Blog Posts by Peter Gorenstein

The United States military budget accounts for over 40% of the world's annual military expenditures and, at around $700 billion per year, more than 20% of the federal budget. The Federal government wants to curb that spending as part of deficit reduction.

Last week's deficit deal calls for up to $350 billion in cuts over the next decade on the departments of Defense, State, Homeland Security and Veterans Affairs, among others. And, if the debt "super-committee" fails to reach a deal on $1.2 trillion in budget cuts, it will automatically trigger an additional $500 billion in cuts over the next decade.

Cutting in a bureaucracy as large and convoluted as the Pentagon is no easy task, but Stephen Glain author of State vs. Defense: The Battle to Define America's Empire says there are three issues at the heart of their spending problem.

Growing obligations: Much like other public sector groups, the Pentagon has growing liabilities coming from pension and medical insurance plans. It's "very

"An economy in which you have homeless people and empty homes doesn't make any sense and that's where we're heading," Nobel laureate Joseph Stiglitz told the Daily Ticker earlier this week.

With home prices continuing to fall in most of the country and sales volume off 13% last quarter compared to prior year, the housing problem, if not getting worse, is certainly still a major mess for America.

True, foreclosure filings dropped 35% last month - to the lowest level in four years - says RealyTrac, but that is in part due to a bottleneck of proceedings caused by the robo-signing induced moratorium.

"The data suggests home prices will continue to drift lower for a couple of years - maybe just go sideways for a decade," says FusionIQ CEO Barry Ritholtz, who predicts another jump in foreclosures unless and until the weak jobs market picks up.

In fact, there are so many delinquent homes and underwater homeowners the federal government is looking into renting their share of them in an

Stocks resumed their decline on Wednesday -- the third big drop in the last five trading days. The Dow Jones Industrial Average closed down 520 points, or 4.6%. The S&P 500 fell 4.4% to close at 1,121, while the Nasdaq was taken down more than 101 points to the end the day at 2,381.

In other words, Tuesday's gains, in which the Dow jumped 430 points, are a distant memory.

Stocks are on track for their worst monthly drop since after the Lehman Brothers bankruptcy in the fall of 2008. After making steady gains in their 401(k) plans since then, average Americans are once again falling further behind on their retirement goals. The recent drop in the market is making headlines, but as Aaron Task and the Breakout team discuss in this clip, it's by no means the only economic hardship facing the middle class -- it's just the latest.

Here are some other headlines you might have missed while you were watching your portfolio shrink over the last few days.

Horrific Housing Market

Existing home

Goldman Sachs is telling its clients to expect another round of quantitative easing from the Federal Reserve within the next year, which if it came about, would follow two previous efforts by the U.S. central bank.

"We now see a greater-than-even chance that the FOMC will resume quantitative easing later this year or in early 2012. We have changed our call because [Tuesday's] statement suggests that the committee's reaction function to incoming economic news is more dovish than we had previously thought," Jan Hatzius, chief economist at the firm, said in a research note.

Daily Ticker guest Doug Roberts, chief investment strategist for the Channel Capital Research Institute and author of Follow the Fed to Investment Success, would welcome the news, but he isn't as confident as Goldman about the Fed's future actions.

On Tuesday, the Federal Reserve said the economic recovery was occurring at a somewhat "slower pace" than anticipated. As a result, policy makers agreed to keep rates at

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In a best case scenario, the U.S. economy is destined for a Japanese-style malaise, otherwise known as an L-Shaped recovery, Nobel prize winning economist Joseph Stiglitz tells The Daily Ticker in the accompanying clip. In a worst case scenario, the U.S. is headed for many 'double dip' recessions if policy makers push for austerity measures.

Contrary to the Tea Party, Stiglitz has been arguing since the financial crisis that cuts in government spending will only worsen America's fiscal mess because we will generate fewer tax revenues. "Austerity is not only a recipe for more pain now it's really a recipe for more pain later," he says. "You don't provide the basis of economic growth by having negative economic growth."

So here's how to fix what's ailing the economy:

Home Improvement

Instead of bailing out banks, the government should be doing more to bailout homeowners, he says. "An economy in which you have homeless people and empty homes

Stocks are bouncing back in early trading Tuesday as the market catches a bid after suffering its worst day since October 2008 and, at down 6.66%, the S&P's 12th-worst single-day performance since World War II.

"Investors remain very much on edge," says Dan Greenhaus, chief global strategist at BTIG. "They aren't' really sure what's happening economically; they aren't really sure what's happening fundamentally."

Greenhaus says the shift in the market - and market sentiment - began earlier this month after first-quarter GDP was revised down from 1.8% to 0.4%. Add to that the debt ceiling debacle, the S&P downgrade and Europe's implosion and you've got the makings of a crisis. What's adding to the worry is the concern the federal government can't bailout the private sector again this time; that, Greenhaus says, explains the ferocity of the decline in the past 12 trading days.

All eyes will be on the The Federal Reserve's ROMC announcement today at 2:15 p.m. EDT. Though most don't expect

During the 2008-09 financial crisis, central banks and sovereign nations came together to bail out the private sector and restore confidence to the markets. While that did little for Main Street, the moves did save the global banking and financial system … for a time.

Now that the sovereign debt crisis is accelerating and countries like Italy and Spain appear to be too big to bail out and the U.S. is dealing with the aftermath of the S&P downgrade, the question is who will come to the rescue? Or as Minyanville.com founder and CEO Todd Harrison has been asking for more than two years, who will save the lifeguards when they start drowning?

It's a great question. Unfortunately, there are no easy answers. In the accompanying video, Harrison and The Daily Ticker's Aaron Task discuss the potential solutions. As Aaron points out there are only a few entities with enough money and muscle to bail out the system -- China and Warren Buffett come to mind -- but Harrison isn't holding his breath.

And the hits keep coming ... . After the worst week for stocks since the debt crisis of 2008-09, Standard & Poor's has followed through on its warning and downgraded U.S. debt for the first time in history.

This certainly adds to the crisis of confidence making its way through the market. Will this cause interest rates to spike and add to the price America has to pay to service its debt? Maybe, but the way investors continued to pile into Treasuries this week, even knowing this downgrade could be on the horizon, raises some doubts about it.

More than anything, this is a political embarrassment for President Obama and Congress. But if rates do rise, guess who gets to pay the price? We all do, no matter which dysfunctional political party you're affiliated with.

The week of course seemingly started with a sense of optimism and relief after U.S. politicians finally came to an agreement on the debt ceiling. But it ended with confusion and a global crisis of confidence.

The Dow