Daily Digest 1/20 - How to Fix Social Security, Rising Gas Prices, Brazil Slams Brakes to Curb Inflation

• 1) Defaults by Cities Looming as US Mayors Say Deficits Hinder Debt Payment

"The mayors of Los Angeles and Chicago said the financial strains still weighing on local governments in the wake of the recession may cause cities to default on their bonds.

Los Angeles Mayor Antonio Villaraigosa, a Democrat, said municipalities are being squeezed as states move to balance their own budgets, a step that can involve taking more funds that would otherwise be sent to towns and cities.

“There’s no question you’ll see some cities in default,” Villaraigosa told reporters today at a press conference in Washington, where the U.S. Conference of Mayors is meeting. “The difference between us and the federal government is they can print money. The states balance their budget oftentimes on the backs of cities, counties and school districts. We actually have to balance a budget.” "

• 2) Greek Bondholders Unlikely to Get Paid Back in Full, Goldman's Wilson Says

"Greek bondholders are unlikely to get all their money back on schedule unless borrowing costs fall, said Andrew Wilson, head of fixed-income at Goldman Sachs Group Inc.

“Unless we have a dramatic change in the interest-rate structure, particularly for a country like Greece, I think some form of restructuring is a relatively high-probability event” after 2011, Wilson said in Bloomberg Television’s “On the Move with Francine Lacqua.”"

........................2A) Germany Should Prepare for Greek Default, Adviser Feld Tells Handelsblatt

"Germany should set funds aside to prepare for a Greek default, Lars Feld, a designated economic adviser to the German government, was cited as saying in an interview with Handelsblatt newspaper.

“I don’t believe that Greece will manage to deal with its debts without a cut,” Feld, nominated by the Cabinet to a five- member panel of economists who advise the government and a professor at the University of Freiburg, was cited as saying. “And then German guarantees will come due.” "

• 3) Spain to Ramp Up Banks Bailout (See also the link in the DD above sent in by Pinecarr)

"Spain plans to pour billions more euros into its troubled savings banks and force them to be more open about their lending practices, people familiar with the matter said, an acknowledgment that previous efforts to fix the banks have fallen flat as the country seeks to ward off an international bailout.

In a first step, Spain is preparing to issue €3 billion ($4 billion) in debt in coming days, the people familiar with the matter said. Government officials are putting plans in place to eventually raise as much as €30 billion, according to these people, though some say the final tally will be less. "

• 4) Ohio faces $8 billion deficit and owes Uncle Sam $3 billion

"Even as state legislators debate how to cope with an estimated $8 billion deficit, Uncle Sam wants Ohio to start repaying the federal government billions it has spent in weekly benefits to jobless people.

"It's about $3 billion we owe the U.S. government for money they lent us for the unemployment compensation fund, and we suspect we're going to borrow again within three weeks," said state Sen. Tim Grendell, R-Chester Township. "The interest owed on the increased loans could be in the $200 million range. The Feds aren't giving the money away. The state has an obligation to pay it back."

Neither the state nor the federal government have made any announcements about when Ohio will start paying the money to the federal government."

• 5) NC fiscal woes include $2.5 billion debt for unemployment benefits

"North Carolina must begin to deal this year with interest payments on a $2.5 billion debt to the federal government — money borrowed over time since February 2009 to provide for increased unemployment benefits as a result of the economic downturn, according to a report today in the News & Observer of Raleigh.

One of 30 states in the same borrowing predicament, according to the N&O, N.C.‘s unemployment insurance fund is otherwise solely dependent on a tax on employers for 5.7 percent of taxable payroll. The report indicates that state officials have been reluctant to raise that percentage, which could increase financial pressure on the businesses involved.

The incoming legislature must now factor in plans to start paying off the debt to the feds as well as idealing with an announced $3.7-billion budget shortfall."

• 6) State's budget deficit bigger than expected, DiNapoli says (New York)

"More bleak news for New York.State Comptroller Thomas DiNapoli said the budget deficit for the next fiscal year, which starts April 1, could reach $11 billion.

DiNapoli said the projected budget deficit for the current fiscal year, which ends March 31, will be higher than the state Division of Budget's $315 million estimate. It will likely be in excess of $1 billion and could be as high as $1.5 billion, he said.

Looking at spending commitments versus new revenue for the next fiscal year, which begins April 1, "we see a gap that's about $9.5 billion," he said.

If this year's deficit is rolled into next year's budget, it could total $11 billion, he said."

.........................6A) Report: Cuomo considers 15000 state layoffs (New York)

"ALBANY (WABC) -- New York Governor Andrew Cuomo is reportedly considering laying off up to 15,000 state workers.

According to the New York Times, sources familiar with the plan say the layoffs will accompany large cuts to medicaid and education spending.

The move comes as Cuomo tries to close a projected budget gap of more than $9 billion."

• 7) Cuts could mean justice denied (Minnesota)

"Counties are short of judges. Public defenders are overbooked. About 250 court positions around the state are vacant. Paperwork is stacking up. It's taking longer to file orders for protection, get divorced, collect debts, even contest traffic tickets.

And with Minnesota now facing a $6.2 billion deficit, the prospect of any more state cuts is chilling to court officers."

..................7A) GOP wants to cut 5000 state jobs (Minnesota)

"Minnesota Republicans are pushing for a 15 percent cut in the size and cost of the state's bureaucracy, a move that could lead to 5,000 fewer jobs in the state.

Rep. Keith Downey, R-Edina, said Wednesday that the state could no longer afford more than 30,000 employees and wants to see the number shrink by 2015, possibly through early retirement incentives or even layoffs.

But Downey would leave it up to Gov. Mark Dayton's administration to decide how to make those cuts, leaving open the possibility of reductions through attrition."

..............................7B) State grant funding threatened (Minnesota)

• 8) Vallejo proposes paying some creditors only 5% to 20%

"Vallejo, which filed for bankruptcy in 2008, has proposed paying its unsecured creditors, who are mostly current and former employees, as little as 5% to 20% of the amount they say they are owed in a bid to return the economically shaky Bay Area bedroom community to fiscal health.

John Knox, a San Francisco lawyer representing Vallejo, said the proposal to not repay all debts is "probably rare" for a municipal bankruptcy. But he said it would save the city "tens of millions of dollars," including claims for unpaid sick leave and vacation."

• 9) San Jose council members consider changing layoff rules

"With a $90 million deficit threatening hundreds of job cuts in the next budget year, San Jose officials Wednesday took steps toward changing the city's seniority-based layoff ranking system.

The council's Rules and Open Government Committee voted unanimously to ask that the city manager compile a list of issues that must be considered if the council wants to make job performance a factor in which employees get cut. Layoffs are currently determined on a "last hired, first fired" basis."

• 10) UC President Warns Of Possible Layoffs, Program Cuts

"SAN DIEGO — University of California campuses may have to layoff hundreds of faculty members and enroll more out-of-state students to deal with Gov. Jerry Brown's budget cuts. The UC Board of Regents met yesterday in San Diego to talk about their next steps.

Brown has hit the UC system with potentially $500 million in state-budget cuts. Regents say the UC is grappling with an additional $500 million in costs associated with UC pensions and rising utility bills. Altogether, the UC-budget gap stands at $1 billion.

Regents say access, affordability and the quality of the UC system will be severely affected."

• 11) York City School District could seek tax exceptions (PA)

"The York City School Board on Wednesday discussed the possibility of raising property taxes beyond its state-mandated limit for next year.

The city school district is facing a $15 million deficit for the 2011-12 school year. The board voted 7-2 Wednesday to move forward with advertising a preliminary budget in order to seek state exceptions to raise taxes by more than 2.2 percent, the limit set for the district.

Districts can ask for special exceptions for a variety of reasons in order to raise taxes higher than their state-set limit. The city could use one or more exceptions, said Kenn Medina, business manager.

Raising taxes by 3.3 percent, instead of 2.2 percent, could generate an extra $660,000, he said."

• 12) Florida Businesses Hammered by Jobless Loan

"Florida's politicians are staying mum, but interest on the state's $2 billion unemployment-insurance loans continues to mount.

The interest on the federal advances, which the state is using to fund jobless benefits, starts coming due in September. By then, the state will have racked up $61 million in interest charges.

While officials from Gov. Rick Scott on down remain noncommittal or silent on the subject of repayment, Florida's businesses are paying through the nose.

Unemployment taxes nearly tripled this year and the minimum unemployment tax will more than double again in 2012. That's an increase from $25 per employee to nearly $200.

Business groups, including the Florida Chamber of Commerce, hope that Tallahassee can ease that financial blow. But with the state facing a $3.6 billion budget deficit, there are no discretionary public dollars laying around.

And with Florida continuing to borrow $115 million a month to pay jobless claims, the state's tab is mounting daily."

• 13) Cuts compound pain for jobless (MD)

"The Prince George's County government is facing a $77 million deficit as it prepares its projected $2.7 billion fiscal 2012 budget. The state government, which passed a $32 billion fiscal 2011 budget, is facing a $1.6 billion deficit in fiscal 2012. "

"In 2008, 69 percent of the Training Source Inc.'s funding came from the local, state and federal governments, executive director Evelyn Kim Rhim said. In June 2009, 50 percent of that funding had been "wiped out," Rhim said. As a result, the Training Source, which has a budget of $500,000, can no longer provide training for the state's Displaced Homemaker Program, which provides resources for those who have lost income due to death, divorce or a disabled family member who was a source of income, according to the state's DHR Web site."

• 14) Jobless claims fall more than expected (9.6 million on benefit rolls)

"The number of Americans filing for first-time unemployment benefits dropped sharply to 404,000 from a downwardly revised reading of 441,000 in the prior week, the Labor Department said on Thursday."

However, the total number of Americans on benefit rolls, including extended benefits under emergency government programs, jumped to 9.6 million in the week ended January 1 from 9.2 million the prior week.

• 15) Berkeley Faces Tough Decisions on Unfunded Pension Liabilities

"The Berkeley City Council special session Tuesday on the $310 million — or higher — unfunded liability on promised employee benefits revealed the difficult choices faced by the city.

A presentation by Budget Manager Teresa Berkeley-Simmons made the root of the problem clear. The California Public Employees' Retirement System, CalPERS, assumed annual investment returns of 7.75 percent. The economic crash in 2008 meant that returns in the fiscal year ending June 30, 2009 were negative 24 percent. For Berkeley’s city employees, that has produced investment losses of $200 million.

“We can’t grow our way out of this,” Berkeley-Simmons said."

• 16) City, schools can't count on help to close budget gaps (Rochester, NY)

"Rochester faces a $48.5 million budget gap. The City School District is short about twice that amount — representing 14 percent of its budget. And the state, which has bailed out local governments in the past, is in a $10 billion hole that could grow to $11 billion if lawmakers don’t start making cutbacks.

Coming off a decade in which state aid to the city increased about 50 percent, or more than $30 million in inflation-adjusted dollars, the city is now in the midst of midyear budget cuts. Those reductions are meant to offset the loss of $2.6 million in state and other funding, and possibly begin tackling the looming shortfall that lies ahead.

“We’ve hitched our wagon to the state,” said William Ansbrow, the city’s budget director. “Given the state’s fiscal situation, we’re that much more at risk.”"

• Other news, headlines and opinion:

EU Leaders Must End Default `Taboo,' CDU's Lauk Says

No department spared: Texas budget to cut billions as state faces huge deficit and Texas House eyes $156.4 billion budget, down 16.6 percent

Household debt decreased in 2010 due in part to default

Boeing Cutting 900 Jobs in Long Beach

1600 layoffs in the works at Hanford

Villaraigosa on Los Angeles's budget, potential layoffs

Merced County layoffs could hit 150 (California)

AmEx will cut 1500 jobs

HSBC cutting 500 jobs in Del.

Europe's Planned Budget Cuts Must Be Enacted `Fast,' Baltics Leaders Urge

Bonds at Risk as Moody's, S&P Poised to Lower Credit Ratings: Euro Credit and EU debt crisis faced with possible downgrades

School officials say cuts could be 'devastating' (SD)

Denver's projected $99.4 million deficit in 2012 will be "challenging" for budget planners

New Britain Schools Could Lose More Than 100 Teachers To Budget Cuts

APNewsBreak: Budget may hurt kidney patients (Oklahoma)

Judgment Day for Nassau County's Finances

Clark County Firefighters Brace for Pay Cuts

Public-Worker Unions Battle US Governors Over Benefits in Change of Role

Higher Taxes Wouldn't End Some Deficits

Houston-area prison to shut under budget proposal

No money coming for new I-5 bridge (Oregon)

South Florida repos spike 79% in 2010

FDIC's Bair Warns of Double-Dip if Servicing Problems Aren't Remedied

2010 weakest year for home sales since 1997

Alan Greenspan Video (not sure of the date on this one)

John Michael Greer, author of The Long Descent, names the date at which the first wave of catabolic collapse in the United States occurs. Long, but worth reading for the depth:

"...The foreshortening of history cuts both ways; it makes small but sudden events look more important than they are, and it also helps hide slow but massive shifts that will play a much greater role in shaping the future."

"As societies expand and start to depend on complex infrastructure to support the daily activities of their inhabitants, though, it becomes harder and less popular to do this, and so the maintenance needs of the infrastructure and the rest of the society’s stuff gradually build up until they reach a level that can’t be covered by the resources on hand."

"...The first wave of catabolism in America - the point at which crises bring a temporary end to business as usual, access to real wealth becomes a much more challenging thing for a large fraction of the population, and significant amounts of the national infrastructure are abandoned or stripped for salvage. It’s not a difficult question to answer, either."

The Onset of Catabolic Collapse
http://thearchdruidreport.blogspot.com/2011/01/onset-of-catabolic-collap...

Poet

SaxPlayer listed about a dozen issues that will result in defaults, as States, counties and Cities don't have the money to honor debt payments. Something during 2011, this will lead to another investor loss of confidence and another liquidity crisis not seen since Aug-Oct 2008.

So far the bernanke has stated no bailouts for States and Munis. Of course that is exactly what the Benanke said in early 2008 after the fall of Bear Sterns. Six months later, with the collapse of Lehman Bros. He quickly changed is mind from no bailouts, to bailouts for everyone.

Anyone want to guess when the we will see a repeat of 2008 for 2011? I think it will happen a little earlier this year, perhaps as early as June, and perhaps as late as October. Or Bernanke will preempt the crisis, but pouring money before any significant Muni, defaults.

I'm not up to date on illegal issues....How do they do that?

BTW

Tossing The Consumer Under The Bus

That's from Davos, hurray! :)

Samuel

I tried out a socially responsible investing website the other day focused on social responsibility that gave me the ability to check whether my mutual funds held any companies that didn't reflect my values. I screened for environmentally harmful companies, companies engaged in the tobacco industry and companies involved in the Sudan. But I think they had another 10-20 screens. It was free. They just advertised to me. I love these guys!