Federal Deficit

So once again, political leaders in Washington have lived down to the expectations of business owners and consumers — just about everyone. Having set up a "super committee" to consider how to cut federal red ink by at least $1.2 trillion over 10 years, Congress this week conceded a self-inflicted defeat. Is this failure good or bad for the economy? In the long run it's probably neutral, because it doesn't say anything about the absence of grown-up economic policy thinking in Washington that we didn't know already.

The Treasury Department confirmed this week that the national debt has surpassed $15 trillion -- that's 15, followed by 12 zeros -- a milestone Republicans have latched on to for a fresh attack on President Obama's fiscal management. The timing could not be more conspicuous, with less than a week left before the super committee's deadline and no deficit-reduction plan in sight. A leading Senate Republican said Thursday his party continues to wait for a counteroffer from Democrats, and charged that Obama has been "AWOL" in the discussion.

Returning to South Carolina, a state key to reviving his presidential candidacy, Gov. Rick Perry unveiled what he said was a “bold” tax plan to revive the nation's economy. The Texas governor, speaking at the warehouse of a specialty plastics company south of Greenville, proposed a flat tax plan that critics said would worsen the federal deficit. Perry's plan includes an optional 20% flat tax for individuals and corporations. But he would allow anyone to remain with the current tax system, insuring that no one's taxes would go up and threatening to cut federal revenue by hundreds of billions of dollars a year.

California voters are increasingly downcast about the direction of the country, but -- like their leaders in Washington -- many would rather adhere to party orthodoxy than compromise to address the current economic problems, a new poll shows. The findings offer little guidance for President Obama, who will unveil a jobs package this week that he hopes to push through a polarized Congress. Further troubling for the president: The survey results suggest that Republicans, even in deep-blue California, are winning the rhetorical war of words over how to frame the country's economic troubles, and how to get out of them.

A third consecutive year of massive federal deficits and a slumping economy with high unemployment portrays a bleak fiscal outlook for the U.S., promising a divisive political debate this fall over how to get the country back on track. The Congressional Budget Office said Wednesday the federal deficit was projected to hit $1.3 trillion in fiscal 2011, the third year of shortfalls at levels not seen since World War II. As the economy continues to struggle, unemployment is expected to remain stubbornly high through the end of the year, but dip to 8.5% as the 2012 election approaches, a slight improvement but still high and on par with previous projections by the congressional agency.

The jobs package that President Obama plans to unveil shortly after Labor Day could include tens of billions of dollars to renovate thousands of dilapidated public schools and a tax break to encourage businesses to hire new workers, according to people familiar with White House deliberations. As aides work to put together the proposal, they are also hammering out a companion plan to reduce federal budget deficits over the next decade, which Obama would share with the 12-member congressional "super committee" charged with finding long-term fixes for the growing national debt.

If you take mortgage interest tax deductions, the next 100 days could have significant financial implications for you because of Congress' new federal debt ceiling plan. Although the compromise legislation itself involved no new taxes, it created an unusual mechanism — an evenly split, 12-member bipartisan super-committee that could call for major cutbacks on real estate write-offs by Thanksgiving. All it will take is a single vote by a lone senator or House member who breaks with his or her party to put the mortgage interest deduction into serious play.

Senate Majority Leader Harry Reid announced the first appointees to a congressional super-committee charged with tackling the federal deficit, but the Democratic choices offer few signs that the panel can resolve the partisan stalemate that has only hardened in Congress amid the nation's worsening economic outlook. Reid tapped Sen. Patty Murray of Washington to co-chair the Joint Committee on Deficit Reduction, and also named Sen. Max Baucus of Montana, the chairman of the Senate Finance Committee, and Sen. John Kerry of Massachusetts.

Now that Congress is finished displaying its one unquestionable skill - conniving at ideological extortion, with the household budgets of millions of Americans hanging in the balance - the time has come to calculate the damage done to U.S. fiscal policy by the debt ceiling deal reached this week. The toll can be measured in several categories. One is the way the debate elevated deficit panic, an entirely fabricated issue in terms of today's policy necessities, to legitimacy.

As President Obama pushed hard for a grand deal to reduce the federal deficit, he ignited a furor among congressional Democrats on Thursday by appearing to retreat from his insistence that spending cuts and revenue increases be included in the same package. The White House briefed Democratic leaders on a possible $3-trillion deficit-reduction deal, the latest in a rapid-fire series of proposals aimed at winning congressional approval for an increase in the nation's $14.3-trillion borrowing limit before Aug. 2. That's when the government is expected to run short of funds and risk defaulting on its debt.