Daily Digest 11/17 - California Defaults on Debt, Act Fast on Medicare, Rare Earth Supply Squeeze
- California Will Default On Its Debt, Says Chris Whalen
- Bush-era tax Deal Could Include Jobless Benefits
- Scottsdale Sees 155% Increase in Pension Costs in 5 Years
- Irish Crisis, Contagion Fears Loom over EU Meeting
- Tax-Exempts Tumble as California Sells $10 Billion: Muni Credit
- China Plans Price Controls to Tackle Food Inflation
- Geithner says Confident Euro can Survive
- Ireland Crisis Could Cause EU Collapse, Warns President
- As Hunger Persists in America, Food Security Might be Harder to Achieve
- Doctors: Congress should Act Fast on Medicare Pay
- Medicaid Asking for More Money for this Year and Next
- Ky. gov looks to Private Sector to Manage Medicaid
- Mississippi Governor Spreads the Pain in Proposed Budget Cuts
- Loss of Stimulus Cash to Hurt State
- States left without Easy Answers on Medicaid
- Auto Industry Fears Rare Earth Supply Squeeze
- Rare-earth Crisis Sparks Quest for Alternative Motors
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Municipal bonds have plummeted in recent days, as investors have suddenly focused on huge state and city budget deficits that there's no easy way to fix. Nowhere has this collapse been more visible than California, which faces a massive $25 billion shortfall and red ink for as far as the eye can see.
A deal on a temporary extension of the Bush-era tax rates could emerge that would also renew unemployment benefits for 2 million Americans about to lose them, top lawmakers said on Tuesday.....Jobless benefits for 800,000 Americans will expire on Nov. 30 if Congress fails to act. Two million in total would lose benefits by the end of December.
Scottsdale officials attributed the surge to rising contribution rates that the city has no control over. In addition, public records obtained by the Republic show nine retired city employees are receiving annual pension benefits greater than $100,000.Topping the list is former Assistant City Manager Neal Shearer, whose annual benefit of $158,294 ranks 13th on the list of about 92,000 retirees receiving pension benefits from the Arizona State Retirement System.
European nations are worried that the tension over Ireland's stability is making borrowing more expensive for countries like Portugal and Spain, threatening to push them to the brink of default, as happened with Greece. Containing contagion -- a market panic that jumps from one weak country to the next -- is the priority. Behind Ireland stands Portugal, one of the eurozone's smaller member with 1.8 percent of its economy but one that is considered by some to have done less than the Irish to bring debt and deficits back under control. Next comes Spain, with a proportionally smaller debt burden but a dead-in-the-water economy that is so big -- 11.7 percent of eurozone output -- that it could present a much larger challenge if it needs help.
States and local governments plan to offer about $26.3 billion in debt during the next 30 days, according to the Bloomberg visible supply index, the most since February 2005. "We're going to need a bigger boat," Tony Shields, a principal in the public-finance department at Williams Capital Group in New York, said in an e-mail. "New supply is close to unmanageable."
China will unveil food price controls and crack down on speculation in agricultural commodities to contain inflationary pressure that its central bank governor highlighted as a risk on Tuesday. With consumer prices rising at their fastest pace in more than two years, the National Development and Reform Commission, the country’s top planning agency, is preparing a “one-two punch” of actions to rein in food costs, official media reported.
Amid a crisis over Greece's debt problems the EU had agreed, along with the International Monetary Fund, a painful 110-billion-euro bailout -- a fate that could now befall Ireland or other indebted EU nations. Ireland's public deficit this year is set to pass 30 percent of GDP, 10 times the permitted EU limit and double last year's Greek deficit.
Herman Van Rompuy, president of the EU, has warned it faces a 'survival crisis', with the risk of contagion spreading from Ireland across the continent
About 15% of U.S. households, 17.4 million families, lacked enough money to feed themselves at one point last year; in California just over 14% of households suffered from “food insecurity” at one point during 2009....stimulus money went to prop up food stamps last year and that extra funding is petering out; and budget cuts, both at the federal and state levels, threaten all kinds of nutritional sustenance programs. Even as the economy gets a little better might more Americans be going hungry?
If Congress fails to act before the Dec. 1 deadline, the Medicare reimbursement rate for physicians will be cut by 23%, with further cuts slated in later years. Timing on legislative action is unclear as members use the start of the session to sort out priorities. Senate aides on both sides of the aisle tell CNN they expect action on the issue, but are unsure how long any fix would last.
Steady increased demand and a sharp decrease in federal funding are contributing to a more than $200 million shortfall in funding for Idaho’s Medicaid program during the next two years. Idaho could be looking at drastic cuts in health services to balance its Medicaid budget, according to the Department of Health and Welfare (DHW). Medicaid is facing a projected $42.3 million shortfall for the current budget year, which ends in June, and a $171.6 million shortfall for the next budget year.
Beshear told reporters at a Capitol news conference that contracting with private managed-care organizations could help plug a $100 million deficit in the Medicaid program and prevent cuts to medical services that other states have implemented.
Entering his last year in office and mulling a run for president, Gov. Haley Barbour proposed to shore up a $700 million deficit with controversial budget-cutting initiatives, such as rolling back Medicaid reimbursement rates and freezing annual pay raises for K-12 teachers.
Megna noted that when it ends, New York will be on track to spend an additional $4 billion in Medicaid and $1 billion in education expenses. Medicaid may be the hardest area in which to control spending because it's so closely tied to the ongoing economic slump. As more New Yorkers lost their jobs or became impoverished during the recession, the Medicaid rolls mushroomed: By the end of the year, analysts expect almost 5 million New Yorkers -- nearly a quarter of the state's population -- will be on Medicaid.
Facing steep budget shortfalls and growing Medicaid rolls, some states probably must seek federal relief to lower eligibility thresholds, leaving millions without coverage.Medicaid is the means-tested health care program jointly funded by the federal and state governments. The program, which accounts for between 20 and 25 percent of most state budgets and serves more than 50 million people, saw enrollment hit record highs in 2010 while most government programs and services experienced reductions in the wake of the recession.The program is expected to increase 5.4 percent next year, marking a 20 percent increase the last three years, according to a recent study by the National Association of State Budget Officers.“Medicaid rolls are increasing because people have lost their jobs and become eligible for assistance,” said January Angeles, Senior Policy Analyst at the Center on Budget and Policy Priorities.
Car industry experts foresee problems if exports of rare earth metals from China needed for car production are threatened, they told the Reuters Global Autos Summit, as data showed 2010 Chinese imports could dry up. Rare earth metals like neodymium are used in the powerful magnets in electric motors for cars. China produces 97 percent of the world's rare earth metals, which are also used in the production of other high-tech and defense products. Rare earth mineral exports from China could dry up for the rest of the year, according to data cited by China's Ministry of Commerce on Tuesday.
Japanese motor manufacturers are scrambling for motor technologies that do not need rare earth metals, following a crisis in which China, which produces 95–97% of the world’s rare earths, cut off supplies to Japan and limited supplies to other countries. The materials (shown below) – which include neodymium, dysprosium and yttrium – are needed for a wide range of applications, from electric vehicles and wind turbines, to computer hard drives and mobile phones.
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