The Congressional Budget Office provided a glimpse at the 10-month mark of the federal fiscal year 2012, and the results are grim.

Outlays are virtually the same through 10 months of 2012 as they were in 2011 at $3 trillion and revenues collected during this same period are slightly higher at approximately $2 trillion.  This means that our nation is guaranteed to run another trillion dollar-plus budget deficit this year.

The nitty gritty numbers show that in the federal fiscal spending year ending Sept. 30, 2011, the government ended up spending more than $3.6 trillion with revenues of $2.3 trillion leaving a $1.3 trillion deficit ? that's $1,300,000,000,000.00.  If laid end to end, 1.3 trillion dollar bills would go around the circumference of the earth 5,040 times.

If the spending and revenue of the first 10 months of FY12 continue at the same rate through the end of the year, FY12 will be slightly less disastrous with outlays projected to hold steady at $3.6 trillion while revenues increase to $2.4 trillion leaving a $1.2 trillion deficit give or take $50 billion.

That makes four consecutive years that Obama has presided over a budget deficit in excess of $1.2 trillion and more than $5 trillion added to the deficit on his watch.

The chart below from the Office of Management and Budget demonstrate the reality of the budget wars in D.C. and provides some small hope to those who have been frustrated by House Republicans' seeming inability to win the spending battle.  If there is solace to be found, the fact that actual outlays are a full $200 billion short of Administration estimates is some small win.  It is this flattening of the outlays that is largely responsible for the meager reduction of our exploding deficit that was accomplished.

Before our nation's budget cutters go howling in the streets declaring victory is near, if this Congress had just held spending to the same levels as they were the year they were elected, the budget deficit would have dropped by around $150 billion more.

While Obama flies courtesy of the taxpayer around the country declaring a need for higher taxes, the point that he hopes no one notices is that during the Clinton Administration tax revenues only exceeded $2 trillion one time in his last year FY 2000, but in that year, outlays were under $1.8 trillion. Today, revenues are projected to have grown by 20 percent since 2000, while outlays have doubled in those 12 years.

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By Robert Romano

On July 31, Federal Housing Finance Agency (FHFA) acting director Edward DeMarco once again rejected an Obama Administration plan to bail out borrowers who owe more on their mortgages than their homes are worth, citing cost concerns.

The FHFA, which administers the government's conservatorship of Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac, undertook an analysis of the program, showing reductions of mortgage principal owed for certain borrowers would cost taxpayers more and even potentially result in more defaults.

Even under the program's best case scenario, the Agency estimated just 248,000 borrowers would be eligible for principal forgiveness under the Home Affordable Modification Program Principal Reduction Alternative ? or just 2.2 percent of the 11.1 million borrowers nationwide who are underwater.

That means that even if DeMarco had implemented the program, approximately 97.8 percent of underwater borrowers would not have even been eligible. Therefore, more than $700 billion of the $717 billion of negative equity in homes nationwide would have remained unaddressed.

In other words, even if DeMarco had relented, this bailout would have done almost nothing to solve the problem of underwater borrowers. Yet, Treasury Secretary Timothy Geithner, in a letter to DeMarco responding to his decision not to implement the bailout, maintained the fiction that the program would somehow "help repair the nation's housing market".

New York Times columnist and economist Paul Krugman goes further, calling for DeMarco to be fired for not implementing a bailout almost nobody would qualify for, writing, "even if there's a small net cost to taxpayers, debt relief is still worth doing if it yields large economic benefits."

But even if debt relief did yield economic benefits in certain cases, this is not one of them.

According to the FHFA, some 80 percent of underwater borrowers who have GSE mortgages are current on their payments. But that could change if a bailout is implemented.

As DeMarco noted in his letter to Congress, selective application of the program could create a perverse incentive for borrowers to miss payments and potentially default in a misguided attempt to qualify for the bailout.

Under the program's best case scenario ? where all 248,000 underwater borrowers qualify ? if just 19,000 of the 10.8 million remaining borrowers who did not were to strategically default, it would more than offset any potential benefit derived.

As a result, "HAMP PRA would result in a net loss to taxpayers, even using the model-based assumptions most favorable to the program," wrote DeMarco.

Of course, it's all political. Don't let anyone tell you different.

"Obama's goal is to build a constituency of borrowers underwater on their mortgages with the hope that they might ? emphasis on might ? be able to get some relief," said Americans for Limited Government President Bill Wilson, calling it "nothing more than a cynical election year ploy."

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ObamaCare Going Into Effect, Maine Fights Back

Video by Frank McCaffrey

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K Street Republicans' war on Palin

By Rick Manning

As originally published at TheHill.com.

I'm getting sick of the rewriting of 2008 presidential campaign history as K Street Republicans continue to assault Sarah Palin in the fear that a similarly conservative Republican will rise to the top of the VP sweepstakes.

It has been so fashionable in D.C. Republican circles to bash the Palin nomination as a mistake, ill-conceived or even disastrous, that even Dick Cheney has gotten into the act.

These self-serving attempts to change history are nothing more than a smear campaign designed to influence the Romney VP pick by obscuring the truth that the choice of Sarah Palin to be the vice presidential nominee was truly inspired.

The McCain campaign was in the doldrums. Unable to match the youth and enthusiasm of the inexperienced but expert campaigner from Illinois, McCain needed to shake up the race, and Palin accomplished just that.

Her incredible acceptance speech, delivered in spite of a faulty teleprompter (try that, Mr. President), gave the nation a new face and voice for conservative principles just when it was desperately needed.

That same energy from the convention rolled over into the 2010 election, embodied in the Tea Party movement and leading Republicans to a historic victory.

History shows that it was the McCain campaign that blew any chance at election when it suspended its efforts fully three weeks after the nomination to come back to D.C. and rubber-stamp the TARP bailout.

Having agreed upon the legislative actions that socialized losses by too-big-to-fail banks, McCain lost all ability to differentiate between himself and the big-government policies advocated by Obama.

Pollster Scott Rasmussen reported on Sept. 20, 17 days after the Palin pick, that his daily Presidential Tracking Poll "shows Barack Obama with 48 percent of the vote and John McCain with 47 percent. While Obama's lead is statistically insignificant, it is the first time he has held even a single-point advantage in a week and a half. One week ago today, McCain was up by three points."

For the mathematically challenged, this means that less than two months from the election, McCain and Palin were leading in the polls.

Rasmussen goes on to say, "Obama's gains over the past week came as the focus shifted from the momentum generated at the Republican National Convention to the economic rollercoaster ride that played out on Wall Street. Few agreed with McCain's initial statement about the economy being fundamentally sound and neither candidate has yet convinced voters that he will bring the needed changes to the financial markets."

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ALG Editor's Note: In the following featured editorial from the Pittsburgh Tribune-Review, the board lays waste to Harry Reid's claims that Mitt Romney paid no taxes:

The Reid smear: Vermin droppings

Harry Reid beats his wife.

The Senate majority leader also leaves restaurants without paying his bill.

And the Democrat of Nevada lets his dog poop in his neighbor's yard and never cleans it up.

We don't know any of this to be true, mind you. But we have heard these allegations. From whom? Sorry, we're not in the habit of revealing our sources.

Of course, it's up to Mr. Reid to prove otherwise.

Reid doubled-down last week on his allegation that presumptive Republican presidential nominee Mitt Romney did not pay any federal taxes for a 10-year period. An unnamed investor with Bain Capital, Mr. Romney's former company, told him so, Reid said.

And, he added, it's now up to Mr. Romney to disprove the anonymous and undocumented charge.

"So the word is out that (Romney) hasn't paid any taxes for 10 years," Reid said from the Senate floor, rhetorically elevating a smear to a faux fact like so many vermin droppings. "Let him prove that he has paid taxes, because he hasn't."

Romney denies the charge. "It's time for Harry to put up or shut up" and produce proof of his allegation, he said.

Expect that to happen on the same day that Harry Reid actually is arrested for beating his wife, for not paying his restaurant tab and letting Fido do the big No. 2 in the neighbor's yard.

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Law Provides Businesses with Greater Certainty, Will Boost Economic Development Across Illinois

CHICAGO - August 7, 2012. As part of his agenda to grow jobs and increase economic development across Illinois, Governor Pat Quinn today signed a new law to extend the Illinois Enterprise Zone program, a state and local partnership to encourage economic growth across the state. Senate Bill 3616 will create greater long-term stability for businesses, attract more investment in Illinois and protect the interests of taxpayers. The new law provides for a 25-year extension of the program, which creates a process for existing communities with zones and new communities to apply for the designation

"We want our businesses to invest, grow and put more Illinois residents to work," Governor Quinn said. "This new law provides employers with the long-term certainty they need to grow, and strengthens oversight standards to ensure accountability from businesses that participate in the program."

The new law makes three major changes to the state's Enterprise Zone program:

• Extends the sunset of the Illinois Enterprise Zone program 

The law extends the Enterprise Zone Program for 25 years, and creates a process for existing communities with zones and new communities to apply for the designation. Under the new procedure, the Department of Commerce and Economic Opportunity (DCEO) will accept and review all applications to determine if they meet three of 10 criteria to be certified as a zone, which includes unemployment rate, infrastructure, plant closure/job loss, education, poverty rates, and high commercial and industrial vacancy.

• Creates an Enterprise Zone Board
  The Enterprise Zone Board will approve or deny enterprise zone applications certified and scored by DCEO. The board will consist of five members: the director of DCEO, or his or her designee, who shall serve as chairperson; the director of the Department of Revenue, or his or her designee; and three members appointed by the Governor.

• Increases reporting requirements of companies receiving tax benefits from the Enterprise Zone and High Impact Business programs

The law increases accountability by requiring that any business receiving tax incentives due to its location within an enterprise zone or its designation as a High Impact Business must annually report the total Enterprise Zone or High Impact Business tax benefits received. The report must be broken down by incentive category and enterprise zone, to the Department of Revenue. Failure to report data shall result in ineligibility to receive incentives.

SB3616, sponsored by Sen. Michael Frerichs (D-Champaign) and Rep. John Bradley (D-Marion), passed the General Assembly unanimously and was supported by many in the business community, including the Illinois Municipal League, Caterpillar, the Illinois Chamber of Commerce and the Illinois Manufacturers Association. The new law renews the Illinois Enterprise Zone program, which is one of the state's most vital economic tools. During its history, 42,543 businesses have invested in enterprise zones. Businesses located in enterprise zones have created 354,762 jobs and retained 536,562 jobs. According to the National Conference of State Legislatures, 43 states, including Illinois, have enterprise zone programs under a variety of different program names.

"By helping our communities become enterprise zones, we are giving them a leg up on the competition in drawing companies to their areas, " said Rep. Bradley. "I would like to thank Governor Quinn for signing this law to help bring businesses to every corner of Illinois."

"The Illinois enterprise zone program is a vital tool for growing jobs and attracting investment in Illinois. We applaud Governor Quinn and the General Assembly for taking action and sending a positive message to the business community," said Greg Baise, president & CEO of the Illinois Manufacturers' Association, a statewide business group representing nearly 4,000 companies. "Enacting a long-term extension of this successful program is another step in making Illinois a good place to do business and providing stability for employers." 

"As economic developers, we compete every day for jobs and investment with locations throughout the country and around the world and the Illinois Enterprise Zone program has kept us in the game for nearly 30 years," said Craig Coil, president of the Illinois Enterprise Zone Association and the Economic Development Corporation of Decatur & Macon County. "By passing and signing this bill, Governor Quinn and the General Assembly have helped all of us who are involved in economic development in Illinois and the communities we represent remain competitive for the foreseeable future."

"We are listening to what companies say they need to thrive," said David Vaught, acting director of the Department of Commerce and Economic Opportunity. "They tell us that the Illinois Enterprise Zone program is one of the most effective economic development tools in the state's tool box. By extending the program for 25 years, companies have a predictable environment in which they can create jobs and fuel economic growth."

SB 3616 is effective immediately. The Governor will make stops today in Chicago, Rockford, Quad Cities, Peoria, Decatur and Mount Vernon to highlight the new law that will boost economic growth in communities across Illinois.

For more information on why Illinois is the right place for business, visit http://illinoisbiz.biz.

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By Robert Romano

As originally published at RealClearMarkets.com.

The Federal Reserve shocked markets on Aug. 1 when it decided to do nothing. Do nothing new, that is. Particularly, no QE3 ? i.e. a third round of quantitative easing, or printing money to purchase U.S. treasuries and other securities.

Markets immediately started tanking, and continued, through Aug. 2 before finally recovering on Aug. 3. Traders apparently wanted another temporary sugar high from the nation's central bank and didn't get it.

Oh well, not that it matters all that much.

As if the Fed taking on another $500 billion or so of federal government debt would have magically turned the economy around any more so than the previous $860 billion of such purchases since Aug. 2007 has.

To print, or not to print?

Even some more conservative pundits were distraught, such as Bloomberg View columnist Caroline Baum, usually a hawk on monetary policy, who advocated for the Fed to "consider more outright purchases of treasuries... Yes, print money. There, I said it."

Baum wrote she is "thinking differently" about monetary policy, but has not reached any conclusions yet. What promoted her new, potential outlook was a recent book by Robert Hetzel, senior economist and research adviser at the Richmond Fed, entitled, "The Great Recession: Market Failure or Policy Failure?"

In it, Hetzel takes the view that monetary policy ? even with the Fed's gross expansion of its balance sheet from $869 billion in 2007 to $2.8 trillion today, more than tripling it in just a few short years ? is too tight, and has "simply accommodated the increased demand for bank excess reserves."

To be certain, deposits held by Federal Reserve banks on behalf of financial institutions have exploded from $13.4 billion in 2007 to more than $1.5 trillion today. Therefore, it is hard to argue with Hetzel's conclusion that most of QE1 and QE2 is just sitting in a vault.

Probably the reason for that is as a hedge against any new losses that pop up in the wake of the financial crisis, which as Europe is discovering, may just be clearing its throat. Leaving that aside, if one views current policy as being too tight, one opens the door for more credit expansion.

But how much money-printing would be necessary to restore economic growth seen in the past 60 years?

Doubling down

Previously, Americans for Limited Government President Bill Wilson has examined the relationship between credit expansion in the U.S. and the growth of the Gross Domestic Product (GDP) since World War II in a piece entitled, "Can the economy grow without debt?"

In it, Wilson observes that the relationship between debt and economic growth between 1945 and 1970 was relatively stable. Throughout that period, credit outstanding nationwide hovered between 140 to 167 percent of GDP.

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Maine's shot across Obamacare's bow

By John Vinci

As originally published at ObamacareWatcher.org.

The state of Maine on Aug. 1, 2012, sent a shot across the bow of Obamacare in the form of a letter to Secretary of Health and Human Services (HHS), Kathleen Sebelius.[1] The letter requests a reduction to Maine's Medicaid eligibility threshold by Sept. 1, 2012 and threatens to sue if the Obama Administration does not agree to the changes. The letter, written by Maine Governor Paul LePage asserts Maine's right not to be coerced by the federal government?a right confirmed by the Supreme Court's Obamacare decision, NFIB v. Sebelius, not quite two months ago.

Gov. LePage hopes the proposed changes, expected to save Maine nearly $20 million, will help solve Maine's fiscal woes.[2]

But a provision of Obamacare, called the "maintenance of effort" (MOE) requirement, bans states from lowering their Medicaid eligibility threshold until they establish a state health exchange. [3] Just like the Medicaid expansion requirement declared unconstitutional by a vote of seven to two justices at the Supreme Court, States that violate the MOE requirement risk losing all Medicaid funding.[4]

The Wall Street Journal reported that "within hours" of the Supreme Court's decision in NFIB v. Sebelius,  Maine's Attorney General's office was studying what effect the case might have on Obamacare's MOE requirement.  After studying the issue, the state's Attorney General, William Schneider, says he's convinced that Maine's challenge to Obamacare is "on solid legal ground."[5]

"The state of Maine is taking the right step in boldly challenging the Obama Administration's threat to cut off all federal Medicaid funding due to the state's decision to lower their Medicaid liabilities," said Bill Wilson, president of Americans for Limited Government (ALG).

Early reports of Maine's requested change claimed that HHS[6] and the Congressional Research Service (CRS)[7] disagree with Maine.  But HHS and CRS did not then have the benefit of seeing Maine's legal analysis.  In a July 11, 2012, letter to Health and Human Services (HHS), Gov. LePage told HHS Secretary, Kathleen Sebelius, that he believed she would "reserve judgment until the law and facts are fully-presented."[8]

Now that Maine has presented the "law and the facts" we know that it has two arguments.

First, Maine argues that Obamacare's MOE requirement is "part and parcel" of its Medicaid expansion provision and thus was struck along with that provision.

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Commentary: Big Government's battle with Chick-fil-A has unintended consequences

Video by Frank McCaffrey

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Tea Party scores another win in Texas

By Duane Miller

Conservatives selected a candidate for senator in Texas this week.  What are called "grassroots-conservatives" celebrated the election.  Ted Cruz, a political unknown one year ago, defeated Lt. Governor David Dewhurst, handily.  Dewhurst represented the Republican establishment.  He was an office-holder, had name recognition, endorsements of the expected GOP names, and much more money.  It is said that Dewhurst spent more than $20 million of his own money on his campaign.

Both men called themselves "conservative."  And, compared to Democrats, both are.  The difference is that Cruz is representative of a movement in America that is fed up with the Go-Along-to-Get-Along compromise-and-defend politics of the Republican Party over the past several years.

Voters turned out in record numbers in Texas for a runoff election held in July.  The totally unheard of voting participation resulted in Cruz winning by double digits.  Money and connections lost to a grass-roots activist base of voters.  Called a "Tea Party Tidal Wave" by some pundits, the victory by Cruz should be an alarm bell for Speaker Boehner and the rest of the Republicans currently holding office or desiring election to office.

Ted Cruz was not the only beneficiary in runoff elections.  "Grassroots Conservatives" won in other Texas races as well as in other states.  In Atlanta, Georgia, a penny increase in the sales tax to fund transportation projects was a major priority for the sitting Republican governor.  It was defeated by 26 points.  True conservatives are angry with wimpy leadership and rising taxes.  The message that is being clearly sent to the establishment republicans is, "represent our interests or get tossed."

Conservatives Have Had It With Do-Nothing Leadership

For decades, the Republicans were the minority party in both the House and Senate.  The Democrats ran everything and the minority party had very little influence.  About the only way a Republican could get his name in the paper was to do something completely outrageous or co-sponsor a Democrat bill.

Then came 1994 and the "Contract With America" that brought Republicans a majority in Congress and an opportunity to lead.  The "Contract" election was the first stirring of conservative sentiment, but traditional media vilified the Republicans, called them, "Obstructionists," the Republicans did nothing to fight back, and, at the next election the Democrats gained 9 seats in the House.  Conservatives were taught to be seen-and-not-heard, their opinions are irrelevant, and that Republicans must behave.

Conservatives choked back their anger, even with "compassionate conservatism," but then Barack Obama was elected and "hope and change" came to the White House.  This President has been the most polarizing in our lifetime.  His disregard for the Constitution and the legislative process; his disdain for the family unit and for the values embraced by most Americans (who comprise the real "mainstream"); his spending policies that will bankrupt this nation sooner rather than later; all have worked to breathe life into what was believed to be a dead body....the Conservative American voter.

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