Daily Digest

Daily Digest 1/19 - U.S. Debt Crisis, More Airline Fees, Greece Denies Seeking Repayment Extension

Wednesday, January 19, 2011, 11:00 AM
  • U.S. in Debt Crisis Without Spending Cuts, Pimco's Kashkari Says
  • State Bankruptcy: An Idea That's Ready for Primetime?
  • World Oil Price Edges Near To $US100
  • Local Food Pantries Seeing Record Number Of People Seeking Help
  • Buffalo Companies Decry China's Rare Metals Policy
  • Travelers Should Prepare For More Airline Fees
  • Delta Warns That Higher Fuel Costs Could Erase Gains
  • Bill Would Raise Motor Fuel Tax In Nebraska
  • Belgium Raises Just 3 Bln With 10-Yr Bonds
  • Greece Denies Seeking Repayment Extension
  • Camden Police Will Overlook Some Crime Due To Layoffs
  • Chancellor Warns Of Tuition Increases In Light Of Budget Cuts
  • SD Governor Expected To Seek Deep Budget Cuts
  • Harrisburg Mayor Refuses To Sign Budget
  • Moody's Cuts Troubled Pennsylvania City's Parking Debt
  • Md. Group Protests Over Possible Medicaid Cuts
  • NM Governor Fights Tax Hikes As Lawmakers Return
  • Branstad Says Hundreds Of State Layoffs Necessary
  • SC House Budget Subcommittees Beginning Hearings
  • GOP Leadership Outlines 'Familiar' Plan To Trim $1 Billion From State's Projected Deficit
  • Department of Health Welfare Proposes Cutting Costs By Calling On Volunteers
  • Bad Budget May Halt School Construction In Wash. State

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Economy

U.S. in Debt Crisis Without Spending Cuts, Pimco's Kashkari Says

The U.S. may face a debt crisis without action to limit federal spending, according to Neel Kashkari, a former Treasury official who headed the taxpayer- funded $700 billion Troubled Asset Relief Program. “Our debt is now starting to get away from us,” Kashkari, a managing director at Pacific Investment Management Co., said in an interview on Bloomberg Television’s “InBusiness” with Margaret Brennan. “Indicators in the Treasury market are flashing caution.”

State Bankruptcy: An Idea That's Ready for Primetime? (CNBC)

California is currently engaged in 'deep spending cuts', as well as an extension of tax hikes. Here on the East Coast, the troubled city of Camden, New Jersey just laid off 25 percent of its workforce—including 168 police officers, which represents nearly half of its force. And the state of Illinois has just raised its state income tax rate by 66 percent. In short, don't look for the issue of states in financial crisis to disappear from the headlines anytime soon. And as long as the issue is outstanding—and apparently insoluble—look for discussions to continue on the viability of state bankruptcy.

World Oil Price Edges Near To $US100

World oil prices rose slightly on Tuesday as the IEA warned that crude near $100 was posing a real risk to the global economic recovery. Brent North Sea crude for delivery in March rose 59 cents to $98.02 a barrel in late afternoon London trade. Advertisement: Story continues below New York's main contract, light sweet crude for February, was 17 cents lower at $91.37 in mid-afternoon trade on the New York Mercantile Exchange (NYMEX). In its latest monthly report, the International Energy Agency said "recent price levels already pose a real economic risk - something of deep concern to producers and consumers alike." Oil prices of $100 a barrel represent a burden of five percent of gross domestic product on the global economy, the IEA calculated, and said such levels in the past "have clearly been associated with economic problems.

Local Food Pantries Seeing Record Number Of People Seeking Help

Nationwide, the Salvation Army reported demand for food pantry services was up 94 percent last year compared with the previous year, according to the Salvation Army National Commander Commissioner William Roberts. And, as demand for the services provided by the Salvation Army has increased, donations to the non-profit has remained flat or decreased in some cities. Experts expect the demand for food services to continue through 2011, and in Illinois, the food stamp program has experienced a record-breaking increase. Numbers from the Illinois Department of Human Services show about 857,000 households enrolled in the Supplemental Nutrition Assistance Program in December. That's 12.7 percent more people using food stamps this year compared with December 2009 and a record number of people depending on the help.

Buffalo Companies Decry China's Rare Metals Policy

With China's president making a state visit to Washington, Chuck Schumer is hoping to influence his trip. New York's senior senator claims China is cornering the rare earth metals market and that it's hurting local businesses. Ceno Technologies is a new Buffalo-based company that relies on rare earth metals for its research and products. Company officials say their business has been hurt by China's near monopoly of the metals market. Senator Chuck Schumer says, on this issue, China is a playground bully. "We sort of like 150 pounds and muscular and [China] is 90 pounds and not so muscular and we're afraid of them and it doesn't make sense," Schumer said.

Travelers Should Prepare For More Airline Fees

Prepare for more fees and higher airfares. Delta and United are raising their prices and experts predict airlines will be tacking on brand new fees in 2011. The new fees could include no more free flights for infants, no more free drinks and paying to talk to a flight attendant. The extra fees are working; last summer, airlines made more than half their revenue, over $2 billion, from fees.

Delta Warns That Higher Fuel Costs Could Erase Gains

Oil prices have risen above $90 a barrel in recent months. While that is still short of the highs reached in 2008, when oil spiked to over $145 a barrel, today’s prices represent an unwelcome burden to the industry. Fuel accounts for about a third of their costs. “As we move into 2011, the biggest issue we face is the recent steep run-up in fuel prices,” the chief financial officer, Hank Halter, wrote in an e-mail to Delta employees. He indicated that with oil prices at current prices, Delta’s costs this year would rise by $1 billion. In the first quarter, fuel expenses have already risen by $350 million.

Bill Would Raise Motor Fuel Tax In Nebraska

The Nebraska Department of Roads said late last year that Nebraska must spend $9.2 billion over the next 20 years for state highways - a figure that could climb to $13.2 billion with inflation. But the state is facing a possible $1 billion budget gap over the next two years. Campbell's bill would raise the current 7.5-cent per gallon state fuel tax on those who sell it to 11 3/10 cents starting in October. The tax would go up again in October 2012 to 15 1/10 cents.

Belgium Raises Just 3 Bln With 10-Yr Bonds

Belgium scored only limited success with a 10-year bond sale via banks on Tuesday, a day after fiscally stretched euro zone peer Spain took greater advantage of a dip in borrowing costs. Belgium, under market scrutiny over government debt almost as large as its annual economic output and politically deadlocked for seven months, raised only 3 billion euros ($4 billion) from the sale, the country's debt agency said. That compares with the 4 billion or 5 billion euros raised in each of the past five years from new 10-year bonds.

Greece Denies Seeking Repayment Extension

Greece's Socialist government insisted Tuesday it was not seeking a repayment extension of its overall debt, hours after the country's deputy prime minister expressed surprise support for the idea....In an interview broadcast early Tuesday, Pangalos said he favored a broad extension instead of opting for a possible haircut — or a reduction in the amount of money owed. He told private Skai television: "You might ask me: 'isn't that restructuring?' It is, technically, but in the sense that there is never any doubt of our obligation to pay back the debt, and to pay back everything we owe."

Camden Police Will Overlook Some Crime Due To Layoffs (New Jersey)

Camden's police department will no longer be able to respond to vehicle accidents without injuries, minor thefts and vandalism due to layoffs, Police Chief Scott Thomson said. Residents will now have to phone those incidents in or visit headquarters. Camden was dueto lay off around a quarter of its workforce on Tuesday, including almost half its police, to close a $26.5 million budget deficit. Thomson said he will have about 200 officers to police one of the nation's most dangerous cities. Reuters reports that Camden, rated as one of the most dangerous cities in America, plans to fire 180 police, or 43 percent of the force; 67 firefighters, and 150 other workers to balance its budget.

Chancellor Warns Of Tuition Increases In Light Of Budget Cuts (Georgia)

Georgia's college students should brace for more tuition increases in the coming months as the head of the state's university system warned Tuesday that their costs are almost surely to rise....Davis was one of of several state leaders to appear before the joint committee Tuesday as lawmakers begin the process of cutting between $1.2 billion and $2 billion from the state budget that takes effect July 1. But lawmakers must also make cuts to the current state spending plan.

SD Governor Expected To Seek Deep Budget Cuts

South Dakota Gov. Dennis Daugaard (DOO'-gahrd) is expected to seek deep cuts across state government when he presents the Legislature with a new budget proposal on Wednesday. Before leaving office, former Gov. Mike Rounds suggested a budget that would make 5% cuts in state aid to school districts and reimbursements to doctors and others who provide services to patients in the Medicaid program. Daugaard is expected to propose even deeper cuts than those presented by Rounds. Daugaard last week said he wants to cut each state department by at least 10%. Asked if that kind of cut would apply to schools and Medicaid providers, Daugaard said every part of state government should share in the sacrifice to balance the budget.

Harrisburg Mayor Refuses To Sign Budget

Reductions made by the council to the police department, she said, will jeopardize adequate protection. Thompson said Council's amendments created a $3.9 million budget hole that will leave the city without fuel for its vehicles well before the end of the year, and unable to make required repairs to equipment and infrastructure.

Moody's Cuts Troubled Pennsylvania City's Parking Debt (Harrisburg)

Moody's Investors Service cut its ratings on Tuesday on parking authority debt issued by the troubled Pennsylvania capital of Harrisburg to reflect a "substantial credit risk." Moody's lowered the rating on $16.28 million of bonds sold in 2007 by the Harrisburg Parking Authority to Ba3 from Baa2. At that level, the debt is considered to have "speculative elements" according to Moody's scale. The city is currently creating a recovery plan for its debt crisis which was triggered by costly overruns on its trash incinerator. Moody's said there was a risk the parking authority's assets could be transferred to the city as part of that plan. The credit ratings agency noted that Harrisburg filed last month to be part of a Pennsylvania program that helps distressed cities pay their bills, adding it "continues to explore a bankruptcy filing under Chapter 9."

Md. Group Protests Over Possible Medicaid Cuts

Disabled Maryland residents called on the governor on Monday to avoid budget cuts to Medicaid that they fear could seriously damage community-based support services. About 10 people held a brief rally in front of the marble staircase that leads to Gov. Martin O'Malley's office inside the Maryland State House, down the hall from the Maryland House of Delegates and the Maryland Senate. The state is facing a $1.6 billion shortfall for the next fiscal year. The rally was held four days before O'Malley is scheduled to disclose a budget proposal he says will fill the hole entirely with cuts.

NM Governor Fights Tax Hikes As Lawmakers Return

Financial issues are expected to dominate this year's legislative session because the state faces a budget shortfall of up to $400 million in the coming year. On Monday, educators, parents and children rallied at the Capitol against spending cuts for public education and in support of tax increases to balance the budget.

Branstad Says Hundreds Of State Layoffs Necessary (Iowa)

Iowa Gov. Terry Branstad on Tuesday said spending cuts needed to balance the state's budget will force the layoffs of hundreds of state workers hired during former Gov. Chet Culver's single term in office.

SC House Budget Subcommittees Beginning Hearings

South Carolina's public schools and college systems will make pitches to House budget writers as legislators deal with a projected $829 million budget shortfall for the upcoming fiscal year. On Tuesday, the state Education Department, Commission on Higher Education and the Board for Technical and Comprehensive Education are scheduled to go before House Ways and Means subcommittees. A handful of colleges also will make their budget pitches this week including Clemson University, the Medical University of South Carolina and The Citadel. Federal bailout cash during the past two years has helped schools and colleges avoid the deep spending cuts other agencies have seen. But that money is no longer available, and legislators say schools and colleges have to deal with reductions.

GOP Leadership Outlines 'Familiar' Plan To Trim $1 Billion From State's Projected Deficit (Minnesota)

Former Gov. Tim Pawlenty’s budget-balancing strategy is carrying over into this session as the Republican legislative leadership today outlined plans to continue his spending cuts from last session as part of its plan to tackle the state’s projected $6.2 billion deficit....Even after the spending reductions, the state would face a $5.2 billion deficit. Holberg said it’s hard to “guesstimate” when the shortfall might be fully solved.

Department of Health Welfare Proposes Cutting Costs By Calling On Volunteers (Idaho)

Families and communities need to return to a spirit of volunteerism that extends to those needing health and welfare services. That message emerged strongly when Richard Armstrong, director of the Idaho Department of Health and Welfare, gave his budget presentation to legislators on Monday. It signaled a desire for the state agency to seek new ways to deal with a shrinking budget. “We need families and communities to step up for their loved ones,” Armstrong said. For example, Medicaid covers the cost to have someone take disabled people on shopping trips, which volunteers could do, Armstrong said.

Bad Budget May Halt School Construction In Wash. State

Gov. Chris Gregoire's austere budget proposal could mean that school construction projects approved by local voters might not get built, state lawmakers were told Monday. As part of her next two-year budget Gregoire would allocate $505 million for capital projects at public schools. That compares with $757 million budgeted for the current spending plan and the nearly $950 million requested by the office of the superintendent of public instruction....Facing a $4.6 billion deficit in a $36 billion operating budget and pressures to other spending plans, Gregoire has said she's left with no other options but to make deep cuts to education and health care.

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10 Comments

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
Joined: Jul 30 2009
Posts: 4009
Re: Daily Digest 1/19 - U.S. Debt Crisis, More Airline ...

"The world's expected economic growth will have to be supported by an extra $100 trillion (£63 trillion) in credit over the next decade, according to the World Economic Forum.

This doubling of existing credit levels could be achieved without increasing the risk of a major crisis, said the report from the WEF ahead of its high-profile annual meeting in Davos."

..........................1A) DAVOS-$103 trillion credit needed to support global growth-WEF

"San Francisco's pension time bomb just exploded, with the city being told it will have to pony up $20 million more than previously expected in the next fiscal year.

That will bring the total bill for city government retirees to about $375 million - $100 million more than this year, according to the city Controller's Office.

To give that some perspective, $375 million is more than three times the annual budget for the Recreation and Park Department.

A big chunk of the increase is the result of a mandatory, 3.5 percent cost-of-living hike for retirees required under terms set out in the City Charter."

  • Other news, headlines and opinion:

San Jose moves to save redevelopment money and California cities race to shield funds from state

Dallas City Hall could face another massive budget deficit for 2011-12

Kan Says Japan is in `Crisis' Comparable to Japan Airline's Bankruptcy

Supreme Court takes on states' plans to cut Medicaid payments

Growing Medicaid cases putting pressure on local hospitals (NY)

Calpers Recoups Lehman Crash Loses as Taxpayers Face Higher Cost

Analysis: What is Plan B if China dumps its US debt?

Perceptions Are Not Reality: U.S. Investors are Being Duped More than Most (McAlvany audio...A must listen!)

Higher taxes? (Google news search link)

Housing Starts in U.S. Decreased in December to One-Year Low

China Needs Urgent Guidance on Euro Zone Debt Risk Plans, Yu Yongding Says

Greek Bond Spread Widens as Die Zeit Reports Germany Considering Debt Plan

Poet's picture
Poet
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Posts: 1889
Re: Daily Digest 1/19 - U.S. Debt Crisis, More Airline ...

Congratulations, Saxplayer. I noticed you're the one updating the Daily Digest today. Is this a permanent move or are you one of the people who can do this now?

Poet

saxplayer00o1's picture
saxplayer00o1
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Re: Daily Digest 1/19 - U.S. Debt Crisis, More Airline ...

Thanks Poet

Just Wednesdays.

minnsotagal's picture
minnsotagal
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Re: Daily Digest 1/19 - U.S. Debt Crisis, More Airline ...

I can't stomach that Neel Kashkair, of all people, is now warning us about our debt.  Why didn't he think of that when he was green-lighting TARP?

DRHolden's picture
DRHolden
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saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
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Posts: 4009
Re: Daily Digest 1/19 - U.S. Debt Crisis, More Airline ...

 

 

 

(Treasury Direct link: http://www.treasurydirect.gov/NP/BPDLogin?application=np )

Date Debt Held by the Public Intragovernmental Holdings Total Public Debt Outstanding
01/14/2011 9,377,350,492,041.16 4,630,593,044,829.99 14,007,943,536,871.15
01/18/2011 9,415,963,819,710.17 4,636,417,010,832.63 14,052,380,830,542.80

 

Fitch: US Fiscal Metrics To Be Worst Among 'AAA' Sovereigns

Sweden halts $600 mn treasury bond emission

Minister warns over Japan’s state debt

printfaster's picture
printfaster
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Re: Daily Digest 1/19 - U.S. Debt Crisis, More Airline ...

I feel compelled to change your headline:

1) World needs $100 trillion more credit, says World Economic Forum

To

World needs $100 trillion more in savings, says Printfaster

If not, it really becomes:

World needs $100 trillion more in money printing says World Economic Forum

 

 

Poet's picture
Poet
Status: Diamond Member (Offline)
Joined: Jan 21 2009
Posts: 1889
Re: Daily Digest 1/19 - U.S. Debt Crisis, More Airline ...
printfaster wrote:

I feel compelled to change your headline:

1) World needs $100 trillion more credit, says World Economic Forum

To

World needs $100 trillion more in savings, says Printfaster

If not, it really becomes:
World needs $100 trillion more in money printing says World Economic Forum

I am reminded of what John Michael Greer, author of The Long Descent, said about how there is a primary economy, which is the the earth's natural resources such as animals, plants, minerals. And there is a secondary economy made up of us humans who work to extract the riches of the earth. And then there is a tertiary economy which is the financial system that rests atop all of that and flies off into realms of the impossible. There is just not $100 Trillion to be found in savings or in credit unless money is printed. Which makes the total value of credit default swaps and derivatives in the quadrillions of dollars a ludicrous proposition.

Poet

osb272646's picture
osb272646
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Posts: 120
Re: Daily Digest 1/19 - U.S. Debt Crisis, More Airline ...

Minnesota - My thoughts exactly.  But, you must understand, he is now one of the strings in Bill Gross' (and Pimco's) violin.  Kashkari is just good at doing whatever he's told to do.

 

 

featherjack's picture
featherjack
Status: Bronze Member (Offline)
Joined: Dec 7 2010
Posts: 51
Re: Cutting Costs By Calling On Volunteers & Alt currency

Department of Health Welfare Proposes Cutting Costs By Calling On Volunteers (Idaho)

    Families and communities need to return to a spirit of volunteerism that extends to those needing health and welfare services. That message emerged strongly when Richard Armstrong, director of the Idaho Department of Health and Welfare, gave his budget presentation to legislators on Monday. It signaled a desire for the state agency to seek new ways to deal with a shrinking budget. “We need families and communities to step up for their loved ones,” Armstrong said. For example, Medicaid covers the cost to have someone take disabled people on shopping trips, which volunteers could do, Armstrong said.

 

This strikes me as an outstanding opportunity for a local alternative currency. In exchange for their time providing these services, volunteers would be paid in, say, Idaho Hours. The state gummint could encourage their acceptance by offering merchants small tax incentives, accepting the Hours for tax payments (in full or part), or even promoting them as the state-patriotic thing to do, a la WWII war bonds were.

Many of those with the time to volunteer are un- or under- employed (their name is Legion) and would jump at the opportunity to earn a medium of exchange.

As an example: I have Chronic Fatigue Syndrome. One of its manifestations for me is an inability to concentrate for long or even to trust my thinking. When I do errands, I have to be certain to be done and home within 3 hours -- longer than that and I am as unsafe a driver as any drunk. As I live 30 mins from town, I haven't been able to work my job since last July. But that time frame would allow me 2 hours to volunteer, and ease both the household financial situation and the depression that CFS causes. Win-Win-Win.

Perhaps I'll write my state reps...

featherjack

Reality has no problem adjusting complexity downward.

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