Debate over the budget continues: New budget ends credit-card finance

As we celebrate our nation's birthday this week, not only should we reflect on the great history of our country and celebrate the many freedoms we enjoy, we also should look ahead to the new direction that our state is headed financially.

We were once known as a state with high taxes that businesses and workers would avoid. We were a state where legislatures refused to tackle the mountain of debt and only used accounting gimmicks or one-time stimulus money to put off paying our bills.

I can tell you that those bad days are over. We're righting our financial ship and are setting sail with a bright future ahead for the hardworking families of our state.

The new biennial budget officially started July 1. State lawmakers spent the past several months making the tough decisions in this tough economy. Like any family struggling with tight finances and a big stack of bills, we took a good look at our priorities. We decided that we must pay off the state's $3.6 billion deficit while maintaining essential state services and investing in job creation and education.

The result is plain and simple: The nonpartisan Legislative Fiscal Bureau says in two years, the state will be in the black, with a $300 million structural surplus. This balanced budget puts the state on solid financial ground for the first time in more than a decade.

As the co-chair of the budget-writing committee, the Committee on Joint Finance, I'm very cognizant of the fact that families can't afford to pay more in taxes, especially property taxes. Our budget holds the line on taxes: Overall taxes decrease by $24 million in our spending plan. We're protecting middle-class families and seniors by putting forth a property tax freeze so they can afford to stay in their homes.

This means taxpayers owning a median-valued home will be protected from the previously projected property tax increase of $736 over the next two years. We also eliminated regional taxing authorities and their potential to increase taxes for unwanted transit projects.

For our economy to continue to improve, we must get more people back to work. From Day One, we focused on job creation and developing a better economic climate. The budget continues our efforts by providing tax incentives for investing capital gains in Wisconsin businesses and expanding manufacturing jobs. We're investing in the Wisconsin Economic Development Corp., a new public-private partnership that has one main focus - to create jobs.

Our efforts are already paying off. Nearly 25,000 jobs have been created since January. Companies are moving to Wisconsin, many local companies are expanding and chief executives around the country are taking notice.

More than half of the budget goes to pay for local government services. Because of the needed spending reductions, we gave municipalities and school districts the tools to manage their costs. By asking employees to pay a reasonable contribution to their pensions and health care, local school districts have been able to balance their budgets and maintain important services without laying off teachers. This includes districts in Appleton, Palmyra, West Allis and Menomonee Falls, to name a few.

This is a stark contrast to the Milwaukee Public Schools, where 519 layoff notices were issued last week but officials say 200 of which could be saved if teachers paid into their pensions. Also, our tools are working in Racine County. County officials tell me they now have additional dollars to spend on county services.

Even though I fully supported the governor's initial budget plan, we found ways to improve it. For example, we invested more in education, one of our top priorities. We added nearly $116 million to K-12 classrooms, which is the single largest state expenditure in our budget. Plus, because of the great success of the Milwaukee school choice program, we're expanding it to the rest of Milwaukee County and Racine so more parents can have the opportunity to find the best educational fit for their children.

We also reversed some of the governor's proposals. The budget fully restores the successful Senior Care program, which ensures continued access to expensive medication for seniors. We also kept the recycling mandate for our citizens and continued to provide recycling grants for communities. State lawmakers also felt that the University of Wisconsin-Madison should not become a separate authority, but we granted additional flexibilities to all the universities in the UW System.

While our budget has many highlights, our major accomplishment is that we cleaned up a major financial mess. We cut up our credit cards and set the foundation for future balanced budgets not only at the state level but at the local level as well.

Google Plus invite reaches Twitter “king” Ashton Kutcher

Ashton Kutcher joins Google+, admits he needs more practice inside.

Looks like Google+ isn’t only for nerds like me, unless Ashton Kutcher is also a nerd, oh maybe he is.

The famous Hollywood star is the latest member of still-exclusive and hard-to-join Google+ social networking site launched by Google last Thursday. No official word yet about the exact date of Kutcher’s inclusion inside G Plus, but his first post was recorded July 1st.

He said, “sweet. another thing for me to post on.” Kutcher is known for his record as the first Twitter user to reach 1 million followers mark with the social networking site’s “Million followers contest.”

In Google Plus, Ashton Kutcher holds at least 680 “in circles” or “followers.” Apparently, the Google Plus community is still small, so Kutcher is still on track to get another “million” record, unless Larry Page (one of the founders of Google) will maintain its lead with 12,000+ “in circles.”

Anyway, Kutcher admits in one post that he’s still trying to adjust inside the new social networking site. He posted publicly, “this is going to take getting used to. makes me feel like a newbie.”

Google Plus is the latest project of the search engine giant that will obviously challenge the popularity of Facebook and Twitter. According to multiple testers including “me”, Google Plus is like Twitter, Facebook and Tumblr in one website, with better sharing and “privacy” setting. Trust me, Google Plus and “privacy” mixed inside.

FINANCE: Government Debt and You

With the August government debt ceiling approaching, you may be concerned about what it means to you, your financial security and the probable outcome. While guessing exactly what politicians will do is impossible, it is widely believed that not extending the debt limit could result in a worse financial situation than we just went through. For this reason alone, we believe the following solutions and results are most probable.

Since 1917, the debt limit has been increased numerous times, usually associated with great political drama. If history repeats, the outcome will be a compromise. For the average investor, the probable result will be higher taxes for those in the upper-income ranges as well as higher taxes on dividends and capital gains. Budget cuts will most likely impact older Americans as Medicare and Social Security pose the greatest future financial challenges to the country if not addressed. And with the end of the Federal Reserve monetary easing programs (QE2), interest rates are naturally expected to rise.

The summary outcome appears to be a compromised “fix” at the expense of those who are older and those who are wealthier. If this is the case, you need to be prepared to have saved enough and that you are protected sufficiently against higher taxes and increased interest rates.

Without diving into particulars, the issues are straight forward, our government has been running huge deficits and we are maxed out on the national “credit card.” We have only a few options which span the spectrum of increasing our “limit” once again or making tremendous spending cuts mixed with increased taxation. Some combination seems to be the direction we are heading toward.

Regardless of the solution or political party posturing, the numbers indicate that the budget cannot be balanced strictly by cutting discretionary government spending. If we cut 100% of the non-defense discretionary spending, that would only account for half of the current deficit according to the government budget reports. Well, then how about cutting 100% of defense? That does not do it either. You would have to cut 100% of defense along with 100% of Social Security and then you cover the deficit.

From all the reports and numbers we have reviewed, it does not appear as though the budget can be balanced without spending cuts to Social Security, defense, Medicaid and Medicare while increasing taxes as well. This is our conclusion, what do others say on the matter?

Last December the Deficit Commission issued a report that was supported by 11 of 18 members with the following major points. Discretionary spending levels should be cut to pre-2008 levels with increases at 50% of inflation (thus not keeping up with price increases…a further “cut”). A recommended 15 cent gasoline tax for a few years. A cut to corporate and individual tax rates but taking back some mortgage deductions and tax benefits associated with municipal bond interest, dividends, capital gains and health insurance. While increasing Social Security age eligibility and making reforms to Medicare and Medicaid.

 The “Ryan Plan” focuses on spending controls to Medicare and Medicaid (mostly State driven to put them in control to promote hopeful efficiency). Then some kind of subsidized health care premium program along with some similar Deficit Commission recommendations for cuts to taxes but a reduction to some tax breaks. Social Security and defense spending seems to be largely untouched.

The President’s plan focuses on tax increases, lower interest costs and the majority of savings coming from non-defense discretionary, defense and medical programs. His proposal already assumes the repeal of the Bush era tax cuts already set to expire on their own in 2013.

So why not just cut some spending and increase taxes to fix this today? If the “fix” was immediate, the last recession would seem like a walk in the park as the economic hit would be too great. The reason why we believe the politicians will address this “appropriately.”

So what is the most likely scenario? Your guess is as good as anyone but we would expect a rise to the debt limit associated with some kind of budget limitation. This will kick the can down the road into 2012 where we have the same argument again. But from all the proposals and reviews from both sides of the aisle, the themes are clear. As a society we will have to save more for ourselves, rely less on government, pay more in taxes, especially those over $250k of earnings and expect less benefits coming from Social Security, Medicare and Medicaid. And every government program will be under fire, including defense which has to be cut as well.

When the family hits financial troubles, everyone feels it. From top to bottom, we all need to chip in on this one…and for a long time. Save more, protect your portfolio, globally diversify, position for higher taxes and stay tuned for changes and remain nimble

U.S. Treasury Debt Manager Miller Nominated for Finance Post

Mary Miller, the U.S. Treasury Department official responsible for managing public debt, is the Obama administration’s nominee for chief of domestic finance.

Miller, 55, would replace Jeffrey Goldstein, the Treasury’s undersecretary for domestic finance, who plans to leave the department at the end of this month. If she is confirmed by the Senate for the promotion, Miller would advise Treasury Secretary Timothy F. Geithner on policy issues concerning the U.S. banking and financial systems and regulation.

As assistant secretary for financial markets since February 2010, Miller manages the Treasury’s public debt and oversees the offices of federal finance, capital markets and government financial policy. Earlier today she reiterated the Treasury’s projection that U.S. authority to borrow under the $14.29 trillion debt limit would expire on Aug. 2.

Miller previously worked 26 years at T. Rowe Price Group Inc. in positions including director of the fixed-income division.

One of Goldstein’s responsibilities has been coordinating the Financial Stability Oversight Council, a group of regulators charged with preventing a financial crisis. The council is led by Geithner and includes Federal Reserve Chairman Ben S. Bernanke.