Daily Digest

Daily Digest - December 9

Wednesday, December 9, 2009, 10:48 AM
  • MDOT warns money running out for Michigan roads
  • Social Security's Grim Milestone: Half a Year in the Red
  • New Jersey may double unemployment tax and increase other taxes
  • State unemployment tax on businesses to triple (Texas)
  • Florida borrowing $300 million per month for unemployment
  • Calpers Real-Estate Holdings Decline 30% During First Quarter
  • Moody's downgrades Illinois debt ratings
  • Hunger, Family Homelessness On Rise In U.S. Cities
  • Job Openings in U.S. Decreased by 80,000 in October, Labor Says
  • Extended Unemployment Benefits Automatically End (Indiana)
  • Concord Cuts Xmas Tree Funding because of the Great Recession (Video)
  • LA schools OK 5,000 job cuts in last resort budget
  • County’s sales tax revenue lower than expected (San Diego)
  • LA city budget outlook bleak, Council committees propose police cuts
  • Bernanke Low Rates ‘Poison’ to U.S. Economy, Xie Says

Economy

MDOT warns money running out for Michigan roads

The state could lose hundreds of millions in federal highway dollars each of the next five years because it can't raise enough to receive all its matching funds. It could go from spending more than $1.4 billion annually on highways this year with the help of federal stimulus money to less than $600 million three out of the next four years, costing thousands of highway jobs.

Social Security's Grim Milestone: Half a Year in the Red

Data recently made public by the Social Security Administration confirm that in October, 2009, the program reached a grim milestone: six consecutive months of operating cash deficits. This is the first time Social Security has faced this situation over the entire time period, dating back through 1987, for which SSA posts the monthly data online....(Note...use the link and type 10 in box 3)

New Jersey may double unemployment tax and increase other taxes

Lawmaker: Higher N.J. gas tax may be inevitable "Democratic Sen. Ray Lesniak told a New Jersey Business and Industry Association forum on Tuesday that a gradual increase in the tax may be inevitable to prop up the state's nearly depleted Transportation Trust Fund."........ "Lawmakers from both parties say residents also should brace for the disappearance of property tax rebates due to the budget deficit. They also say business owners can anticipate an unemployment tax increase that could reach 100 percent or more to bolster the depleted Unemployment Insurance fund."

State unemployment tax on businesses to triple (Texas)

The taxes feed the state's unemployment trust fund, which has been depleted by a high number of jobless claims. The state already has borrowed about $1 billion interest-free from the federal government to help keep the fund afloat. Just counting state-paid unemployment benefits – not federally funded extensions – Texas is paying $68.6 million a week in unemployment benefits compared with $33.6 million a year ago.

Florida borrowing $300 million per month for unemployment

Even as the state borrows $300 million a month from the federal government to pay unemployment claims, a key senator said the Legislature is unlikely to consider a change in the law that could bring more than $400 million in federal stimulus money to Florida. The GOP-dominated Legislature last year rejected a “modernization” measure by Sen. Tony Hill, D-Jacksonville, that would have allowed the state to tap as much as $444 million in additional unemployment benefits by changing how it calculates benefits.

Calpers Real-Estate Holdings Decline 30% During First Quarter

The California Public Employees’ Retirement System, the largest state-run U.S. public pension, saw the value of first-quarter real estate holdings decline 30 percent and is terminating contracts with some investment firms behind the loss, a consultant for the fund said. The pension fund, with $201.9 billion in assets, will report that its real estate portfolio declined by 30.1 percent during the quarter that ended Sept. 30 and by 48.7 percent from a year earlier, according to a report to be presented to the Investment Committee Dec. 14 by its consultant, Los Angeles- based Pension Consulting Alliance Inc.

Moody's downgrades Illinois debt ratings

Moody's Investors Service on Tuesday downgraded Illinois' general obligation bond rating to A2 from A1, citing the state's financial woes stemming from the U.S. recession. Moody's cut other Illinois ratings, affecting about $24 billion of outstanding debt, including the state's Build Illinois sales tax revenue bonds, also cut to A2 from A1. The downgrade gave Illinois the second lowest U.S. state rating from Moody's, with California having the lowest at Baa1, a Moody's spokesman said. Moody's said Illinois has yet to take action to tackle a structural budget gap of more than $11 billion, equal to about 35 percent of its expenditures.

Hunger, Family Homelessness On Rise In U.S. Cities

Hunger is spreading while the number of homeless families is increasing as a result of the recession and other factors, according to a report on Tuesday. The U.S. Conference of Mayors said cities reported a 26 percent jump in demand for hunger assistance over the past year, the largest average increase since 1991. Middle-class families as well as the uninsured, elderly, working poor and homeless increasingly looked for help with hunger, which was mainly fueled by unemployment, high housing costs and low wages.

Job Openings in U.S. Decreased by 80,000 in October, Labor Says

U.S. job openings declined in October, a sign employers are reluctant to expand staff even as layoffs wane. Openings, or the number of jobs available as a percent of total employment, fell by 80,000 to 2.51 million, the Labor Department said today in Washington. The number of unfilled positions was down by 2.3 million, or 48 percent, since peaking in June 2007.

Extended Unemployment Benefits Automatically End (Indiana)

The Indiana Department of Workforce Development says the state has stopped providing extended unemployment benefits. The state has notified the U.S. Department of Labor about the decision. The program provided up to 20 weeks of benefits and automatically starts and stops based on economic indicators. Indiana says since its federal funding for state extended benefits has lapsed, the program has automatically stopped.

Concord Cuts Xmas Tree Funding because of the Great Recession (Video)

At 42 seconds into the video look at the tree they used.

LA schools OK 5,000 job cuts in last resort budget

The Los Angeles school board on Tuesday approved a plan to close a $470 million budget gap in the next academic year by cutting more than 5,000 jobs if unions do not agree to givebacks and voters do not approve a parcel tax. As some 300 employees protested outside the board offices, district Superintendent Ramon Cortines outlined a preliminary series of options to make up the revenue shortfall, saying that layoffs of teachers and other employees would be a last resort for the nation's second-largest school district. "As your superintendent, it is my responsibility to lead us through these difficult times," Cortines said. "It will not be easy." The district will instead first ask voters to approve a limited parcel tax, which would raise $100 million-$200 million a year for schools over the next four to six years and cost property owners $2-$4 a week.

County’s sales tax revenue lower than expected (San Diego)

San Diego County sales tax revenues will come in about $45.3 million below estimates this fiscal year, and property assessments are expected to drop 2.3 percent, the county’s chief financial officer said Tuesday.



“Revenues are falling, or failing to keep pace, while expenditures are increasing,” Steuer said. Without improved earnings from the county’s pension fund, county employees will need to increase their pension payments, he said. Steuer said the county’s economic picture was clouded by uncertainty over what portion of local taxes the cash-strapped state would return to the county.

LA city budget outlook bleak, Council committees propose police cuts

Like those of most cities, L.A.’s tax revenues continue to decline. The city’s already cut $300 million in spending this year by reducing salaries and encouraging early retirements. It still faces a $100 million deficit. Some members of the City Council want more cuts at the police department.... The horizon looks even worse for L.A. The city’s number crunchers say escalating employee pension costs and sluggish revenues could put L.A. a billion dollars in the hole within three years.

Bernanke Low Rates ‘Poison’ to U.S. Economy, Xie Says

Federal Reserve Chairman Ben S. Bernanke is prescribing “poison” to the U.S. economy by keeping interest rates near zero and fueling a wave of speculative capital that may cause the next global crisis, former Morgan Stanley chief Asian economist Andy Xie said....“There is a Chinese saying that one could quench the thirst by drinking poison,” said Xie, who predicted in September 2006 that the U.S. economy would fall into a recession in 2008. “Bernanke seems to be prescribing exactly this to the U.S. economy. The slower Bernanke raises interest rates, the bigger the next crisis.”

11 Comments

saxplayer00o1's picture
saxplayer00o1
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Re: Daily Digest - December 9

"Sentiment in the market has been knocked in the last couple of days by worries about a global debt crisis. Moody's Investor Services said the United States and Britain must get a grip on their public finances to avoid threats to their top triple-A credit ratings and Fitch downgraded its rating on Greece.

"Greece's debt downgrade will still be adding to worries about the exposure of European banks," said Arifa Sheikh-Usmani, equity trader at Spreadex.

Later Wednesday, the British finance minister Alistair Darling delivers his latest projections about the country's debt — Darling has all but admitted that his most recent forecasts were way too optimistic as the recession proved to be longer and deeper than anticipated."

..................1A) Emerging-Market Stocks Fall on Dubai, Greece, Spain Concern

"U.S. homeowners have lost about $5.9 trillion in value since the housing market’s peak in March 2006 as mounting foreclosures and the recession weighed on prices, according to Zillow.com.

Almost half a trillion dollars was wiped out this year through November as housing headed for a third straight annual decline. New foreclosures and higher mortgage rates in 2010 may hinder a rebound, the property data service said today in a statement.

“A phenomenal amount of wealth has been erased since the housing bust,” Stan Humphries, chief economist for Seattle- based Zillow, said yesterday in an interview. “For many households, most of their wealth is tied up in real estate.” "

"WASHINGTON — Congressional negotiators sealed agreement Tuesday night on sweeping spending legislation that boosts housing and heating subsidies but curbs President Barack Obama's requests for aid to Afghanistan and Pakistan.

The move comes as lawmakers wrapped the budgets of nine Cabinet agencies into a $1.1 trillion spending bill they hope to complete before a stopgap measure expires Dec. 18.

The measure would combine six of the dozen routine annual appropriations bills for the budget year that began Oct. 1. It combines a huge increase in foreign aid with an 18 percent cut to a program that helps states with the cost of incarcerating criminal illegal immigrants."

"WASHINGTON (Reuters) - Lawmakers agreed on Tuesday on a $447 billion spending bill that would fund large parts of the U.S. government for the fiscal year that began more than two months ago.

Agencies from the Justice Department to the Treasury are operating on temporary extensions of last year's budget because Congress did not finish its work on spending bills before the fiscal year began on October 1."

"China is ready to invest USD50 billion to acquire 6 billion barrels of Nigerian oil reserves in a proposal made in June, a sum which could help the OPEC member fund its joint ventures with oil majors, a top adviser said.

Several state-run Chinese oil firms, including CNOOC, are in talks with Nigeria about Beijing's search for proven oil reserves, which include incursions into some oil blocks held by Royal Dutch Shell, ExxonMobil and Chevron."

"MISSION VIEJO – Faced with an anticipated $26 million deficit, Saddleback Valley Unified trustees on Tuesday approved a preliminary 2010-11spending plan that indicates the district may not be able to meet its financial obligations."

"SAN FRANCISCO (Reuters) - Double-digit unemployment in California will peak this quarter and grip the state until 2012, slowing its economic recovery and threatening the state government's already fragile budget, a UCLA Anderson Forecast report said Wednesday"

"Question: There was a rally this morning about hundreds that say that they're going to get laid off next month from the department, training, vocational teachers that rehabilitate prisoners and they're going to be laid off next month, 900 out of 1,400. How do you expect our streets to be safe if our criminals are not going to be educated and have nothing to do on the outside?

Governor Schwarzenegger: Well, the question is, when you have a limited amount of money then you can only go and pay out the money you have. And so when you have all of a sudden $60 billion less money, you cannot pay out the same amount to prisons, you cannot pay out the same amount to education, to higher education, to in-home services, to any of those things. So everyone has to be cut back."

"LANSING, Mich. - While most Michigan public school students will be home for their holiday breaks and anticipating gifts, the school districts are preparing for what some expect will seem more like getting lumps of coal in their Christmas stockings.

On December 21, the second allocation of state money is being sent to schools. The first payment decreased funding per student by about $165, and another cut is expected this time, too. Michigan Education Association spokesman Doug Pratt predicts it will be as much as $600 less per student for some schools."

"Where will the money come from?

Christina Romer, chair of the White House Council of Economic Advisers, says some of it could come from the $200 billion the government plans to get back in TARP funds. "

"Only in Washington could someone get away with this kind of fuzzy math. Let's not forget that $200 billion she refers to isn't a gain we booked on our TARP investment, it's simply $200 billion we didn't lose. It's like spending $2000 on a PC, returning the PC and then calling the refunded money a profit. "

"Dec. 9 (Bloomberg) -- U.S. state government collections fell 16 percent to almost $1.7 trillion in fiscal 2008 from a year earlier, while spending increased 6.2 percent, according to the U.S. Census Bureau.

The biggest drop came in so-called insurance trust revenue, which slid $377.7 billion, or 73 percent, the federal agency reported today. Such funds include public employee retirement systems, unemployment compensation and worker compensation funds, many financed with payroll taxes and other worker contributions, according to the bureau.

Spending exceeded $1.7 trillion for the combined states, according to the report."

"Connecticut sits fifth nationally on the list of per-capita state tax burden, at $3,681 for every man, woman and child in the state in fiscal year 2007. The state's tax burden is almost 48 percent higher than the national average, according to the report.

When including county and local taxes, and adjusting for personal income, Connecticut (11.1 percent) ranks third in the nation, behind New Jersey (11.8) and New York (11.7).

It also sits atop the national rankings in state, county and local tax burden on a per-capita basis, at $7,007. That figure is 63.6 percent higher than the national average of $4,283."

"A federal board that sets accounting standards for local governments is leaning toward requiring that cities and counties report their pension debts in a way that could damage their ability to obtain credit.

Staff for the Governmental Accounting Standards Board is eyeing a plan to make municipalities report their pensions’ unfunded liabilities on their balance sheets — which are used by lenders to determine an agency’s financial health. Currently, the unfunded liabialities are listed as footnotes.

The change, already required of private financial firms, would add millions of dollars - in some cases billions – in reported debt to cities and counties.

For the city of Orange, that would mean about $60 million.

For the county of Orange, that would mean about $2.5 billion.

“What you’re doing is taking the hay out of the loft and putting it on the floor where everybody can see it,” said Orange County Supervisor John Moorlach, an outspoken pension reformer. “If GASB issues that (decree), it’s going to be a mind-blower.”"

"I doubt the EU dissolves, but it clearly is not the safe haven have many think it is. Loans made to the Baltic states are in trouble, Greece itself is in serious trouble, and Spain is in serious trouble as is Ireland.

Most in the United States are too U.S. centric, not understanding any of the economic problems or currency problems elsewhere. Currency and fiscal problems are everywhere one looks."

 

...................I don't think that we're too "U.S. centic", Mish. It's just that we have problems everywhere here too.

jkibbe's picture
jkibbe
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Re: Daily Digest - December 9

Johnny Oxygen's picture
Johnny Oxygen
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Re: Daily Digest - December 9

 

Treasurys Slump After Weak Auction for 10-Year Notes

http://www.cnbc.com/id/34345275

opusnz's picture
opusnz
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Re: Daily Digest - December 9

A petition to increase inflation by 100%.  I am not sure if I should laugh or cry.

http://www.youtube.com/user/MarkDice#p/a/u/0/vJtS9CuyuaU

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Damnthematrix
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Re: Daily Digest - December 9

The Devil and Mr. Obama

By Joe Bageant

http://www.joebageant.com/joe/2009/12/the-devil.html

Barack promised change -- and sure enough, things changed for the worse

(Note: Patrick Ward, associate editor of the UK's Socialist Review asked
Joe to write a piece for the party publication. This is the unabridged text
of Joe's submission.)

Well lookee here! An invite from my limey comrades to recap Barack Obama's
first year in office. Well comrades, I can do this thing two ways. I can
simply state that the great mocha hope turned out to be a Trojan horse for
Wall Street and the Pentagon. Or I can lay in an all-night stock of
tequila, limes and reefer and puke up the entire miserable tale like some
5,000 word tequila purged Congolese stomach worm. I have chosen to do the
latter.

snip....

But even if Americans understood socialism, they are too terrified to ever
admit to its virtues, much less publicly support the cause. And without
free and open public participation in some democratic form of socialism,
regardless of the name or label given it, there can be no recognition of
the people's common welfare and good. And so the most egalitarian social
philosophy ever conceived dies within a nation, with very little chance of
being reborn because such an ideal, by its definition, cannot exist within
the narrow mindset of bankers and oligarchs.

Bush smirks, Obama breakdances in and around the minefield of his false
promises, and Wall Street CEO bonuses are higher than ever.

Like I said, the Devil does take care of his own.

Joe Bageant

also in this vein

Johann Hari: The real reason Obama is not making much progress
Before you can appeal to America's voters you have to appeal to the
corporations
http://tinyurl.com/yj275vb

dave s's picture
dave s
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Re: Daily Digest - December 9

The importance of the SSA article regarding current income now being insufficient for current expenses cannot be overstated.  The future is now.  This is a big, big deal.

TechGuy's picture
TechGuy
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Re: Daily Digest - December 9

The SS and Medicare problems will only compound as more and more boomers file for retirement.  Just a couple of years ago, the gov't stated that the SS wouldn't go into the red until late 2017 or early 2018.  Its not going to get any better with much more people collecting entitlements.

It wouldn't surprise me that the gov't starts using accounting tricks to spend the SS IOUs and fool the public that the SS IOU's are real money sitting in a lock box. Another words they will covert the $4 Trillion in debt into real cash using a printing press. That would be the same as running up a credit card with $40K in debt, and then spending another $40K by claiming the debt is really cash in a bank account. That would postpone Gov't judgement day by another 5 to 8 years if they can pull it off!

 

 

dps's picture
dps
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Re: Daily Digest - December 9

Our wonderful banking system at work again.  Check this out off the main page on Yahoo:

Mortgage rates as low as 3.60% APR.
Lock in $250,000 for only $1,140/mo.
No SSN required. LendingTree® Quickmatch

Damnthematrix's picture
Damnthematrix
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Posts: 3998
YESSSS!!

Bankers hit with bonus supertax

By Business editor Peter Ryan for AM

http://www.abc.net.au/news/stories/2009/12/10/2767386.htm?section=justin

Some of Britain's top bankers are about to lose half their bonuses in a one-off supertax.

The British government made the announcement as part of moves to address public anger over the excesses that took British banks to the brink of collapse.

The image of bankers with multi-million dollar bonuses in the run-up to Christmas is not a good one, especially for a country in deep recession which was caused in part by the banking sector.

This tax sends a strong message to the 8,000 bankers in London, who earned multi-million-dollar bonuses last year, that they would probably be out of a job without the massive bailouts from the British taxpayer.

The Chancellor of the Exchequer, Alistair Darling, has been under pressure to deal with enormous public anger.

"I've decided to introduce from today a special one-off levy of 50 per cent on any individual discretionary bonus above 25,000 pounds" he told the House of Commons.

"This will be paid by the bank, not the bank employee, and anti-avoidance measures will be introduced with immediate effect. High-paid bank staff will of course also have to pay, as usual, income tax at the top rate on any bonus they receive."

Banking bosses are expected to trim bonuses to below the threshold to avoid the tax slug and some might get around it by deferring bonuses for two or three years.

But many are worried that this might set a wider pattern of retribution around the world and market watchers, like London stockbroker David Buick, worry the tax might force some banks to go into exile.

"I'm not worried about the individual bankers setting off hot foot for other more better clients," Mr Buick said.

"I'm interested in the like of Goldman Sachs, JP Morgan, UBS, Credit Suisse getting outraged and saying, 'It's very easy to move capital, it's very easy to move individuals and frankly we'll pack up our bags and go to a country where we're wanted.' And I think this is a real danger."

Ordinary Britons are going to be paying more in taxes as well, with all but the poorest to be hit with higher income taxes in 2011 as the government tackles massive public debt.

Mr Darling says he wants to hit the wealthy but has promised to protect hospitals and schools.

But none of this happens until next year after the election in Britain.

Wayne Grow's picture
Wayne Grow
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Re: Daily Digest - December 9

Surplus of worry over national debt

http://seattletimes.nwsource.com/html/businesstechnology/2010457513_debt...

Last line is perfect:

Burman, the economist, said he has developed a computer model that shows that a "catastrophic budget failure" is a possibility.

"I try not to get too depressed, because if I really thought it was going to play out the way this model works, I would just move to a cabin in Montana and stockpile gold and guns," he said.

Davos's picture
Davos
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Re: Daily Digest - December 9
Wayne Grow wrote:

 

"I try not to get too depressed, because if I really thought it was going to play out the way this model works, I would just move to a cabin in Montana and stockpile gold and guns," he said.

He'll be a movin and drinking the 4G mantra.

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