Tag: debt

LA Budget Crisis, Deficit Approaches $1 Billion, Layoffs ‘Nearly Inevitable’

L.A.’s financial problems exploded into a full-blown crisis on Wednesday, with the city’s top budget official announcing that next year’s shortfall is now just shy of $1 billion, making layoffs “nearly inevitable.”

City Administrative Officer Matt Szabo said Mayor Karen Bass’ proposed budget, which will be released April 21, will close that gap, but it will require difficult “cost-cutting decisions.” He warned that the severity of revenue declines and rising costs has created a budget gap that makes layoffs “nearly inevitable.”

Szabo, in his presentation to the council Wednesday, attributed the city’s financial woes, in part, to increased spending on legal payouts, which have ballooned over the last few years. Tax revenues have been coming in much weaker than expected — and are expected to soften further in the upcoming budget year, which starts July 1.

Pay raises for city employees that are scheduled to go into effect in the coming budget year are expected to consume an additional $250 million. On top of that, Szabo said, the city needs to put hundreds of millions into its reserve fund, which has been drained in recent months in an attempt to balance this year’s budget.

Councilmember Katy Yaroslavsky, who heads the budget committee, said the council will need to look at the possibility of asking unions representing city workers to defer the scheduled raises or make other concessions.

“I think everything needs to be on the table,” she said in an interview.

David Green, president and executive director of Service Employees International Union Local 721, called Szabo’s remarks “short-sighted and irresponsible.”

“There’s no question that all of us are in shock with this number,” said Councilmember Bob Blumenfield, who sits on the council’s budget committee.

Blumenfield predicted that city leaders would need to seek financial concessions from the workforce.

“Eighty percent of our expenses is labor,” he said. “If we are short more than 10% of our budget, the ‘math doesn’t math’ without looking at labor costs.”

Over the last two years, Bass and the council have signed off on raises and increased benefits for an array of unions — first police officers, then civilian city workers, then firefighters.

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US Household Debt Surpassed $18 Trillion

American households have been unable to pay off their debts. The Federal Reserve Bank of New York recently reported that household debt has reached a new all-time high at $18.04 TRILLION.

Americans acquired an additional $93 billion in outstanding payments during Q4 of 2024, with half of this debt finding its way onto high interest credit cards. Credit card debt has also reached a record high at $1.21 trillion. I reported in January that credit card defaults his a 14-year high after skyrocketing by 50% in a one-year period.

Donald Trump said during his campaign that he would like to cap credit card interest fees at 10%, perhaps for a temporary period. There are now bipartisan calls for companies to lower fees, with Congresswomen like AOC and Anna Paulina Luna both championing a 10% credit card cap.

Prior to the pandemic, Americans paid $120 billion annually in credit card interest fees from 2018 to 2020, amounting to $1,000 annually per household. In 2022, consumers were paying $105 billion in interest as it has become the main cost behind having a credit card. Rates on credit cards have doubled in a mere decade from 12.9% in 2013 to 22.8% in 2023.

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Musk Fired-Up About Paul’s Rescission Idea For Slashing Spending Up To $500 Billion

Seeking to codify spending cuts pursued by his Department of Government Efficiency, Elon Musk held a closed-door lunch with Republican senators on Wednesday. Musk was said to be “elated” with Sen. Rand Paul’s recommendation to make the cuts stick with a relatively expeditious budget-slashing technique called “rescission.” The approach could guide DOGE cuts around federal judges who consider executive-branch-initiated spending cuts as exceeding constitutional authority. 

Rescission offers a means by which presidents can collaborate with Congress to cancel previously-appropriated spending. Enabled by Title X of the Congressional Budget and Impoundment Control Act of 1974, the rarely-used process starts with the president sending a special message to Congress, providing specific details about which budgetary authorities he wants to rescind. 

With Republicans holding a narrow 53-47 Senate majority, one of the most attractive aspects of rescission is that it doesn’t require 60 votes — a simple majority suffices to grant the president’s wish. Missouri Sen. Josh Hawley told reporters that Musk was “elated” with Paul’s proposal: “I think he didn’t realize it could be done at 51.” According to South Carolina Sen. Lindsay Graham, it was the first time Musk had heard of the rescission process. He said Musk reacted by triumphantly lifting his arms into the air.  

The approach promises to immunize DOGE spending cuts from federal judges who are skeptical about the executive branch’s power to cut spending that was duly authorized by Congress. This week has seen two major developments that demonstrate the strength of that judicial headwind:

Rescission is an alternative to “impoundment,” by which presidents unilaterally delay Congressionally-directed spending. First used by Thomas Jefferson, the method was restricted by the Impoundment Control Act of 1974 (ICA) after Democrats felt President Nixon was abusing it. Trump has called ICA “a disaster of a law” and vowed to “do everything I can to challenge [it] in court, and if necessary, get Congress to overturn it.” However, as noted above, the same law provides the opportunity for rescission, which means Trump can use ICA to his advantage. 

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Chancellor set to cut welfare spending by billions

The chancellor has earmarked several billion pounds in draft spending cuts to welfare and other government departments ahead of the Spring Statement.

The Treasury will put the proposed cuts to the government’s official forecaster, the Office for Budget Responsibility (OBR), on Wednesday amid expectations the chancellor’s financial buffer has been wiped out.

Sources said “the world has changed” since Rachel Reeves’s Budget last October, when the OBR indicated she had £9.9bn available to spend against her self-imposed borrowing rules.

The OBR’s forecast is likely to see that disappear because of global factors such as trade tariffs, as well as higher inflation and borrowing costs in the UK.

The Treasury will on Wednesday inform the OBR of its “major measures” -essentially changes to tax and spending in order to meet the chancellor’s self-imposed rules on borrowing money.

The government has committed to get debt falling as a share of the economy during the course of this Parliament, and to only borrow to fund investment, not to cover day-to-day spending.

Such rules, put in place by most governments in wealthy nations, are designed to maintain credibility with financial markets. Reeves has repeatedly said her rules are “non-negotiable”.

The spending cuts drafted by the Treasury will help plug the gap that has emerged in recent months, ahead of the OBR publishing its forecast and Reeves giving a statement on 26 March.

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United States Senate Fails First Test on Balancing the Budget

Congress hates ideas to cut spending. Whether we are talking about Republicans or Democrats, they seem to be incapable of taking any concrete action to lead on the idea of balancing the budget and paying down America’s approximate $36 trillion in debt. Our national debt is emerging as the greatest threat to national security, yet Congress refuses to follow the lead of the Department of Government Efficiency (DOGE), run by Elon Musk, to make reforms to government spending programs. The fact that the Senate has rejected ideas to use the budget process to cut spending is a bad sign going forward.

The Trump Administration has been aggressive in finding places to cut spending through executive action. This continues the idea of “Promises Made, Promises Kept” that has been a mantra of the Trump Administration since his first term in office. One promise was to find ways to shrink government where it made sense. The executive branch of government has taken the lead on weeding out waste, fraud and abuse, yet Congress seems to want to increase spending on programs they want to empower, yet they steadfastly refuse to pay for new spending with the spending cuts proposed by President Trump and Members of Congress who have proposed reforms to government programs.

The evidence of a lack of will on the part of the Senate to cut any spending was clear recently when my former boss, Sen. Rand Paul (R-KY), offered an amendment to the Senate budget resolution on February 20, 2025 to cut federal spending by at least $1.5 trillion mirroring his “Six Penny Plan.” The Paull amendment sets up a process to balance the federal budget in five years by cutting spending 6% per year by creating a new budget function that freezes in programs spending, in addition to calling on Congress to find a 6% cut every year for five years. The Paul idea preserves Congressional discretion on how to achieve the reductions.

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Thanks To Massive Deficits, U.S. Will Pay $13.8 Trillion In Interest Over The Next Decade

The Friday before Inauguration Day, the Congressional Budget Office (CBO) illustrated the fiscal challenge facing President Trump and the new Republican Congress. In a short version of its annual Budget and Economic Outlook, CBO quantified the whopping $21.8 trillion in budget deficits the federal government faces in the coming decade.

While the updated numbers only marginally constitute news — CBO has warned for years about our dire financial future, only for lawmakers to keep spending — one particular nugget illustrates the problem. The budget gnomes significantly increased their spending projections for Medicaid, as but one example of how entitlement programs continue to cannibalize the federal budget.

Double-Digit Growth in Medicaid

Appendix A, which contains all the changes — legislative, economic, and technical — to the fiscal baseline since CBO’s last update last June, contains a sizable change in the last category. Among the technical “tweaks,” the budget office increased projected federal spending on Medicaid over the coming decade by $817 billion, or 12 percent. Most of this projected increase has to do in one way or another with administrative actions by the Biden administration.

Chief among the factors driving the spending explosion were continued increases in Medicaid enrollment, even after states were finally permitted to remove beneficiaries from the rolls following the pandemic (something they could not do during the Covid “emergency”). CBO increased projected enrollment for calendar year 2025 from 79 million last June to 84 million. It also noted that the enrollees remaining on Medicaid have generally worse health than those who were removed from the rolls, resulting in “significantly higher than expected” costs per enrollee last year — which CBO believes will force state Medicaid programs to raise their rates to the managed care plans that provide coverage.

Other factors also drove the growth in the Medicaid spending estimates, including projected increases in enrollment among individuals with disabilities — a result of Biden’s rules expanding eligibility for the Supplemental Security Income program — and rising drug costs, attributable in part to Biden’s recent proposal to require Medicaid programs to cover GLP-1 drugs to control obesity. CBO assumed a “modest increase in expected coverage expansions” under Obamacare, meaning more red states will decide to cover able-bodied adults (which they should not do).

Finally, the budget office assumed that another Biden regulation will raise Medicaid spending. Specifically, a rule on state-directed payments will encourage states to raise reimbursement levels to draw additional federal matching funds. In a recent paper for the Paragon Health Institute, I suggested that Congress or the new administration should repeal many of these requirements, which provide examples of the executive branch spending money without congressional approval.

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Another Biden Time Bomb Just Blew Up

Former presidentish Joe Biden shuffled off into the sunset almost exactly 22 days ago, but his demented legacy of radical overspending, over-borrowing, and overregulating lives on — and the latest Treasury figures are one more glaring example of how deep the hole is the Biden Cabal dug for us.

Look, I know these spending stories might seem dry and boring, and I feel like I lose readers every time I get into one of them — but this is real End of the Republic stuff, as Donald Trump, Elon Musk, and the DOGE boys seem to understand. So bear with me once more as we stare into the abyss and hope that it is not gazing into us.

“The train is out of control,” Geiger Capital warned on X on Monday. “The first four months of FY 2025 produced a deficit of $838 billion. That’s $306 billion more than the deficit recorded in the same period last fiscal year.” 

Keep your flashlight on me as I walk you through the tall weeds.

The year-over-year deficit increased by more than a third in the last quarter of Bidenomics, and yet revenues only increased by less than 1%. Washington is spending a whole lot of money we don’t have to almost zero effect, like transfusing fresh blood into a corpse. 

This is the Biden economy that the press assured us was all hunky-dory in their attempt to push Kamala Harris over the finish line.

“We’re running a $2.5 TRILLION annual deficit” for 2025, Geiger concluded. 

The economy’s official growth rate last year was 2.8%. That’s an extra $815 billion in a $29.1 trillion economy. But the federal deficit last year — the money Washington conjured up out of nothing to pay for s*** we didn’t need — was $1.8 trillion. What that means is that our 2.8% growth was an illusion, a Washington accounting gimmick financed by our grandkids and great-grandkids. 

The weeds are looking like redwoods right now, I know, but stay with me.

If Washington had done nothing more radical last year than spend within our means, the economy would have shrunk by about $1 trillion. That’s a nasty recession where the economy ended the year almost 3.5% smaller than it began. 

So where’d all that funny money go?

Would you believe… right back to the government?

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‘Worse Than World War II’ – Visualizing US National Debt (As A Percent Of GDP) Since 1900

This year, U.S. national debt is set to approach 100% of GDP, up from 36% in 2005.

By 2035, the tab is projected to reach 118.5% of GDP as higher debt costs steepen the deficit, fueling further government borrowing. Today, the deficit stands at $1.9 trillion with net interest and mandatory spending outpacing revenues.

This graphic, via Visual Capitalist’s Dorothy Neufeld, shows U.S. federal debt projections to 2035, based on data from the Congressional Budget Office.

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How is Stargate’s $500B getting funded?

OpenAI, SoftBank, Oracle, and the UAE’s MGX on unveiled a company on Tuesday that plans to invest $500 billion in AI infrastructure for OpenAI in the U.S.

Why it matters: SoftBank is doubling down on its OpenAI bet, and it reduces OpenAI’s reliance on the infrastructure of Microsoft, its largest investor.

Context: The Stargate project will invest an initial $100 billion, with another $400 billion over the next four years.

Between the lines: A portion of the $100 billion is expected to be funded via third-party debt rather than equity, Axios has learned.

  • SoftBank will be responsible for raising the debt.
  • SoftBank and OpenAI are the largest equity investors in the first $100 billion in stargate yes, with Oracle and MGX also having contributed.
  • Similarly, the additional $400 billion is expected to be a mix of current investors, new investors, and debt providers.

OpenAI will be responsible for the day-to-day operations of the business.

The big picture: SoftBank CEO Masayoshi Son previously promised President Donald Trump that he would invest $100 billion in U.S. firms over the next four years. This is part of that promise.

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Our 101 Trillion Dollar Problem: This Is The Number One Tool The Elite Use To Enslave Us

Right now, a tremendous awakening is happening as people all over the world become educated about the tools that the elite use to enslave us to their system.  The number one tool that they use to enslave us is debt.  The financial powers of the world use it to enslave individuals, corporations and governments.  For thousands of years humanity has been taught the proverb that “the borrower is the servant of the lender”, and yet today billions of people around the globe have willingly made themselves servants of the money powers.  You see, when you borrow money from a financial institution, you not only have to pay that money back, but you also have to pay a significant amount of interest.  In fact, often the interest ends up being much more than the principal of the loan.  Thus the borrower ends up devoting a great deal of his or her labor to earning money for the lender.  Yes, there are times when it is necessary to borrow money.  But what we have been doing over the last 30 years goes far beyond “necessary” borrowing.  The fact that the U.S. government is now 36 trillion dollars in debt gets a lot of attention, but the truth is that state and local governments, corporations, and U.S. households have piled up enormous mountains of debt as well.

I want to show you a chart from the Federal Reserve that is hard to believe.

In the mid-90s, the total amount of debt in the system was about 20 trillion dollars, but now we have reached the 101 trillion dollar mark…

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