- Tax Cuts Could Hurt Moody’s U.S. Rating: Report
- Treasury Yields Spike After Tax Deal
- New York State Pension $71 Billion Underfunded, Empire Center Report Says
- Social Security Fund Can Weather Tax Break
- Florida’s 2011-12 Budget Outlook Getting Gloomier
- Unemployment Insurance Rate To Rise (Nevada)
- Increases In Unemployment Insurance Rate Could Impact Small Businesses (Utah)
- Nys Public Pension Costs Will Double In 5 Years: Report
- Top Pension Schemes Facing Funding Shortfall ‘Soars By 50 Per Cent’ (UK)
- City Oks $67 Million Budget, Ends Trash Pickup At 450 Properties (Poughkeepsie)
- Fight Brews Over Houston Budget, Furloughs
- Greenlight’s Einhorn Says Global Sovereign Debt Crisis Looms
- Higher Gas Prices Mean Cuts For Some Shoppers
- World Faces Oil Supply Crisis – Iran Opec Chief
- Governor To Call Emergency Session (Washington)
- ECB Said to Be Buying Irish, Portuguese, Greek Government Securities Today
U.S. sovereign debt ratings from Moody’s Investor Service could be hurt by extended tax cuts in the long term, Reuters reported Tuesday. Moody’s lead analyst for U.S. sovereign debt, Steven Hess, told Reuters he is not concerned by an extension of the Bush tax cuts on the U.S.’s AAA rating over the next 18 months to two years, but he is worried about what happens after two years when the extensions are set to expire again. “We have long term concerns about the (U.S. credit) outlook and they are not yet being addressed. We’re waiting to see if they’re going to be addressed in the next couple of years,” Hess told Reuters in an interview.
The deal translates into a short-term boom for yields, but the measure could cost the government between $700 billion and $800 billion, which will add to an already sharp run-up in government debt.
New York state’s $132.8 billion pension plan is underfunded by $71 billion and annual taxpayer payments to keep it sound may more than double to almost $4 billion during the next five years, a report says.
A plan that is projected to take $120 billion out of the Social Security trust fund would seemingly be one to draw the ire of deficit hawks…. Social Security trustees had projected a deficit for 2011 even before the proposal to cut the payroll tax, though they had anticipated a surplus between 2012 and 2014.
A legislative economist told the Senate Budget Committee on Tuesday that she expects a predicted $2.5 billion budget gap to widen because the state’s economic recovery has been slower than forecast….Baker’s bad news includes up to $400 million more in state Medicaid expenses and $150 million less in school property tax collections due to a 1.2 percent drop in real estate values than previously predicted for 2011-12. The state now also expects to collect $30 million less from utility gross receipt taxes earmarked for education construction and maintenance projects. Gasoline and other transportation taxes also are expected to drop, which would cut funding for road building and maintenance.
Nevada businesses will pay $136 million more in taxes in 2011 to try to put some cash back into the state’s Unemployment Insurance Trust Fund. That fund, which started this recession with a balance of more than $700 million, was depleted in October 2009 by benefit payments to record numbers of out-of-work Nevadans. Since then, Employment Security Division Administrator Cindy Jones said the state has had to borrow $579 million to cover checks for more than 100,000 on unemployment each week. Through the end of September this year, she said, the state collected $570 million from employers but paid out $1.8 billion.
This month, the Utah Department of Workforce Services posted a letter on its website, explaining to employers that the contribution rate for Unemployment Insurance would increase for 2011. DWS attributed the need for the hikes to “the higher benefit costs associated with the economic downturn” resulting in “a significant decline in the Utah Unemployment Trust Fund balance over the past two years.”….As an example, he mentioned that new employer rates for his industry jumped from 1.3 percent in 2010 to 3.3 percent for 2011 — a full 250 percent increase.”To put that in perspective, if a business did $2 million in taxable wages in a year, the adverse impact will be $40,000 annually,” Call said. “In a ‘tight margin’ economy, that kind of impact could be devastating.”
Taxpayer contributions to the New York State and Local Retirement Systems could double over the next five years, adding nearly $4 billion to annual taxpayer costs, according to the report by the nonpartisan think tank. Taxpayer contributions to the New York State Teachers’ Retirement System, which totaled $900 million this year, could reach $4.5 billion by 2016, the report said. ”The run-up in pension costs threatens to divert scarce resources from essential public services during a time of extreme fiscal and economic stress for every level of government,” the report said.
But despite the recent stability, the group said the funding shortfall faced by the 200 largest schemes had still soared by 50 per cent during the past four years, rising from an average of £55 billion during 2006 to one of £87 billion this year. Sarah Abraham, consultant and actuary at Aon Hewitt, said: ‘In the aftermath of the financial crisis, pension deficits crept up to record highs. In mid-June 2010, the deficit reached its highest level of £112 billion.
Some residents and property owners have spoken against the plan, claiming that cutting the service would be unfair. Opponents also say landlords at the affected properties will raise tenant rents if property owners are forced to hire private trash haulers. Council Chairman Lee Klein, R-4th Ward, said the difficult economy has forced many cities to make difficult fiscal choices. ”These are tough times,” Klein said. “The choices are tough.”
Some estimates predict Houston will face a nearly $120 million budget shortfall as early as next summer, in part because of a drop in property-tax revenues, a loss of revenue from the now-defunct red-light cameras and growing pension costs. ”We’ve been focusing on finding the efficiencies,” Mayor Annise Parker said. “Now we’re down to what we can do to plug the hole.” Fear of mandatory furloughs and layoffs has led to lower morale, according to city employees. ”You’ve got people that are living paycheck to paycheck,” said a City of Houston employee, who asked not to be identified. “There’s going to be a lot of people out there struggling.”
David Einhorn, president of hedge- fund operator Greenlight Capital Inc., said the global economy will face a sovereign debt crisis after governments around the world increased spending to deal with the fallout from the financial crisis. “We managed to transfer a lot of the problems from the private sector to the public sector,” Einhorn said in an interview with the Charlie Rose television show. “It’s created a very, very large budget deficit. And it’s created a monetary policy that’s extremely easy. It is eventually going to come to a tough spot.”
The national average for a gallon of regular hit $2.95 on Monday. That’s the highest December price in three years. Analysts say the national average could hit $3.00 or more by the end of the year if oil prices don’t go down. One shopper we spoke to said she’s going to have to cut back somewhere. ”It’s gonna take a little bit from that, you know, just having to manage the fuel to get around,” Bernadette Kelly said. “You’ve got gifts and groceries and other bills that have to be paid along with paying for gas.”
“In recent years some of non-OPEC countries have continuously oversupplied the market, but this will not be possible in the coming years because of a drop in production,” Khatibi said. Characteristically bullish on the oil price, Khatibi said higher prices were needed to enable producer countries to invest.
Governor Christine Gregoire says she will call state lawmakers into an emergency session later this month to deal with a billion-dollar hole in the state budget….Washington State is facing an estimated $1.1 billion deficit in its current budget and $5.7 billion in the 2011-13 biennium.
The European Central Bank bought Irish and Portuguese government bonds today, according to at least two people with knowledge of the transactions. Central banks were also buying Greek debt, said one of the people, who asked not to be identified because the deals are confidential. A spokesman for the ECB in Frankfurt declined to comment.
Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the “3 Es.”