Classic Austerity Question to Answer: Guns or Butter?

Question: What is the difference between fiscal and monetary policy?

Answer: Fiscal = budgetary choices of taxing and spending

Monetary = federal reserve decisions on interest rates and monetary supply.

Question: What is the best way to attack the budget in 2013, with a scalpel or a machete?

Answer: Depends on who you ask, the President who submitted his 2013 $3.80 trillion budget this week, or the House Republicans who re-titled the Fiscal Year 2013 Buget "Debt on Arrival."

When Congress, using its Power of the Purse debates passage of the package, an age old debate will rage again. Guns vs. Butter. The president is proposing "strategic " military spending cuts that will help modernize our National Security, he says. He is also calling for the fairness of increased revenue raised by increasing the tax rate of those making of $250,000. GOP Congressional leaders don't that choice, they say the President is refussing to cut the fatty butter out of the budget, with what they say is miniumal entitlement reform in the plan.

President's Budget FY 2013

Speaking of entitlements, here's a multiple choice stumper from one of the practice tests that await you the in May:

Which of the following programs are entitlements?

I. Medicaid
II. Medicare
III. food stamps
IV. Social Security

(A) I and II

(B) I, II, and III

(C) II and IV

(D) I and IV

(E) II, III, and IV

C is the correct answer because Medicaid and Food Stamps are means-tested programs whereas entitlements are not.

Entitlement (also called social insurance) - Gov't benefits that certain qualified individuals are entitled to by law, regardless of need.

Means-tested - Gov't programs available only to individuals who qualify based on specific needs.

Here's how this can get real confusing, even when entitlement reform is a huge part of the current budget/deficit battles on Capitol Hill. From Susan Milligan of US News & World Report (2011):

"For long-term fiscal health, the nation needs to do entitlement reform. But first, there has to be sense-of-entitlement reform.

Entitlements, of course, are those popular federal programs meant to address basic human needs and maintain basic human dignity. Social Security keeps senior citizens from crippling poverty. Medicaid provides healthcare to the poor and disabled. Medicare is a federal healthcare plan for the over-65 crowd. The cost of the programs represents a huge chunk of the federal budget, and there is really no way to balance the budget without addressing those long-term costs. Certainly, the budget cannot be balanced merely by cutting spending that is not part of the entitlement programs. The idea that this can be done without cutting defense spending, either, is just laughable."
Sounds like she wasn't reading her Patterson text. Make sure you review it.

The Two Teachers at CBS 2 School had their take, with a comparative analytical eye on last year's Grammy's:

Just look at this year’s Grammy (2011) winners and decide for yourself. President Obama could not have asked for a better opening act to his budget proposal this week.

Lady Antebellum, who brought both shock and awe to the Grammys this year, won big for their song, “Need You Now.” Equally showing shock and awe the president this week proposed his $3.7 trillion budget for 2012. The leadership from both political parties rained down criticism. Obama is going to need, at the very least, the help from his own Democratic Party.

President George W. Bush shocked us in 2002 by proposing a $2 trillion dollar budget. The trillion-dollar marker was first crossed back in 1967. It would not take another thirty years to add another trillion. Obama crossed into $3 trillion just six years later. Combined with historically high deficits today’s outrageous budget numbers make Lady Gaga look down right dull.

President Obama and his budget team are attempting to pass off these record deficits and debt by assuring us we were just “Born This Way.”

Strangely, the Republicans seem to be channeling Eminem. His most recent effort “Recovery” was the top selling album of 2010. The same could be said of the Republican Party. Aided by the Tea Party, Republicans have recovered their majority of the House of Representatives.

With their newfound confidence Republicans are “Not Afraid” to take a stand against the president and his “monsters.” Resurrecting memories from the Carter administration, House Speaker Boehner can be heard crying out, “Holla if you feel that you’ve been down the same road.”

The Grammy artist who seems to have touched closest to our nerves, however, is singer-songwriter Cee Lo Green. Some might remember him as vocalist of Gnarls Barkley and the smash hit “Crazy.” We were singing that song just as the unknown Barack Obama was deciding to run for president four years ago.

Today Cee Lo Green is singing a different tune.

He is no longer crazy. He is angry. The new normal is unacceptable.

His monster hit can be song in many different ways. Even Gwyneth Paltrow covered it during an episode of “Glee.” Cee Lo Green’s “Lady Killer” lyrics reflect the angst of our age.

President Obama is singing about mo’ green. You can understand if our first reaction is “Forget you.”

And here is a re-run graphic of what $1 trillion looks like....now times 3.80 and you have the 2013 presidentially proposed Federal Budget.

http://www.pagetutor.com/trillion/index.html