The United States is not the first nation to face tough fiscal challenges. Other countries have faced similar fiscal challenges – and gotten out of them.
In a new paper ("Fiscal Turnarounds: International Success Stories"), CRFB’s Fiscal Roadmap Project looks at successful fiscal turnarounds around the world and possible lessons for the U.S.
What are the lessons?
Here are the highlights from this weekend’s editorials on fiscal and budget policy:
The New York Times argued that the temporarily higher federal matching for state Medicaid funds should continue past the end of next year, when the higher matching rates are set to expire. They claimed that this would be a good way to help states' budgets and will help the increased numbers of poor people who currently rely on Medicaid for healthcare.
Nobel Laureate Joseph Stiglitz stopped by New America this week to discuss his new book "Freefall", about our economic and financial crisis.
For the fiscal hawks among us, he warns: "Our economic growth has been based … on borrowing from the future: we have been living beyond our means."
But, he has other worries for the immediate future:
President Obama has just proposed a fee on financial firms, stating his commitment “to recover every single dime the American people are owed.” The measure, called the Financial Crisis Responsibility Fee, will only apply to the largest firms with over $50 billion in assets. The White House expects it to raise $117 billion over 12 years and $90 billion over the next ten.
The Financial Crisis Inquiry Commission, which was established to examine the causes of the economic and financial crisis, kicked off the first day of its first hearing today. The witnesses on the main panel today were the chairmen and CEOs of Goldman Sachs, JP Morgan & Chase, Morgan Stanley, and Bank of America. Commissioner statements and testimony can be seen here.
The Federal Reserve announced, this morning, that it will transfer $46.1 billion in FY2009 profits over to the Treasury, higher than the $31.7 billion in 2008 profits (Thanks to Donald Marron for pointing this out). The Fed reported that the increase in profits was due largely to earnings on additional securities holdings.
The IRS has agreed to give up billions in tax money in exchange for Citigroup’s repurchase of $20 billion of its assets held by TARP. In a notice released on Friday, the IRS will exempt up to $38 billion in future Citi profits from taxable income.
General Motors and Wells Fargo have both just announced that they intend to repay all of the $6.7 billion and $25 billion, respectively, in outstanding TARP investments. GM said it hopes to repay the Treasury by the end of June, but Wells Fargo did not offer a time frame.
Today, Citigroup announced that it will repay $20 billion in TARP funds. Since last fall, the government has provided $45 billion in capital for Citi, investing in the company through the Capital Purchase Program and the Targeted Investment Program.
In his speech today, President Obama proposed reducing the amount of money available in the TARP fund to pay for the new stimulus measure. When TARP was created, Congress authorized the Treasury to use up to $700 billion for purchasing troubled financial assets. Currently, about $300 billion remains available, and so policymakers could technically rescind part of that money to pay for new stimulus costs.
