. 19, 1978
Frederick H. Schultz July 27, 1979-Feb. 11, 1982
Preston Martin Mar. 31, 1982-Apr. 30, 1986
Manuel H. Johnson Aug. 4, 1986-Aug. 3, 1990
David W. Mullins, Jr. July 24, 1991-Feb. 14, 1994
Alan S. Blinder June 27, 1994-Jan. 31, 1996
Alice M. Rivlin June 25, 1996-July 16, 1999
Roger W. Ferguson, Jr. Oct. 5, 1999-Apr. 28, 2006
Donald L. Kohn June 23, 2006-
Return to top
Ex-Officio Members

Secretaries of the Treasury Date of term
W.G. McAdoo Dec. 23, 1913-Dec. 15, 1918
Carter Glass Dec. 16, 1918-Feb. 1, 1920
David F. Houston Feb. 2, 1920-Mar. 3, 1921
Andrew W. Mellon Mar. 4, 1921-Feb. 12, 1932
Ogden L. Mills Feb. 12, 1932-Mar. 4, 1933
William H. Woodin Mar. 4, 1933-Dec. 31, 1933
Henry Morgenthau, Jr. Jan. 1, 1934-Feb. 1, 1936

Comptrollers of the Currency Date of term
John Skelton Williams Feb. 2, 1914-Mar. 2, 1921
Daniel R. Crissinger Mar. 17, 1921-Apr. 30, 1923
Henry M. Dawes May 1, 1923-Dec. 17, 1924
Joseph W. McIntosh Dec. 20, 1924-Nov. 20, 1928
J.W. Pole Nov. 21, 1928-Sept. 20, 1932
J.F.T. O'Connor May 11, 1933-Feb. 1, 1936
Historical Notes

Under the provisions of the original Federal Reserve Act, the Federal Reserve Board was composed of seven members, including five appointive members, the Secretary of the Treasury, who was ex-officio chairman of the Board, and the Comptroller of the Currency. The original term of office was ten years, and the five original appointive members had terms of two, four, six, eight, and ten years respectively. In 1922 the number of appointive members was increased to six, and in 1933 the term of office was increased to twelve years.

The Banking Act of 1935, approved Aug. 23, 1935, changed the name of the Federal Reserve Board to the Board of Governors of the Federal Reserve System and provided that the Board should be composed of seven appointive members; that the Secretary of the Treasury and the Comptroller of the Currency should continue to serve as members until Feb. 1, 1936; that the appointive members in office on the date of that act should continue to serve until Feb. 1, 1936, or until their successors were appointed and had qualified; and that thereafter the terms of members should be fourteen years and that the designation of Chairman and Vice Chairman of the Board should be for a term of four years.

Date after words "Resigned" and "Retired" denotes final day of service.

Chairman and Vice Chairman were designated Governor and Vice Governor before Aug. 23, 1935.

Friday, November 20, 2009

Republican Deficit Hypocrisy

In the November 2009 Forbes article "Republican Deficit Hypocrisy," conservative Bruce Bartlett reminds readers that the current U.S. budget problem was created by Republicans:
The human capacity for self-delusion never ceases to amaze me, so it shouldn't surprise me that so many Republicans seem to genuinely believe that they are the party of fiscal responsibility. Perhaps at one time they were, but those days are long gone.

This fact became blindingly obvious to me six years ago this month when a Republican president and a Republican Congress enacted the Medicare drug benefit, which former U.S. Comptroller General David Walker has called "the most fiscally irresponsible piece of legislation since the 1960s."

Recall the situation in 2003. The Bush administration was already projecting the largest deficit in American history--$475 billion in fiscal year 2004, according to the July 2003 mid-session budget review. But a big election was coming up that Bush and his party were desperately fearful of losing. So they decided to win it by buying the votes of America's seniors by giving them an expensive new program to pay for their prescription drugs.

Recall, too, that Medicare was already broke in every meaningful sense of the term. According to the 2003 Medicare trustees report, spending for Medicare was projected to rise much more rapidly than the payroll tax as the baby boomers retired. Consequently, the rational thing for Congress to do would have been to find ways of cutting its costs. Instead, Republicans voted to vastly increase them--and the federal deficit--by $395 billion between 2004 and 2013.

However, the Bush administration knew this figure was not accurate because Medicare's chief actuary, Richard Foster, had concluded, well before passage, that the more likely cost would be $534 billion. Tom Scully, a Republican political appointee at the Department of Health and Human Services, threatened to fire him if he dared to make that information public before the vote. (See this report by the HHS inspector general and this article by Foster.)

It's important to remember that the congressional budget resolution capped the projected cost of the drug benefit at $400 billion over 10 years. If there had been an official estimate from Medicare's chief actuary putting the cost at well more than that, then the legislation could have been killed by a single member in either the House or Senate by raising a point of order. Then-Senate Majority Leader Trent Lott, R-Miss., later said he regretted not doing so.

Even with a deceptively low estimate of the drug benefit's cost, there were still a few Republicans in the House of Representatives who wouldn't roll over and play dead just to buy re-election. Consequently, when the legislation came up for its final vote on Nov. 22, 2003, it was failing by 216 to 218 when the standard 15-minute time allowed for voting came to an end.

What followed was one of the most extraordinary events in congressional history. The vote was kept open for almost three hours while the House Republican leadership brought massive pressure to bear on the handful of principled Republicans who had the nerve to put country ahead of party. The leadership even froze the C-SPAN cameras so that no one outside the House chamber could see what was going on.

Among those congressmen strenuously pressed to change their vote was Nick Smith, R-Mich., who later charged that several members of Congress attempted to virtually bribe him, by promising to ensure that his son got his seat when he retired if he voted for the drug bill. One of those members, House Majority Leader Tom DeLay, R-Texas, was later admonished by the House Ethics Committee for going over the line in his efforts regarding Smith.

Eventually, the arm-twisting got three Republicans to switch their votes from nay to yea: Ernest Istook of Oklahoma, Butch Otter of Idaho and Trent Franks of Arizona. Three Democrats also switched from nay to yea and two Republicans switched from yea to nay, for a final vote of 220 to 215. In the end, only 25 Republicans voted against the budget-busting drug bill. (All but 16 Democrats voted no.)

Otter and Istook are no longer in Congress, but Franks still is, so I checked to see what he has been saying about the health legislation now being debated. Like all Republicans, he has vowed to fight it with every ounce of strength he has, citing the increase in debt as his principal concern. "I would remind my Democratic colleagues that their children, and every generation thereafter, will bear the burden caused by this bill. They will be the ones asked to pay off the incredible debt," Franks declared on Nov. 7.

Just to be clear, the Medicare drug benefit was a pure giveaway with a gross cost greater than either the House or Senate health reform bills how being considered. Together the new bills would cost roughly $900 billion over the next 10 years, while Medicare Part D will cost $1 trillion.

Moreover, there is a critical distinction--the drug benefit had no dedicated financing, no offsets and no revenue-raisers; 100% of the cost simply added to the federal budget deficit, whereas the health reform measures now being debated will be paid for with a combination of spending cuts and tax increases, adding nothing to the deficit over the next 10 years, according to the Congressional Budget Office. (See here for the Senate bill estimate and here for the House bill.)

Maybe Franks isn't the worst hypocrite I've ever come across in Washington, but he's got to be in the top 10 because he apparently thinks the unfunded drug benefit, which added $15.5 trillion (in present value terms) to our nation's indebtedness, according to Medicare's trustees, was worth sacrificing his integrity to enact into law. But legislation expanding health coverage to the uninsured--which is deficit-neutral--somehow or other adds an unacceptable debt burden to future generations. We truly live in a world only George Orwell could comprehend when our elected representatives so easily conflate one with the other.

Of course, there are good reasons conservatives oppose expanding the government, as the pending health legislation would do, even if it adds nothing to the deficit. But anyone who voted for the drug benefit, especially someone who switched his vote to make its enactment possible, has zero credibility. People like Franks ought to have the decency to keep their mouths shut forever when it comes to blaming anyone else for increasing the national debt.

Franks is not alone among Republicans for whom fiscal responsibility never consists of anything other than talk. The worst, undoubtedly, is DeLay, who actually went so far as to attack Sen. John McCain, R-Ariz., last year for his principled vote against the drug benefit, one of only nine Republican senators to do so. (By my count, there are still 24 Republicans in the Senate who voted for the drug benefit, including such alleged conservatives as Jim Bunning and Mitch McConnell of Kentucky, John Cornyn of Texas, Mike Crapo of Idaho, Orrin Hatch of Utah and Jon Kyl of Arizona.)

Amazingly, leading Republicans still defend the drug benefit. Just the other day, former Senate Majority Leader Bill Frist, R-Tenn., celebrated its passage, and at a recent American Enterprise Institute forum, former House Ways and Means Committee Chairman Bill Thomas, R-Calif., berated me for criticizing it. In each case, their main argument was that it ended up costing a little less than originally projected. Somehow, I doubt that Frist or Thomas would feel the same way if their wives thought it was OK to buy a closet full of expensive new shoes just because they were on sale.

I don't mean to suggest that Democrats are any better when it comes to the deficit, although they have a better case for saying so based on the contrasting fiscal records of Bill Clinton and George W. Bush. The national debt belongs to both parties. But at least the Democrats don't go on Fox News day after day proclaiming how fiscally conservative they are, and organize tea parties to rant about deficits, without ever putting forward any plan for reducing them. Nor do they pretend that they have no responsibility whatsoever for projected deficits, at least half of which can be traced directly to Republican policies, according to Office of Management and Budget Director Peter Orszag.

It astonishes me that a party enacting anything like the drug benefit would have the chutzpah to view itself as fiscally responsible in any sense of the term. As far as I am concerned, any Republican who voted for the Medicare drug benefit has no right to criticize anything the Democrats have done in terms of adding to the national debt. Space prohibits listing all their names, but the final Senate vote can be found here and the House vote here.

Bruce Bartlett is a former Treasury Department economist and the author of Reaganomics: Supply-Side Economics in Action and Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy. Bruce Bartlett's new book is: The New American Economy: The Failure of Reaganomics and a New Way Forward. He writes a weekly column for Forbes.

Wednesday, November 18, 2009

Consumer Price Index news release

The latest Consumer Price Index news release
was issued today by the Bureau of Labor Statistics. Highlights are below.

On a seasonally adjusted basis, the CPI-U increased 0.3 percent in October after rising 0.2 percent in September.
The index for all items less food and energy increased 0.2 percent in October, the same increase as in September.

News releases archives:

Budget Hero - "If you ever wanted to control where your tax dollars go, here is your chance to decide."

Budget Hero is an online game that allows you see how different policy choices will affect the U.S. fiscal budget in the future. According to the website:
Budget Hero seeks to provide a values- and fiscal-based lens for citizens to examine policy debates during this election year. Partisan messages tend to cloud the real issues at play during campaigns, and most candidates are loath to attach detailed financial impacts to solutions which make up their platform. Budget Hero provides an interactive experience involving policy options that have been extensively researched and vetted with non-partisan government and think tank experts to enable players to objectively evaluate candidates.

Tuesday, November 17, 2009

No Matter How Much Stuff People Have, It Seems They Always Want More

No matter how much money or material possessions people have, it seems they always want more. The November 17, 2009 Access Hollywood article "Nicolas Cage's Former Business Manager Files Counter Suit, Claims Actor Went 'On A Spending Binge Of Epic Proportions'" provides an example:
LOS ANGELES, Calif. -- A former business manager for Nicolas Cage has filed a cross complaint in Los Angeles Superior Court claiming the actor was already deeply in debt when he was hired by the star in 2001.

As previously reported on, last month Cage filed suit against Samuel J. Levin, whom he claimed in court papers was an "incompetent business manager," and whom he said sent the star, "down a path toward financial ruin."

But in his cross complaint, filed late last week, Levin claims that when he was hired by Cage in 2001, the actor had already, "squandered tens of millions of dollars he had earned as a movie star, he was deeply in debt, and he owed millions of dollars in accrued but unpaid income taxes, with no funds available to pay the debut."

Levin claims in his court filing that from the start of the two men's "Business Management Agreement," Cage "knew about his perilous financial situation and he knew he was behind on paying his taxes."

The business manager claims he "warned" Cage that in order to "maintain his lavish lifestyle," he needed to earn $30,000,000 a year.

In fact, Levin said the two came up with an agreement at the start of their business relationship.

Among the "objectives" Levin claimed the men agreed to were:

Reduce Cage's spending and use his "assets and earnings to pay off his debts and eliminate the tax arrearage."

Accumulate a "cushion" of at least $10,000,000, but preferably $20,000,000, for Cage's financial security purposes and to "alleviate the financial pressure to take film roles that might be detrimental to his career."

Levin said after agreeing, he sold off the actor's $1.6 million comic book collection and more than "a dozen of his automobiles."

But the business manager claims that after Cage had "a string of hit films," his increased earnings saw the actor abandon "the economic conservatism" he had agreed to.

Levin claims Cage went bought new cars to replace the ones he sold and "set off on a spending binge of epic proportions."

By July 2008, Levin claims, Cage owned:

15 palatial homes around the world

4 yachts (one for the following locations: Caribbean, Mediterranean, Newport Beach and Rhode Island)

1 island in the Bahamas

1 Gulfstream jet

Millions in jewelry and art

Levin claims he "implored" the actor to stop buying property and spending, but he "rejected this advice and continued his compulsive spending.

Levin claims the actor then bought more including

3 more homes worth more than $33,000,000

22 automobiles (including 9 Rolls Royces)

12 expensive jewelry pieces

47 artwork and exotic item purchases.

Levin claims as time went on, his advice was ignored and "rebuked."

"The pinnacle of [Cage's] spending spree came with his quixotic acquisition of Midford Castle in England and Schloss Neidstein Castle in Bavaria," Levin claims in the cross complaint.

The business manager claims he was eventually "terminated" and the actor hired a Certified Public Accountant to take over the account, an account which brought Levin back on board on an "hourly basis" until October 13, 2009, when Levin filed the actor's 2008 tax returns. A short while later, Cage filed the original suit against Levin.

Just last week, Cage lost two of his New Orleans homes due to foreclosure auction and the IRS has claimed the actor currently owes over $6 million back taxes.

As previously reported on, Cage claims he is having to divest himself of a host of assets because of "Levin's incompetence, misrepresentations and recklessness."

He further asserted in his lawsuit that Levin paid himself "millions of dollars" while putting Cage's money into "risky" and "highly speculative" investments, and that he also allegedly failed to "timely pay taxes."

Producer Price Index

The latest Producer Price Index (PPI) news release
was issued today by the Bureau of Labor Statistics. Highlights are below.

The PPI tracks the prices of goods before they reach store shelves and is considered a predictor of price trends. This small increase in wholesales prices suggests inflation is not a current concern of the Federal Reserve System and they are expected to keep interest rates near zero to encourage economic growth to spur continued recovery from the economic recession.


The Producer Price Index for Finished Goods advanced 0.3 percent in October, seasonally adjusted. This increase followed a 0.6-percent decline in September and a 1.7-percent rise in August. Prices for finished goods other than foods and energy fell 0.6 percent after decreasing 0.1 percent in September.

Bernanke: Fed will keep eye on sliding dollar

In the November 16, 2009 article "Bernanke: Fed will keep eye on sliding dollar," Associated Press economics writer Jeannine Aversa reports the Federal Reserve System anticipates keeping interests rates extremely low to encourage economic growth. But the declining value of the dollar and continued high budget deficits remain as challenges for U.S. macroeconomoic policymakers.

WASHINGTON – Federal Reserve Chairman Ben Bernanke on Monday said the central bank will monitor the sliding U.S. dollar but pledged anew to keep interest rates at record lows to nurture the economic recovery.

In remarks to the Economic Club of New York, Bernanke engaged in a delicate dance. He tried to bolster confidence in the dollar without taking any real action.

"Bernanke is trying to use words — not interest rates — to prevent the dollar from going even lower," said Jay Bryson, global economist with Wells Fargo Securities.

Bryson and other analysts said they didn't think Bernanke was signaling that the Fed would join with central bankers in other countries to intervene in markets to strengthen the dollar. But that is an option for the Fed if the dollar were to start plunging.

Bernanke's remarks gave a brief lift to the dollar in trading Monday. But it resumed its fall after traders focused on his assertion that the central bank would hold interest rates low for an extended period. The dollar has posted double-digit declines against other major currencies since spring.

Low interest rates could put additional downward pressure on the dollar. And economists say a free-fall in the value of the dollar, while unlikely, can't be entirely dismissed. Still, low rates are needed to encourage consumers and businesses to spend more and fuel the economic rebound.

"We are attentive to the implications of changes in the value of the dollar," Bernanke said in rare remarks about the greenback. The Fed, he said, will continue to "monitor these developments closely."

Commodity prices — such as oil — have risen lately. That pickup likely reflects a revival in global economic activity and the recent depreciation of the dollar, Bernanke said. Commodities such as oil and gold are priced in dollars so they become cheaper when the dollar falls.

Despite "cross-currents" in the outlook for prices, the Fed chief predicted inflation probably will remain "subdued for some time."

That gives the Fed leeway to hold rates at record-low levels for an "extended period," he said, repeating a pledge made at the Fed's meeting earlier this month.

The sagging dollar has helped sales of U.S. exports because it makes those goods less expensive on foreign markets. But if the dollar were to plunge in value, it could ignite a new economic crisis in the U.S., prompting investors to dump their dollar holdings and driving up domestic interest rates.

Still, by holding rates at record-lows, the Fed risks creating a speculative bubble.

"It's extraordinarily difficult to tell" if a bubble is forming, Bernanke acknowledged. "It's not obvious to me in any case."

If a bubble did form, "we use our interest rate tools to try to meet our mandate — full employment and price stability," he said.

The Fed's decision to hold interest rates at exceptionally low levels after the 2001 recession was blamed for feeding the housing bubble. When the housing boom went bust in late 2006 the economy soon followed.

During the question and answer session, the Fed chief also urged Congress and the White House to trim the record $1.42 trillion budget deficit, another force depressing the value of the dollar.

China, the No. 1 lender to the United States, has expressed concerns that the falling dollar threatens the value of its existing U.S. holdings. China also is the third-largest market for American goods, accounting for 6 percent of U.S. exports through September.

The ICE Dollar Index, which measures the value of the dollar against a basket of foreign currencies, has fallen 16.7 percent since March 4. The dollar is off 19.5 percent against the Canadian dollar since March 9, while the euro is up 18.4 percent since March 4. The dollar has also lost 12.2 percent of its value against the Japanese yen since April.

In recent weeks, some Asian countries have been intervening to try to keep their currencies from rising further against the dollar. They are feeling pressure because of China's tight link to the dollar which has meant as the dollar has tumbled since March, China's currency has fallen in relation to their currencies, giving China a competitive advantage.

Economists expect the Fed will hold rates near zero at its next meeting on Dec. 15-16 and into part of next year to help the recovery gain traction.

Bernanke predicted the economy should continue to grow next year, but he warned of "important headwinds" that will restrain the recovery, including a weak job market and tight credit for small businesses and households.

After a record four straight losing quarters, the economy started to grow again in the July-September period at a pace of 3.5 percent. Government-supported spending on homes and cars drove the rebound, raising questions about the staying power of the recovery once that assistance fades.

Bernanke said the rebound reflected more than "purely temporary factors" and predicted growth would continue into next year.

One of the biggest threats hanging over the recovery is rising unemployment. The nation's unemployment rate bolted to 10.2 percent in October. It marked just the second time in the post-World War II period that the jobless rate topped 10 percent.

Some economists think it could rise as high as 11 percent by the middle of next year before starting to gradually drift down.

Bernanke said the unemployment rate "likely will decline only slowly" if economic growth remains "moderate" as he expects.

USDA: Number of Americans going hungry increases

In the November 16, 2009 article "USDA: Number of Americans going hungry increases," Associated Press writer Henry C. Jackson reports an increase in the number of U.S. residents who have difficulty feeding their families.
WASHINGTON – More than one in seven American households struggled to put enough food on the table in 2008, the highest rate since the Agriculture Department began tracking food security levels in 1995.

That's about 49 million people, or 14.6 percent of U.S. households. The numbers are a significant increase from 2007, when 11.1 percent of U.S. households suffered from what USDA classifies as "food insecurity" — not having enough food for an active, healthy lifestyle.

Researchers blamed the increase in hunger on a lack of money and other resources.

President Barack Obama called the USDA's findings "unsettling." He noted that other indicators of hunger have gone up, such as the number of food stamp applications and the use of food banks. And he said his administration is committed to reversing the trend.

"The first task is to restore job growth, which will help relieve the economic pressures that make it difficult for parents to put a square meal on the table each day," Obama said in a statement.

Agriculture Secretary Tom Vilsack said the numbers could be higher in 2009 because of the global economic slowdown.

"This report suggests its time for America to get very serious about food security and hunger," Vilsack told reporters during a conference call.

The USDA said Monday that 5.7 percent of those who struggled for food experienced "very low food security," meaning household members reduced their food intake.

The numbers dovetail with dire economic conditions for many Americans. And they may not take the full measure of America's current struggles with hunger: Vilsack and the report's lead author, Mark Nord with USDA's economic research service, both emphasized that the numbers reflected the situation in 2008 and that the economy's continued troubles in 2009 would likely mean higher numbers next year.

The report also showed an increasing number of children in the United States are suffering. In 2008, 16.7 million children were classified as not having enough food, 4.3 million more than in 2007.

Hunger advocates said they were not surprised by the numbers, and said the problem among children, in particular, is lamentable.

"What should really shock us is that almost one in four children in our country lives on the brink of hunger," said David Beckmann, the President of Bread of the World, an advocacy organization.

Vilsack said that it would take a concerted effort to reduce the number of Americans who face a lack of food and said he hoped that the stark reality of Monday's report would inspire action. The numbers could have been much worse without adequately funded food aid programs, such as food stamps, he said.

"There's an opportunity here for the country to make a major commitment to focus on ways we can improve this process and make sure that food is safe and available for everyone," he said.

Monday, November 16, 2009

Fox News - the subtle altering of reality to sell a preconceived narrative?

On the Thursday, November 12, 2009 broadcast of Comedy Central’s The Daily Show, Jon Stewart implied that the Fox network is far from fair and balanced:
But, of course, that was just one big story from cable news last night. There was another story – one that actually concerns our humble program here.

On Tuesday night, we did a little bit about Sean Hannity’s program, or to call it by its official name `the greatest program that has ever given to a people by God.’

It concerned the Super Bowl of Freedom that Michele Bachmann sponsored on Capitol Hill.

On Sean’s show, Mr. Hannity and Ms. Bachmann discussed her rally and for no apparent reason then started showing images of Glenn Beck’s much better attended 9/12 rally, not acknowledging that the footage was different, but in fact commenting on how robust the crowd was, even though Bachman’s rally took place on a sunny day in fall and this rally appeared to take place on a cloudy day in summer.

So, we thought that was funny because we finally had a literal manifestation of what we feel is the metaphorical methodology of the entire Fox network, which, of course, is the subtle altering of reality to sell a preconceived narrative.

The previous night, Sean Hannity acknowledged the “inadvertent mistake” that had been caught by one of The Daily Show‘s producers.

Stewart suggests the mistake was not accidental, but part of systematic and intentional deception designed to rally viewers behind favored causes. Stewart seems to imply that other networks may have biases, but they are not as extensive, coordinated, and intentional as those on Fox. The network defends distortions on many of its programs, such as Hannity's, by claiming the shows are widely acknowledged (even by Fox) to be opinion-based.

People of all political persuasions may cling to opinions that support a current perspective and ignore facts that contradict it. The human brain seems to prefer to fit new information into an existing belief system. In the 2008 book, Predictably Irrational: The Hidden Forces That Shape Our Decisions, behavioral economist Dan Ariely explains that people have an irrational tendency to overvalue things they own, including ideas. This can make people reluctant to let go of a preexisting belief, even when provided with substantial contradictory information.

Ariely suggests people will make better individual and social choices if they acknowledge these biases and try to limit their impact. People might benefit by using diverse sources of news rather than limiting their exposure to the information they want to hear.

Related articles:

Click here for a Chicago Tribune article linked to the video discussed above.

An October 29, 2009 report by the Pew Research Center for the People & the Press concludes that Fox News is Viewed as the Most Ideological Network.

Sunday, November 15, 2009

The Value of Education

According to, education has a significant effect on a worker's annual and lifetime earnings:
You can make much more money by earning a college degree.

The data shows that a college degree correlates directly to your salary range—and the relationship between compensation and education level is becoming even more prominent.

At the turn of the 20th century, American working life was different. Only a minority of adults had a high school diploma. But by 1975, full-time workers with a Bachelor's degree had 1.5 times the annual earnings of workers with a high school diploma. By 1999, this ratio had edged up to 1.8. As our society has continued to evolve, education has become the optimal route to professional success: pursuing a degree is the best way to receive training, to gain expertise in a given field, and even to guide you and help you make choices about your career.

Today, a formal, focused education is an essential ingredient. Employers have increasingly used diplomas and degrees as a way to screen applicants. And once you’ve landed the job you want, your salary will reflect your credentials. On average, a person with a Master's degree earns $31,900 more per year than a high school graduate—a difference of as much as 105%!

Average Annual Earnings for College Graduates and Non-Graduates
Professional Degree
Doctoral Degree
Master's Degree
Bachelor's Degree
Associate's Degree
Some College
High School Graduate
Some High School
Average Annual Earnings—Different Levels of Education.
Source: U.S. Census Bureau, Current Population Surveys, March 1998, 1999, and 2000.
Making a Lifetime of Difference.

By the time you comfortably retire, you’ll look back and see that your earnings increase, as figured by your level of education, has compounded over your lifetime.

A person with a Bachelor's degree will earn, on average, almost twice as much as workers with a high school diploma over a lifetime ($2.1 million compared to $1.2 million). This is a result of not only higher starting salaries for people with higher education levels, but also the sharper earnings growth over the course their careers.

Work-Life Earnings for Full-Time Employees (in $ millions)
Professional Degree
Doctoral Degree
Master's Degree
Bachelor's Degree
Associate's Degree
Some College
High School Graduate
Some High School
Average Lifetime Earnings—Different Levels of Education.
Source: U.S. Census Bureau, Current Population Surveys, March 1998, 1999, and 2000.

Retrieved November 15, 2009.

Opportunity Costs of War

When people discuss the costs of the ongoing wars in Iraq and Afghanistan, they usually focus on the government expenditures which are approaching $1 trillion since 2001. Economists argue that society makes better decisions when decisions are based on opportunity costs - which include everything that is sacrificed when a choice is made.

According to the Military Casualty Information provided by the U.S. Department of Defense, as of November 7, 2009 there were 909 deaths in Operation Enduring Freedom (in Afghanistan) and 4,349 deaths in Operation Iraqi Freedom. The number of U.S. military personnel wounded in action were 4,472 in the conflict in Afghanistan and 31,556 in Iraq. The value of these lives, and their lost contributions to society and the economy, are part of the opportunity costs of these wars.

Unfilled Jobs Illustrate Structural Unemployment

In the November 2009 article "Good Jobs Going Unfilled: 6 Careers in High Demand," Patricia Cecil-Reed illustrates structural unemployment because the skills of current unemployed workers do not match the skills required in these growing sectors of the U.S. economy.
With the U.S. unemployment rate now above 10 percent, millions of Americans are searching for new careers. A strange paradox currently exists, however. There are also many empty jobs that remain unfilled. So what's the problem? According to economists and hiring managers, the main problem is finding candidates with the right career training for jobs in emerging fields like energy, health care, and engineering.

Some of these careers require only one to two years of training, while others call for a four-year degree, but one fact remains clear: These new industries are here to stay. Investing in continuing education or career training might be a small price to pay to stay in the game for years to come. Below are some of the hottest careers in need of qualified professionals.

Environmental Science Technician

As scientific procedures have become more complex, the role of science technicians has steadily increased. Technicians not only solve problems in research and development, but also are specially trained in operating and maintaining laboratory equipment. Environmental science technicians perform their work with the goal of determining, alleviating, or controlling environmentally harmful substances.

Job growth for environmental science technicians is expected to be much faster than average from 2006 to 2016. The most common job requirement is a two-year associate's degree in science-related technology.

Average Annual Salary: $43,180.

Electrical Engineer

Electrical equipment of all kinds is developed, designed, and tested by electrical engineers. From lighting to electric motors to the wiring of buildings, electrical engineers shine new light on the way we live and work. Most electrical engineers specialize in an area like power systems engineering or electrical equipment manufacturing.

A bachelor's degree in engineering, with a specialty in electrical engineering, is usually a requirement for entry-level jobs.

Average Annual Salary: $85,350.

Internal Auditor

Following a rash of corporate scandals coupled with the current financial crisis, companies are cracking down on waste, fraud, and mismanagement. Internal auditors evaluate an organization's financial and information systems while keeping an eye on efficiency and productivity. They also evaluate organizational compliance with corporate and government regulations.

A bachelor's degree in accounting or a related field is a good idea for auditors. Some colleges offer programs specifically geared towards internal auditing. Certification as a certified internal auditor (CIA) also boosts credibility and hiring potential.

Average Annual Salary: $65,840.

Management Accountant

For many accountants, there has been a professional shift away from merely preparing tax documents. Management accountants work for businesses, recording, and analyzing their financial information. They also prepare budgets, financial reports, and cost management strategies. Management accountants often work as part of an executive team and communicate with company heads, stockholders, creditors, and regulatory agencies on a regular basis.

Employment of accountants is expected to grow by 18 percent over the next seven years. A bachelor's degree in accounting or finance is usually required, and those who have certification as a certified public accountant (CPA) or other professional certifications should have the best opportunities.

Average Annual Salary: $65,840.

Diagnostic Medical Sonographer

As sonography grows in popularity, and in some cases becomes preferable to radiologic procedures, there is a growing demand for sonographers. Diagnostic sonography helps in diagnosing ailments of all kinds, using high frequency sound waves to assess a particular part of the body. Sonographers are specially trained to use this equipment and evaluate the results. They also interact with patients, keep detailed records, and maintain sonography equipment.

Most employers prefer to hire registered sonographers who have trained for the position by earning an associate's or bachelor's degree in X-ray technology or a closely-related field. In some cases, those already working in the health care field can earn a one-year certificate that may suffice for entry-level sonography positions.

Average Annual Salary: $62,660.

Cardiovascular Technologist

These technologists assist physicians in diagnosing heart and blood vessel ailments. Their day-to-day duties often include scheduling appointments, explaining procedures to patients, and maintaining equipment. Cardiovascular technologists generally specialize in one of three areas: invasive cardiology, echocardiography, or vascular technology.

This career is expected to see much faster than average job growth in coming years, with 26 percent growth expected. Most cardiovascular technologists have an associate's degree in x-ray or cardiovascular technology. Certification is also available, but is not always required.

Average Annual Salary: $48,640.

Like it or not, it seems unlikely that outmoded industries will be making a comeback anytime soon. Rather than hitting your head against a career wall, consider training for a new career in an emerging field. The time spent may be rewarded in a fulfilling new career and an end to your lay-off worries.

Capitalism Sucks?

Federal deficit: Trail of broken promises

In the October 29, 2009 CNNMoney article "Federal deficit: Trail of broken promises," Jeanne Sahad reports that "Republicans and Democrats rage about the long-term deficit, as if they had nothing to do with it. But both parties undermine efforts to get it under control."
NEW YORK ( -- When it comes to figuring out what has caused the country's record accumulation of debt, just about every politician in Washington has a theory.

The theories usually boil down to this: The other guy did it. The other party's White House. A previous Congress. You get the picture.

In reality, growing the deficit has been very much a bipartisan effort. Members of Congress from both parties and presidents past and present have all contributed to the problem.

And it is a problem. By 2019 the total debt accrued over the past several decades is on track to approach an unhealthy 82% of gross domestic product. That's one reason why those who own U.S. debt and credit ratings agencies will be looking for lawmakers to put together a plausible deficit-reduction plan in the next few years. (Clock is ticking on debt ceiling.)

But if Congress and the president are going to stick to it, they better curb the budget trickery. Here are 5 common tricks that undermine fiscal responsibility.

Great idea! Let's ignore it.
The trick: Bypass rule to rein in spending and then overturn it

In 1997, Congress passed a provision that aimed to limit overall Medicare spending. When spending exceeds a certain target, an automatic reduction in physicians' reimbursement fees kicks in -- unless lawmakers act to block the reduction.

And they do, almost every time a cut to doctors is in the offing.

They usually don't bother to cut spending or raise revenue elsewhere to make up for it. And when they do, they aren't exactly realistic about it.

Four years ago, they decided to pay for rescinding a cut by promising to cut rates even more steeply in the future, said Donald Marron, an acting director of the Congressional Budget Office during the last Bush Administration.

Well, welcome to the future. Those steeper rate cuts aren't flying either. Lawmakers now want to pass a permanent "fix" so that physician payment rates don't drop. The estimated cost of doing so: $247 billion over 10 years.

The proposal was voted down last week in part because there were no provisions in the bill to pay for the cost. But don't expect that to be the end of it.

How about a quickie?
The trick: Enact a one-year "fix" that really fixes nothing

Few lawmakers want to see physician rates cut. They need physicians' support for health reform and there is concern that more physicians would refuse to treat Medicare patients if their rates are cut further.

So lawmakers may just pass another one-year fix to prevent near-term cuts, just like they've done in years past.

The one-year "fix" for perennial issues makes the cost of what Congress is doing look less expensive because well, it's only for one year, right?

The classic example is how Congress deals with the pernicious Alternative Minimum Tax. Without congressional action, an increasing number of middle class families will have to pay the tax, originally created to extract tax payments from the wealthy.

So every year Congress enacts a "patch" to protect those middle-class families. Those one-year patches have recently cost in the neighborhood of $70 billion. A permanent patch, which President Obama has called for, would cost at least $448 billion over 10 years, according to the Congressional Budget Office.

Let's play make-believe
The trick: Count on future taxes everyone knows will never be collected

The AMT patches are not paid for through reduced spending or increased revenue elsewhere.

The argument is that the AMT was never supposed to hit so many people and generate so much revenue. So why pay for the loss of revenue that was never supposed to be collected in the first place?

It's a good theory. The problem is that Congress, in deciding which policies to pursue, uses budget and deficit projections that assume the AMT will raise lots and lots of revenue.

As a result that phantom AMT revenue makes the deficit look better than it is.

While the estimated cost of permanently patching the AMT is $448 billion, the real price goes up by hundreds of billions if it's done in conjunction with extending the 2001 and 2003 tax cuts. And odds are high they will be extended.

This is just temporary. Honest.
The trick: Call a tax cut or spending hike temporary

Like the one-year fix, implementing a "temporary" tax cut or spending increase often disguises the true cost, since there will be pressure to make the measure permanent -- or to "temporarily" renew it every year.

"There's a ton of effort to get things into law because once there, they're hard to get rid of," said Marron, who is now a visiting professor at the Georgetown Public Policy Institute.

The 2001 and 2003 Bush tax cuts are a good example.

No one really expected the cuts to expire, even though they're slated to do so by 2011. In fact, President Obama has called for them to be made permanent for the majority of Americans. The cost: $2.3 trillion in forgone revenue over the next 10 years.

We'll pay for everything ... except some things
The trick: Promise to pay for some tax cuts and not others

In a speech this week, Christina Romer, head of Obama's Council of Economic Advisers, pointed to research that found nearly half of the long-run fiscal shortfalls is due to the policies that cut taxes and increased spending under the Bush administration.

"Obviously, we can't go back eight years and make more responsible choices," she said.

Well, yes, the past is past.

But what about future choices? Obama has promised to pay for any new tax cuts or spending increases he proposes. Yet he is not calling on Congress to pay for his $2.3 trillion proposal to extend the Bush tax cuts.

By not doing so, he joins a not-so-select club of politicians, according to Diane Rogers, chief economist at the deficit watchdog group Concord Coalition.

"[T]he clever idea to hide the permanent costs of spending or tax cuts by making them temporary, and then later extending them while refusing to pay for the costs of extending them ... is something government policymakers have been practicing in a bipartisan manner for awhile," Rogers wrote in her blog

Donations to Reduce the U.S. Public Debt

In the November 11, 2009 CNN Money article "Donating This Year? Uncle Sam Needs Your Help," Jeanne Sahadi reports that under a little-known law, the U.S. government accepts contributions to pay down national debt.
If you're irked by the U.S. debt, you can make tax-deductible contributions to pay it down. Fiscal year 2009 saw $3.1 million in donations. Only $12 trillion left to go!

You've probably heard about the country's giant debt load - $12 trillion and rising.

Did you know you can help reduce it?

Under a little-known law enacted in 1961, Uncle Sam accepts tax-deductible contributions to pay down the country's debt.

Not that the Treasury Department does much to publicize the program.

You can find it under the header "Accepting Gifts" in the U.S. Code. Or, if you're not an avid reader of dusty legal books, you can check the FAQ section on the Web site of the Bureau of Public Debt, an agency within Treasury. Or flip to page 91 of the IRS' 2009 Instruction Booklet for Form 1040.

Contributions made are typically small -- under $100. But there have been a few humdingers over the years.

The largest single gift ever made was in 1992 for $3.5 million, said Mckayla Braden, a spokesperson for the Bureau of the Public Debt.

For fiscal year 2009, all donations totaled just over $3 million. That's well more than what was donated in any single year in the decade prior. But it's far less than the nearly $21 million collected in 1994.

The money credited to the "Gifts to Reduce the Public Debt" account in theory reduces the amount of money the government has to borrow to finance its debt. But the dent is not deep or lasting.

"We might have to finance a tiny bit less that week," Braden said.

The Nuts and Bolts

So who are the folks who send Uncle Sam money of their own volition?

"Usually someone dies and leaves a gift. And many contribute regularly," Braden said. "On average, we get five donations a week."

Sometimes, she said, a large donation is made by an estate but is paid out over a number of years.

The names and addresses of the donors are not released. And blessedly, unlike most charities that reward you for giving by bombarding you with solicitations for more money, Uncle Sam will acknowledge your gift but then never bother you again.

There are two ways to give. One is to send a check directly to the Bureau of Public Debt, an agency within the Treasury Department. The address: Attn: Dept G, Bureau of the Public Debt, P.O. Box 2188, Parkersburg, WV 26106-2188.

The other is to include a check -- separate from any tax payment you make - with your federal income tax return.

Hate writing checks? You soon may be able to donate online. "We are going to make it very easy in the future to make gifts to reduce the public debt through PayPal on a regular basis," Braden said.

Would You Give?'s video team took to the streets of New York to ask random passers-by if they were aware of the program. No one was.

When asked if they'd contribute now that they know, the majority said that wouldn't be happening.

One woman put it this way: "They can use my tax dollars to do that and work it out." One man was a little more blunt. "Hell no. Hell no."

But others weren't so put off.

"I think I could give $10 to $20. And if everyone could do that it would make a good dent in the debt," another woman said. Another man figured he could "help the government out" with a hundred bucks.

Of course, with the national debt at $12 trillion, it would take more than a few $100 contributions to get back to even -- 120 billion of them, in fact.

Saturday, November 14, 2009

Obama wants domestic spending cuts in next budget

In the November 14, 2009 article "Obama wants domestic spending cuts in next budget" Associated Press writers Tom Raum and Andrew Taylor outline the challenges of managing the current U.S. economy that needs short-term stimulus to fight the recession, but subsequently needs reduced budget deficits to minimize the burdensome effect of public debt on long-term economic growth.
WASHINGTON – The Obama administration, mindful of public anxiety over the government's mushrooming debt, is shifting emphasis from big-spending policies to deficit reduction. Domestic agencies have been told to brace for a spending freeze or cuts of up to 5 percent as part of a midterm election-year push to rein in record budget shortfalls.

Yet with the economy still in distress and unemployment pushing past 10 percent, prospects for making a dent in a trillion-dollar-plus annual deficit seem slight. And since the Pentagon and Department of Veterans Affairs would likely be shielded from such cuts, overtures toward trimming the deficit may hold more symbolic value than substance.

President Barack Obama is expected to make post-recession spending restraint a key theme of his State of the Union address in January and an important element of the budget he submits to Congress a few weeks later. He is under increasing pressure, including from moderate and conservative members of his own party, to show he is serious about tackling a deficit that has become both an economic and political liability.

Not since billionaire Ross Perot made budget-balancing the centerpiece of his 1992 third-party presidential bid has so much public concern been voiced over the gulf between what the government spends and what it takes in.

White House budget director Peter Orszag on Friday told The Associated Press it is imperative to start curbing the flow of red ink. But he called it a balancing act and said acting too fast could undercut what appears to be a fledgling economic recovery.

Orszag has said the spending blueprint, for the budget year that begins Oct. 1, 2010, would put the nation "back on a fiscally sustainable path" and suggested it would include a mix of spending cuts and new revenue-producing measures.

Democratic officials in the White House and on Capitol Hill say options for locking in budget savings include caps on the amount of money Congress gets to distribute each year for agency operating budgets. They spoke on condition of anonymity to frankly discuss internal deliberations.

The White House told agencies to submit spending plans that would, at the very least, freeze their budgets, and to prepare for cuts as high as 5 percent. That edict is but one round in internal administration deliberations on the budget. Cabinet heads are sure to seek exemptions, and Orszag warned that firm budget decisions haven't been made.

The administration also is weighing committing to debt reduction any unspent funds from the $700 billion bank bailout program. However, such a move would be largely a bookkeeping shift and not likely to yield much in the way of deficit reduction.

The new emphasis at the White House on deficit-reduction follows last month's report showing the economy surged at a 3.5 percent annual pace in the July-September quarter after contracting for four consecutive quarters. That suggested the recession is likely over — even though job losses are expected to continue for some time.

Congress will soon vote on legislation to raise the debt ceiling — the limit on how much the government can borrow — above the present $12.1 trillion. On Friday, the nation's overall debt stood at $11.99 trillion. Some fiscally conservative lawmakers have said they would not vote for further increases in the debt ceiling until the administration took deficit-cutting steps.

The national debt is the accumulation of annual budget deficits. The deficit for the 2009 budget year, which ended on Sept. 30, set an all-time record in dollar terms at $1.42 trillion.

The flow of red ink has been increased by war spending for Iraq and Afghanistan, recession-fighting stimulus and bank bailout spending and by reduced tax revenues from high unemployment and reduced personal and business income.

Polls show rising public concern over deficits. Exit polls from elections earlier this month showed clear majorities of Virginia and New Jersey voters said they were worried about the direction of the nation's economy. In both states, Republicans won gubernatorial seats that had been held by Democrats.

Republicans are seeking to capitalize on this month's Democratic election setbacks and rising voter concerns over the burst in federal spending. House Minority Leader John Boehner, R-Ohio, said the Democrats' "so-called `war on deficits' comes about a year late and more than a trillion dollars short."

"Spending in Washington has been out of control for years, and instead of changing it as they promised they would, Speaker Nancy Pelosi and President Obama have stepped on the accelerator," Boehner said in a statement.

Pollster Andrew Kohut, director of the Pew Research Center, said increasingly "the percentage of people naming the deficit as a problem is pretty substantial."

"It may be approaching the level of concern we had in the early 1990s when Ross Perot rode that horse for quite some time politically," Kohut said.

Still, politicians have typically avoided politically painful deficit-cutting steps in election years.

Stanley Collender, a budget expert at Qorvis Communications and a former staff aide to House and Senate budget committees, said if the administration could actually accomplish cuts in discretionary spending on the order of 5 percent — a big "if" — it would be a notable step toward bringing down deficits.

Despite today's hard times, putting such measures in play sooner rather than later makes sense since they wouldn't take effect until next Oct. 1, when jobs hopefully will be coming back and the economy humming again, Collender said. "It's sort of like an outfielder trying to catch a fly ball. You try to get to where the ball's going to be rather than where it is at that particular moment."

The deficit-cutting drive comes as Obama traveled to Asia where several nations, especially China, have expressed concerns about the size of U.S. deficits. China is the largest foreign holder of U.S. debt and policymakers worry that alarm over deficits could push foreigners into cutting back on their purchases of Treasury securities.