A new program called Federal Spending made its debut on Thursday, July 16. Produced by Inside Analysis in conjunction with Breaking Gov, this apolitical show has a formidable aim: tracking the path of federal dollars. The inaugural episode offered valuable insight into the expenditures of the Troubled Assets Relief Program (TARP) and a newly-mandated federal regulatory agency.

Before any current spending trends were discussed, Robin Bloor, Founder and CEO of The Bloor Group, presented a brief overview of federal spending in relation to the Gross Domestic Product (GDP). “You would think that just by leveraging taxes upon the GDP that the government would have a lot more money to spend,” said Bloor. The discrepancy between expenditures and income, however, explains why the US debt is over 100% of the GDP.


Lawmakers have to give up the thought that they’ve got to get votes; they’ve got to do the right thing

One such expenditure was the much-debated (TARP). “The best way to resolve a banking crisis is to pour liquidity into the system,” said Peter Went, Global Head of Bank Risk Management at GARP. Of the $700 billion that was made available to the financial, housing and automotive industries, however, only about 67% was used. Went’s figures showed that banking and auto companies took the most advantage of the funds; the housing sector, on the other hand, used just 3% of its allocation.

“Lawmakers have to give up the thought that they’ve got to get votes; they’ve got to do the right thing,” said Allan D. Grody, President of Financial InterGroup Holdings, Ltd.

One response to the financial crisis that warranted TARP was the Dodd-Frank Wall Street Reform and Consumer Protection Act, a federal statute aimed at financial regulatory reform. This act created the Financial Services Oversight Council (FSOC) and the Office of Financial Research (OFR), departments whose primary purpose is to monitor global financial transactions. The first two years of implementation will be funded by the Treasury Department, and subsequent year is to be paid for by the world’s top 35 banks.

Mark Madsen, CEO at Third Nature, Inc., demonstrated how efficient data exploration can help bridge the gap between the average person and the people spending taxpayer dollars. “Most people jump into assumptions before the facts, when we should be jumping into facts before the assumptions,” said Madsen. His presentation revealed some details about mandatory and discretionary spending: the two biggest areas of federal spending are in social programs and the military.


Federal Spending is slated to run each Thursday at Noon ET and will cover a wide range of current topics, from healthcare spending to arts and media. Guests and speakers are pooled from industry, government offices and volunteer organizations, and are asked to focus on one thing: the money trail.

Episode 1: The Big Picture – Budgets, TARP, OFR, Deficits & Metrics

Live WebEx Link:

https://bloorgroup.webex.com/bloorgroup/onstage/g.php?t=a&d=664166279

Archive to be posted here:

http://www.insideanalysis.com/fedspend

AOL Episode Page

http://breakinggov.com/2011/07/09/federal-spending-episode-1/

Link to slides: http://bit.ly/qAUQ91

July 14, 2011 @ Noon ET for One Hour

This show is produced by Inside Analysis in conjunction with Breaking Gov. Please share your thoughts on Twitter with #FedSpend. Federal Spending is an apolitical program designed to follow the money, not the politics or personalities. We broadcast Thursdays at Noon ET for an hour. Guests may stream the audio live without registering, or join the WebEx by registering.

Episode Outline

12:00 Host Eric Kavanagh opens the event & explains mission

12:05 Keynote Robin Bloor offers perspective on the federal budget

12:15 Dr. Peter Went, GARP, explains current status of TARP & its impact on taxpayers

12:25 Allan D. Grody, Financial InterGroup, outlines the OFR budget and what it means

12:35 Mark Madsen, Third Nature, debuts the Data Exploration Corner

12:45 Questions by Twitter #FedSpend and/or email

12:55 Wrap-up & Action Items

Good Quotes

“With respect to government, you don’t really have a choice. In the free market, you can choose A company, B company, C company – not really so much when you’re dealing with the government, which is why transparency is so important.”

Eric Kavanagh

“You would think that just by leveraging taxes upon the GDP that the government would have a lot more money to spend and perhaps maybe shouldn’t be borrowing as much as it actually does.”

Robin Bloor

“There was clearly an information problem that happened around the banking collapse.”

Robin Bloor

“Debt and debt overhang can be a very significant problem.”

Peter Went

“The best way to resolve a banking crisis is to pour liquidity into the system.”

Peter Went

“Lawmakers have to give up the thought that they’ve got to get votes; they’ve got to do the right thing.”

Allan Grody

“Most people jump into assumptions before the facts, when we should be jumping into facts before the assumptions.”

Mark Madsen

Good Questions

How do we not know the status of our US General Ledger? That should be as visible as the Debt Clock shown on this desktop!

Will we know when the money runs out?

Why aren’t the housing expenditures under TARP working?

Why is there still so much TARP money available? Why aren’t companies taking advantage of the assistance?

Allocated amount for housing problems is $44B, $1.4B used, yet foreclosures and such continue. Why is that?

Good Insights

In many respects, a government is similar to a household in that it has income, growth, expenditures and debt.

The US income for the 2010 fiscal year totalled $2,162 billion, with the top sources being:

  • 42% – individual income
  • 40% – social security and social insurance
  • 9% – corporate income

Expenditures for the same year totalled $3,456 billion, with the top recipients being:

  • 23% – Medicare and Medicaid
  • 20% – Social Security
  • 20% – Defense Department
  • 19% – Discretionary

The GDP has grown by a factor of 5 since 1950, while the population has only grown by a factor of 2.

In 1903, the percentage of the GDP that the government spent was below 10%; it is currently over 40%.

The federal debt is over 100% of the GDP.

We spend 6% of total expenditures on interest for debt.

The maximum authorization for TARP was $700 billion, which was 5% of the GDP and 20% of federal budget outlays. Of that, $474.8 billion was spent.

Three major groups that TARP invested in: housing ($45b), the financial sector ($245b) and the auto industry ($81.8 b)

Half of what has been obligated by TARP for banking has been repaid. There is a significant amount of available funds for housing that have not been used or drawn.

Through repayments, dividends and interest, the Treasury has earned $277.3 million, with a lifetime positive return for taxpayers equalling over $21 billion.

The Financial Services Oversight Council (FSOC) has been created under the Dodd-Frank Funding Proposition to oversee global financial transactions. It is a transparency process that is being enabled by technology.

The Energy Department was created to propel our independence from foreign oil. We are not any closer to independence from foreign oil than we were 50 years ago; in fact, we’re more dependent.

The newly mandated FSOC and Office of Financial Research (OFR) are expected to create long term savings for financial institutions.

The Treasury will pay for the first two years of the start up, with expenditures around $123 million. The subsequent year will be funded by the top 35 banks

The OFR is trying to take their solutions to a global level, creating a global identification system. It’s like a Tax ID code that’s globally administered.

Discretionary funding in the federal budget means that congress needs to get together and work on it; it’s the kind of arguing we usually hear about. Mandatory spending is set in law; there is no way to change it without changing the law.

Over the last 15 years, corporations started paying less and less taxes, and the burden shifted to the individual.

The two biggest areas of spending are mandatory social programs and discretionary military spending.

Discretionary and non-discretionary spending is driven by military spending.

Government spending on citizens is flat; spending on the military is up.

Action Items

Look into debt clock to see where they get their data.

Resources

Operational Risk and Reference Data: Exploring Costs, Capital Requirements and Risk Mitigation

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=849224

http://www.usdebtclock.org

Pre-Show Abstract

Today’s Federal government wields more financial power than ever before. With over 1300 organizations across all three branches of the government – legislative, executive and judicial – it is little wonder that so many of us cannot answer the question: Where does the money go? And further, who gets it and why?

How these distinct agencies procure funding is not so clear cut, and despite the valiant ideals of the Federal Funding Accountability and Transparency Act, the bottom line is often shrouded in fog. In this inaugural episode of Federal Spending, host Eric Kavanagh will be joined by a panel of expert guests to take an in-depth and discerning look at the scope of federal dollars and the direction in which some of those dollars go.

Points of Discussion

  • An historical perspective of Federal Spending, taking into account population and expenditure increases

  • The size of the current and previous US budget and its relation to Gross Domestic Product (GDP), as well as to other G20 countries

  • The Troubled Asset Relief Program (TARP) – what it is, where it stands and how it affects the taxpayer

  • The newly mandated Office of Financial Research (OFR)

  • Data exploration

Keynote: Robin Bloor, Ph.D., Founder and CEO of The Bloor Group

Guests:

Peter Went, Ph.D., Global Head of Bank Risk Management at GARP

Allan D. Grody, President of Financial InterGroup Holdings, Ltd.

Mark Madsen, CEO at Third Nature, Inc.

Contact Info:

Host: Eric Kavanagh, eric.kavanagh@bloorgroup.com – 512.426.7725

Show Manager: Rebecca Jozwiak, rebecca.jozwiak@bloorgroup.com – 817.320.3495

Robin Bloor, Chief Analyst, The Bloor Group: robin.bloor@bloorgroup.com