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AFL-CIO Threatens To Break From Democrats

by AP on May 21, 2011

Huffington Post…

WASHINGTON — Prominent labor leaders, frustrated that Democrats in Washington aren’t aggressively pursuing the union agenda, are threatening to limit their campaign support for Democrats, an act that would hamper the party’s bid to regain control of the House next year and keep a majority in the Senate. AFL-CIO President Richard Trumka’s threat of a pullback Friday was the latest warning to a party that has long relied on labor’s cash and grass-roots support. If it makes good on its threat, labor probably would spend more time and money combating union-busting efforts by state officials. “We will change the way we spend, the way we do things and the way we function that creates power for workers,” Trumka said. In a speech at the National Press Club, Trumka called for “an independent labor movement” and said unions were not responsible for building the power of any political party, but for improving the lives of working families. He promised that unions would spend the summer holding leaders in Congress and the states accountable. If labor makes itself truly independent of the Democratic Party, it would mark a major shift in a long-standing political relationship. “It doesn’t matter if candidates and parties are controlling the wrecking ball or simply standing aside to let it happen,” Trumka said. “The outcome is the same either way. If leaders aren’t blocking the wrecking ball and advancing working families’ interests, then working people will not support them.” The AFL-CIO’s executive council is considering a plan that could spend less on congressional races and more on fighting state battles like those in Wisconsin and Ohio, where lawmakers want to weaken collective bargaining rights and reduce union clout. But Trumka made clear the federation had no plan to follow the lead of the nation’s largest firefighters union, which announced last month that it would halt all political donations to members of Congress because they are not fighting hard enough for union rights. The move has won praise in many corners of the labor movement, where union activists have openly grumbled about House and Senate Democrats being too quiet while unions are getting pummeled in dozens of states. “We’ve spent money where we have friends and we will continue to do that,” he said. Leon Fink, a labor historian at the University of Illinois at Chicago, said unions are tired of being taken for granted and discouraged that their influence with moderate and conservative Democrats has been limited. “Spending a lot of money electing conservative Democrats in marginal districts had no legislative payoff for unions,” Fink said. “They don’t seem to have the capacity to impose their will on the party.” Unions have been disappointed that Congress has not passed a more ambitious stimulus plan to create jobs, that health care reform didn’t go far enough and that Democrats – when they held a majority in Congress – couldn’t muster enough votes to pass a bill that would make it easier to organize unions. The AFL-CIO spent more than $50 million to support Democrats in last year’s midterm elections, much of it in critical get-out-the vote efforts in dozens of key races. But a growing number of union leaders remain frustrated at what their money has bought. Some activists want to reallocate resources permanently so that more is spent bolstering grass roots support in the states. Unions have threatened to pull support from Democrats before, only to come back as election time draws closer when they realize there are few political alternatives. Asked how seriously Democrats should take the threat, Trumka pointed to former Arkansas Sen. Blanche Lincoln. Unions spent about $10 million last year trying to unseat Lincoln in the Democratic primary because she refused to support a broader health reform package and a bill that would make it easier for workers to form unions. Lincoln beat back the challenge, but lost in the general election. Yet unions continued to offer support to other Democrats in the 2010 election who also wavered on the health overhaul, as some leaders feared the consequences of a GOP majority would be even worse. It remains unclear how far the trend on unions trimming back political donations might spread. The politically powerful Service Employees International Union does not intend to reduce its role in federal races, SEIU political director Brandon Davis said. Guy Cecil, executive director of the Democratic Senatorial Campaign Committee, said organized labor is not just an important part of the Democratic Party, but is “critical to rebuilding our entire economy.” “We are working closely with labor at every level to build strong campaigns and deliver results for working families,” Cecil said. Jennifer Crider, spokeswoman for the Democratic Congressional Campaign Committee, said “labor’s fight is our fight and we’re proud to partner with them.” Trumka saved his harshest criticisms for Republicans in Congress and dozens of state legislatures for passing budgets that slash pensions and curb bargaining rights of union members while giving tax cuts to “the powerful and well-connected.” “The final outrage of these budgets is hidden in the fine print,” Trumka said. “In state after state, and here in Washington, these so-called fiscal hawks are actually doing almost nothing to cut the deficit.” He said these budget deals are sending a message that “sacrifice is for the weak.” “Powerful political forces are seeking to silence working people – to drive us out of the national conversation,” Trumka said. Trumka and other union leaders have said they expect the moves in some states to curb union rights will create a backlash that will help organized labor grow stronger. Unions are already spending millions to help recall campaigns in Wisconsin and Ohio. They are hoping the momentum of those recalls can be sustained through the 2012 elections.

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Newt Gingrich Businesses Owed Unpaid State Taxes

by AP on May 14, 2011

Huffington Post…

ATLANTA — Companies run by Republican presidential candidate Newt Gingrich have faced overdue tax bills in four states worth more than $6,000, according to records reviewed by The Associated Press. The tax liens, which generally allow governments to seize assets or property to settle tax bills, ranged in size from a $195 property tax bill in the Atlanta suburbs to $1,969 in unpaid Missouri taxes. Most of the liens were paid shortly after tax authorities filed them. One exception was in Pennsylvania, where Gingrich Holdings Inc. last week paid off a $1,599 lien for unpaid corporate income taxes just days before Gingrich formally announced he would run against Democratic incumbent Barack Obama. Gingrich spokesman Rick Tyler said Gingrich and his firms were unaware of most of the tax liens until being contacted this week by the AP. “When an issue has arisen, we’re anxious to resolve the issue and get the taxes paid,” Tyler said. “We want to be in compliance with all the states.” Georgia State University professor Jack Williams, who teaches multistate taxation, said he most commonly sees liens filed against businesses in financial distress. Other contributing factors could be poor record-keeping or aggressive tax collectors. “The lien stage is about as deep into the process you get before the taxing authority seizes your assets and sells that,” Williams said. Until deciding to run for president, Gingrich was the CEO of Gingrich Holdings Inc., the parent company of firms that manage his book and TV contracts, produce documentary films, offer consulting services and oppose Obama’s health care overhaul. Tyler said Gingrich’s businesses are financially healthy. Last week, Gingrich Holdings paid off a lien worth $1,599 for corporate income taxes that court records show dates back to 2002. Pennsylvania Department of Revenue spokeswoman Elizabeth Brassell said privacy laws forbid her from discussing the case further. Tyler said the problem appears to have started in 2002 when state officials rejected a tax return on a technicality. While the company believed it had satisfied the bill, it paid off the lien earlier this month after learning of the remaining balance, Tyler said. In 2009, a Gingrich Holdings subsidiary paid $2,654 in Missouri tax liens for unpaid withholdings taxes and sales or use tax. Court documents show Gingrich’s company still faces a $688 lien for more withholding taxes, although Tyler said Gingrich’s company previously paid the bill and blamed state officials for failing to note the payment. He said Gingrich’s company expects to receive paperwork from Missouri officials acknowledging the payment in several days. Missouri Department of Revenue spokesman Ted Farnen said privacy laws ban him from discussing the case. One of Gingrich’s now-defunct businesses, Gingrich Enterprises Inc., faced a flurry of tax liens in Indiana. It satisfied some and believes the rest are paperwork problems. In 2002, records show Gingrich Enterprises resolved Indiana tax liens totaling $1,349. Tyler said he did not know Friday what caused those tax bills. Gingrich had delivered speeches in the state before and after the liens were issued and may have received speaking fees. The company filed paperwork in Georgia showing it was dissolving in November 2002. The next month, Indiana officials filed the first of 43 more liens against the company. Tyler said Gingrich officials alerted Indiana this week that the company went out of business in late 2002 and never owed state taxes after that. He said Gingrich expects to receive a letter from Indiana officials acknowledging that decision shortly. Indiana Department of Revenue spokeswoman Stephanie McFarland said she could not discuss the case, citing confidentiality laws. Business records show the mailing address for the firm was a post office box and the home of Gingrich’s ex-wife, Marianne Gingrich. She said she previously alerted Indiana officials that the company closed and supplied them with ways to contact her ex-husband. She now throws away some of the bills. “If Indiana really wanted money from him, they could find him,” she said. ___ Associated Press news researcher Judith Ausuebel in New York and reporter Charles Wilson in Indianapolis contributed to this report. Ray Henry can be reached at . http://twitter.com/rhenryAP

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Newt Gingrich Businesses Owed Unpaid State Taxes

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Marshall Auerback: Revenue Sharing for the States: How It Works, Why We Need It, and Why Nixon Liked It

May 11, 2011

Cross-posted from New Deal 2.0 . Our policymakers continue to believe that they must first ‘get credit flowing again’ to restore output and employment. Unfortunately the reverse is the case: restoring output and employment will restore the flow of credit. Creditworthiness precedes credit. And yet, as we get closer and closer to D-Day on the debt ceiling limit, the negotiations continue to turn on how much income the government should drain from the economy, even as private sector activity continues to stagnate. All moves to date by the Treasury and Federal Reserve have only served to shift financial assets between the public and private sectors. And that includes quantitative easing . Nothing has directly added to aggregate demand (the overall demand for goods and services). The economy has therefore continued to deteriorate, with only the ‘automatic stabilizers’ like unemployment insurance slowly adding financial assets and income to the private sector as the counter-cyclical deficit rises. The rate of federal deficit spending now exceeds around 8% of GDP and seems to have begun moving the economy sideways, but has been insufficient to offset the impacts of the worst recession in over 70 years. Indeed, the combination of a tepid fiscal response — which appears to have been just enough to ward off a second Great Depression — and the premature fiscal withdrawal are largely to blame for the weak and teetering recovery. Worst of all, most of the fiscal packages have been spent. That suggests that in spite of all of the cheerleading by US officialdom and the beneficiaries of this Potemkin prosperity, we will not record significant gains in employment until real output of goods and services exceeds productivity growth. Withdrawal of yet more fiscal stimulus, as the mainstream “experts” (who completely missed the Great Recession of 2008!) continue their call for further cutbacks in government spending, risks a repeat of the error that FDR made when he listened to conservative economic advisers in 1937. He slashed the budget deficit during the Great Depression — causing a renewed surge in unemployment and the extension of the depression. The most immediate crisis, deserving attention before any other, is in the states and cities. Yet assistance to the states is being cut off at a time likely to forestall economic recovery. State and local budgets should not be cut. But how to prevent this? Here’s an idea: By recreating a revenue sharing program for the states, with a pass-through to cities, on a scale sufficient to plug the budget gaps. How much is needed? As James Galbraith has noted , the federal government’s fiscal aid to the states has hitherto only offset the job cuts imposed by falling revenues and balanced budget requirements. He therefore suggests a number of practical measures to enhance this revenue sharing: Federalizing Medicaid may be the most effective and practical way to achieve this. The alternative is open-ended general revenue sharing: on the condition that states neither raise nor lower their tax rates, the federal government should supply the funds required to close their budget gaps and to maintain public services at baseline levels, for the duration of the crisis. President Obama could well point out that revenue sharing has Republican lineage; it ought to be a bipartisan cause today. It was Richard Nixon who first introduced the concept. Nixon viewed the federal bureaucracy as a poor revenue manager and argued that much counter-cyclical spending should go to the states, as they are closer to people’s needs and more directly hurt by falling revenues. But instead of simply cutting taxes, as later conservatives would, he proposed a new system called revenue sharing, which redirected funds to states and municipalities. The federal government would collect taxes and local governments would spend the money. Passed after contentious debate, the State and Local Assistance Act of 1972 initially delivered $4 billion per year in matching funds to states and municipalities. The program, which distributed some $83 billion dollars before it was killed by Ronald Reagan in 1986, proved enormously popular. It is important to remember that a sovereign government with its own currency can always financially afford such a program. By virtue of its position as issuer of the currency, the US Federal government could promote employment, output, income, and private expenditure through the expedient of revenue sharing. By contrast, US states, as users of currency, are reliant on this counter-cyclical fiscal policy to mitigate the destructive effects of economic downturns — particularly unemployment and the suffering it causes. In the words of Erik Dean, the states “cannot run budget deficits without risking credit downgrades and insolvency. Recessions typically diminish revenues for these users of the currency at the very time that their expenditures are most needed.” As an example, consider Hurricane Katrina. True, the rescue package was marred by incompetence, but how was New Orleans able to rebuild, given the underlying financial condition of the state of Louisiana? Simple, as David McWilliams noted in today’s UK paper, “The Independent”: The United States cavalry rode in to save New Orleans and the State of Louisiana. The President declared a state of emergency, Treasury wrote the cheques and the Federal Reserve credited Louisiana’s accounts. They then spent those dollars on cleaning up the city. So the central bank credited the account of the State of Louisiana because emergency economic conditions meant the State needed it. The State issued no bonds; there were no IOUs, except that the deficit of the US rose. There was no effect on inflation. Yes, we have recovered from the worst of the crisis. But it is delusional to believe that economic recovery can really get underway until we have added something close to 10 million jobs. The current level of job growth will not see us get anywhere near that target for at least another 3-4 years. Indeed, in the absence of revenue sharing, we are likely to see more attacks on workers of the kind that has characterized recent budget battles in Wisconsin and Michigan. Wall Street crashed their pensions and created the fiscal crisis now afflicting the states. But this administration is still caught in the grips of that failed economic paradigm. If President Obama were to fight for revenue sharing, he would develop tens of thousands of local government allies. He would also have a very powerful issue with which to fight the next election, as well as a winning economic argument.

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Amtrak, 15 States Get $2 Billion That Florida Lost

May 9, 2011

WASHINGTON — Amtrak and rail projects in 15 states are being awarded the $2 billion that Florida lost after the governor canceled plans for high-speed train service, the Department of Transportation said Monday. The largest share of the money – nearly $800 million – will be used to upgrade train speeds from 135 mph to 160 mph on critical segments of the heavily traveled Northeast corridor, the department said in a statement.. Another $404 million will go to expand high-speed rail service in the Midwest, including newly constructed segments of 110-mph track between Detroit and Chicago that are expected to save passengers 30 minutes in travel time. Nearly $340 million will go toward state-of-the-art locomotives and rail cars for California and the Midwest. California will also get another $300 million toward trains that will travel up to 220 mph between San Francisco and Los Angeles. “These projects will put thousands of Americans to work, save hundreds of thousands of hours for American travelers every year, and boost U.S. manufacturing by investing hundreds of millions of dollars in next-generation, American-made locomotives and rail cars,” Vice President Joseph Biden said in a statement. President Barack Obama has sought to make creation a national network of high-speed trains a signature project of his administration. He has said he wants to make fast trains accessible to 80 percent of Americans within 25 years. The money – initially $2.4 billion – had been awarded to Florida for high-speed trains between Tampa and Orlando. After Gov. Rick Scott canceled the project, the Transportation Department invited other states to bid for the funds. It received 90 applications seeking a total of $10 billion. Scott said he was concerned that the state government would be locked into years of operating subsidies. However, a report by the state’s transportation department forecast the rail line would be profitable. The project initially had been approved by Scott’s predecessor, Republican-turned-Independent Charlie Crist. Two other Republican governors elected in November have canceled high-speed train projects in their states. Wisconsin Gov. Scott Walker turned down $810 million to build a Madison-to-Milwaukee high-speed line. Ohio Gov. John Kasich rejected $400 million for a project to connect Cincinnati, Cleveland and Columbus with slower-moving trains. Both the Ohio and Wisconsin projects had been approved by the governors’ Democratic predecessors. Republican members of Congress have also opposed funds for high-speed trains, rescinding $400 million of the money previously awarded Florida as well as other unspent money designated for trains in budget deliberations with the administration.

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The States Where People Can’t Afford Gas

April 28, 2011

Gas prices fluctuate sharply from state to state. Regular unleaded fuel costs $4.17 per gallon in Alabama, while the price is below $3.50 in other states. Part of the reason for these discrepancies is differing gas taxes and part has to do with the cost to transport fuel. Gas prices in and of themselves do not affect consumer spending. Fuel costs cannot be considered in a vacuum. A household with an annual income of $250,000 may not be bothered much by $5 gas. A household with an annual income of $35,000 could find that $3.50 gas is so expensive that cutbacks on other daily expenses are necessary to offset the cost of daily driving.

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In Many States, Pensions Gap Continues To Grow, Report Says

April 26, 2011

WASHINGTON (Lisa Lambert) – U.S. states are short $1.26 trillion in paying for public employee pensions and other retirement benefits, a gap that grew 26 percent in one year and will take many more years to wipe out, according to a report released on Tuesday. A total of 31 states had pensions that were underfunded in fiscal 2009, the latest year for which data is available, up from 22 states a year earlier, the Pew Center on the States reported. The financial crisis in 2008 crushed many pension funds’ investments, just as historic budget woes forced governments to cut contributions to those funds. The combination “made a serious problem even worse,” said Susan Urahn, the Pew Center’s managing director. In fiscal 2009, which for most states began in July 2008, states were short $660 billion for future pension payments and $604 billion for other retiree benefits, namely healthcare. Growing unfunded pension liabilities on top of still daunting state budget gaps are a top concern of Wall Street rating agencies and investors in the $2.9 trillion municipal bond market. Most states are legally bound to pay retirees benefits, and they must make up for any investment loss from their already depleted treasuries or by borrowing. Pensions are deemed “underfunded” when they are unable to pay at least 80 percent of liabilities. Preliminary data for fiscal 2010 shows that pension funding levels of 10 states deteriorated further, while just three registered increases, Pew found. “Overall, these results suggest that while states benefited from better returns in fiscal year 2010, the legacy of the financial crisis … will remain an issue for years to come,” Pew said in the report. Last year, Pew found states were short $1 trillion in fiscal 2008 on promises to retirees, using data that came from before the financial crisis. States typically assume an 8 percent annual return and their pension plans suffered a median 19.1 percent drop in their assets’ market value in fiscal 2009, Pew said. One critic said the lagging data does not reflect the improvement in current conditions. “Given where we are in time now, talking about 2009 numbers just isn’t useful. The world has changed in the last 18 months,” said Hank Kim, executive director of the National Conference of Public Employee Retirement Systems. “The market has come roaring back.” On Monday, Kim’s group released a survey of 216 public pension funds showing the average return over the last year was 13.5 percent. Illinois consistently has had the lowest pension funding level among states, one that worsened to 51 percent in fiscal 2009 from 54 percent in fiscal 2008, according to the Pew report. In fiscal 2010 and 2011, the state sold $7.16 billion of taxable bonds to raise money for its annual pension payments. A year ago, Governor Pat Quinn signed into law a pension reform measure reducing benefits for new state workers, which he said would save more than $200 billion over nearly 35 years. The U.S. Securities and Exchange Commission is looking into “communications” by the state regarding potential savings or reduced contributions to pensions resulting from the law. Five other states, including cash-strapped Rhode Island, have funding levels of less than 60 percent, according to Pew. Conversely, New York’s pension is 101 percent funded, followed by Wisconsin at 100 percent and Washington at 99 percent. States must increase their contributions when returns are low. From 2000, when the systems were well funded, to 2009 these payment requirements grew 152 percent, putting pressure on states to take dollars away from other spending areas. Of late, Republicans in the U.S. Congress have pressed states to assume investment return rates closer to 4 percent, which they consider “riskless.” Using assumptions that private pension plans rely on, which are linked to returns on corporate bonds of about 5.22 percent, Pew found the pension shortfall for states could be as much as $1.8 trillion. By relying on a rate based on a 30-year Treasury bond, Pew found the states’ shortfall could be $2.4 trillion. (Additional reporting by Karen Pierog in Chicago. Graphic by Stephen Culp; editing by Leslie Adler) Copyright 2011 Thomson Reuters. Click for Restrictions .

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CEO: ‘Caterpillar Is Here To Stay’

April 6, 2011

EAST PEORIA, Ill. — Illinois is facing growing concerns among business leaders that its policies hurt the companies that drive its economy, the head of Caterpillar Inc. warned Tuesday as he met with Gov. Pat Quinn. The meeting was prompted by a letter that Caterpillar CEO Doug Oberhelman sent to the governor about other states trying to lure his company after Illinois hiked its income tax. Oberhelman spoke with Quinn for about an hour, after which he said he expects the Peoria-based heavy equipment manufacturer to remain in Illinois for the long term. Oberhelman also promised to help make the state more business-friendly, and Quinn vowed to invest in the state’s infrastructure, expand its exports and overhaul its workers compensation system. In his letter, which was leaked to a newspaper, Oberhelman wrote that his warning was not meant as a threat, but rather as a way to initiate a discussion about the state’s business environment. The tax increase was approved in January. “I think Caterpillar is here to stay,” said Oberhelman, whose company employs some 23,000 people in Illinois. Quinn acknowledged that Illinois needs to do more to improve its business environment. He boasted the state added the most total jobs in the Midwest last year, but Illinois ranked eighth in the region in terms of job growth as a percentage of the population. “When you have a tough recession as we’ve had, recovery is never easy,” Quinn said. He emphasized the need to reform the workers compensation system and double state exports in five years by increasing trade with Latin America and Africa. Quinn added Oberhelman to a state export council to help reach that goal. Illinois raised the personal income tax rate in January from 3 percent to 5 percent and the corporate rate from 4.8 percent to 7 percent. At the time, Quinn’s office said the tax hike would bring in an estimated $6.8 billion per year and help the state deal with its massive budget deficit. The tax hike led other states, including New Jersey, Indiana and Wisconsin, to appeal openly to Illinois businesses to pick up shop. Before meeting with Quinn, Oberhelman spoke at a conference on construction and transportation. He told the gathering that during a visit to Hong Kong two weeks ago, Caterpillar’s overseas representatives were surprised by the Illinois tax increase and worried about the state’s business environment. “I thought to myself, ‘That’s not the image or the brand anyone in Illinois would appreciate,’” Oberhelman said. Oberhelman declined to discuss the tax hike’s impact on Caterpillar and to say how much the company paid last year in state and federal taxes, although he said the company did pay state income taxes. Caterpillar has argued the increase hurts the company’s employees and makes it harder to attract employees such as engineers. Illinois’ businesses have made it a priority to cut the cost of workers compensation and unemployment insurance, and to cap the amount of money they could be liable for in lawsuits. Quinn has proposed a 30 percent reduction in employer payments to injured workers, which would still leave Illinois with the nation’s second-highest rates. Still, many lawmakers were disappointed Quinn’s plan doesn’t require workers to prove injuries that occurred on the jobsite were the primary reason for not being able to work. Despite disagreeing with some of his policies, many business leaders have commended Quinn for listening to their concerns and trying to make the state a better place to operate. “It is no longer talking at each other. It’s really talking with one another,” said Amir Al-Khafaji, who introduced Oberhelman and Quinn at the conference and is director of the Center for Emerging Technologies in Infrastructure at Bradley University. David Vite, president of Illinois Retail Merchants Association, said Quinn has called labor groups together for “significant negotiations” on unemployment insurance reform. He said Quinn has met with various interests to get a better grasp of the issue and how to pay $2.5 billion owed to the federal government for unemployment benefits. The Illinois Chamber of Commerce wants expanded research and development tax credits. The state’s current research and development credit has expired and other states are improving their tax packages, the group says. Kim Clarke Maisch, Illinois director for the National Federation of Independent Business, questioned the value of small business tax credits for new hires, which Quinn touted Tuesday. She said the $2,500 credit isn’t enough to coax businesses into hiring, while ones that already planned to add jobs gladly take the free money. Still, it would be something for businesses that feel under siege in Illinois, she said. “It’s better than a stick in the eye, I guess,” Maisch said.

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Republicans Gamble With Politically Risky Budget Proposal

April 6, 2011

WASHINGTON (Reuters) – Republicans on Tuesday unveiled a politically risky 2012 proposal that aims to bring down huge budget deficits by cutting healthcare benefits for the poor and elderly. The 2012 budget blueprint from Paul Ryan, chairman of the House of Representatives’s budget committee, builds on the Republican Party’s campaign promise to scale back the size of the federal government. His plan for the fiscal year that begins October 1 would achieve nearly $6 trillion in savings over the next decade, chipping away at a budget deficit that this year is expected to hit $1.4 trillion. “This is a budget that creates economic growth. It is a budget to pay off our national debt. It is a budget to get our fiscal track on the right track,” Ryan said. But the plan drew harsh criticism. “While we agree with his ultimate goal, we strongly disagree with his approach,” White House Press Secretary Jay Carney said. The House Republican plan, Carney added, “cuts taxes for millionaires and special interests while placing a greater burden” on the elderly, children with disabilities, students and workers who have lost their health coverage. The non-partisan Congressional Budget Office, in its analysis of the Ryan budget, cautioned that some of the Medicare proposals would shift healthcare costs to elderly recipients. Similarly, Medicaid changes would shift some costs to the states, which already are cash-strapped. Republicans hope deficit-cutting scores big with voters concerned about gaping federal budget deficits, but public opinion polls find opposition among Americans to many of the domestic spending cuts Republicans are offering. That could come back to haunt the party in the 2012 elections. Ryan’s plan could move quickly through the Republican-led House, where fiscally conservative Tea Party members are clamoring for even deeper spending cuts. It is unlikely to clear the Senate, where Democrats still have a majority. Ryan put forward his 2012 blueprint while his colleagues continued to wrangle about a budget for the current fiscal year ending September 30. That bitter debate, if unresolved by Friday night, could lead to a partial government shutdown. Negotiations this week on the 2011 budget have stalled over some $33 billion in proposed cuts. Ryan’s proposal for 2012 includes much steeper cuts and sets the stage for an even more contentious debate. Republican leaders hope Ryan’s 2012 proposal can reduce pressure from members of the conservative Tea Party movement who are forcing the party to adopt a hardline stance in current negotiations over the 2011 budget. MEDICARE, MEDICAID PROPOSALS Under the Republican proposal, which could be approved by the House Budget Committee soon, Medicare would be replaced with a voucher system giving recipients a fixed amount of money to buy private insurance plans. People now 55 and older would stay in the current plan. Medicaid healthcare for the poor would be turned over to the states under a block grant system. On the tax side, top rates for individuals and businesses would be cut to 25 percent from 35 percent under the Ryan proposal. The Wisconsin Republican said his plan would balance the U.S. budget by 2015, but that does not include the effect of interest payments on debt. His plan also makes economic assumptions that some critics call rosy. The proposal fails to address another major problem — keeping the Social Security retirement system solvent. Instead, it urges Congress to work on a bipartisan solution to reforming this popular program. The sniping between Republicans and Democrats over tax and spending priorities will extend well into next year and the 2012 presidential and congressional elections. Democrats hope the Ryan budget proposal and Tea Party demands for deeper, faster spending cuts on popular domestic programs like Medicare will prompt a voter backlash against Republicans. Some corporate groups praised the Ryan budget plan. The proposal “focuses the policy discussion on the importance of entitlement reform in putting America’s budget in order for the long term,” said the Business Roundtable. (Additional reporting by Thomas Ferraro, Kim Dixon, Donna Smith and David Morgan; Editing by Eric Walsh and Paul Simao) Copyright 2010 Thomson Reuters. Click for Restrictions .

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US Department of Justice CTO Jeremy Warren Joins 2GIG Technologies(R) as CTO

April 4, 2011

CARLSBAD, CA–(Marketwire – April 4, 2011) – In a major public to private sector move, Jeremy Warren, Chief Technology Officer (CTO) of the United States Department of Justice , has been hired as the new CTO of 2GIG Technologies , the Carlsbad, CA-based developer of home security and related systems. “We are fortunate to have one of the top federal technology executives coming to work for us at a time of major expansion and innovation at 2GIG,” states Todd Santiago, President.

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Turkey Burger Recall Announced

April 3, 2011

The Jennie-O Turkey Store has recalled 54,960 pounds of frozen, raw turkey burger products, the U.S. Department of Agriculture announced . The recall was prompted by possible Salmonella contamination, according to the release . The affected product will have a use date of Dec. 23, 2011 and includes: “4-pound boxes of Jennie-O Turkey Store® “All Natural Turkey Burgers with seasonings Lean White Meat”. Each box contains 12 1/3-pound individually wrapped burgers.” At least 12 people in Wisconsin and nine in other states have reported illnesses, Milwaukee Journal-Sentinel reported , prompting the recall. According to WalletPop , illnesses have also been reported in Colorado, Ohio, Arizona, California, Georgia, Illinois, Mississippi, Missouri and Washington. For more information, read the USDA release here.

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Missouri Unemployment Benefits Extension To Be Dropped

March 31, 2011

JEFFERSON CITY, Mo. — Thousands of people in Missouri who have been unemployed for more than a year soon will lose their jobless benefits, marking a significant victory for Republican fiscal hawks who are crusading against government spending. When eligibility ends Saturday, Missouri will become the only state to voluntarily quit a federal stimulus program that offers extended benefits. Michigan, Arkansas and Florida also recently took steps to cut back on money going to the unemployed, although they targeted state benefits instead. “We have to take a stand and say, `When is enough enough?’ and send a message to the federal government, and hopefully shame them into doing the right thing and quit spending money that they don’t have,” said state Sen. Jim Lembke, a Republican from St. Louis. Lembke has led a coalition of four filibustering senators who have blocked legislation necessary to reauthorize Missouri’s participation in a federal program offering long-term unemployment benefits. It’s been a stunning setback for a bill that had passed the Republican-led House 123-14 two months ago and had the support of GOP Senate leaders and Democratic Gov. Jay Nixon. As a result, more than 34,000 unemployed residents in Missouri could miss out on $105 million in benefits over the next nine months. Unlike some other stimulus programs, Missouri’s unclaimed money would not be redistributed by the federal government to other states. It simply would remain unspent. At issue is a provision in the 2009 federal stimulus act that allowed residents in states with high unemployment rates to receive up to 20 additional weeks of federally funded jobless benefits after exhausting the 79 weeks authorized under other federal laws. At least three dozen states, including Missouri, enacted laws to participate. Although their unemployment rates were high enough to qualify, seven other states – Arkansas, Louisiana, Maryland, Mississippi, Montana, Oklahoma and Utah – never passed laws to join in, according to the U.S. Department of Labor. Maryland is now pursuing participation, but many of the other states seem content to remain out of the program. Much like his Missouri counterparts, Utah Senate President Michael Waddoups said the states need to set an example of self-sufficiency. “Somebody has to start pulling back from the federal government somewhere,” said Waddoups, a Republican from Taylorsville. That federal backlash is particularly strong in Missouri, where voters were the first in the nation to pass a measure challenging the new federal health care mandate and where Republican senators also are holding up federal stimulus money for education. Missouri’s unemployment rate has remained above 9 percent for nearly two years. Yet it is poised to become the first state to take the additional federal unemployment money, then later voluntarily stop doing so, according to officials at the federal Labor Department and the National Employment Law Project, a New York-based advocacy group for employment rights that has been urging Missouri to remain in the program. Several other states could have been in the same situation. But the governors of Massachusetts, Michigan and Oregon all signed laws within the past week continuing participation. Michigan’s action came with catch, also cutting state jobless benefits from 26 to 20 weeks starting in 2012. The Florida House has passed a similar state benefits reduction. Arkansas’ legislature this week gave final approval to a bill shaving off one week of eligibility for state jobless benefits. In Missouri, about 10,000 people would immediately be cut off from additional jobless payments, according to the state department of labor. And extended unemployment benefits would be denied to about 24,000 additional residents who otherwise are projected to become eligible. St. Louis resident Peter Gordon, who has been unemployed for a little over a year, is among those who could miss out. A former patient care coordinator at a hearing aid company, Gordon has been searching for jobs over the Internet but said he can’t travel far because he can’t afford to license his car. He fears he could eventually be evicted from his apartment. “They can provide money for government programs to take care of the elite and rich,” Gordon said. “But when it comes to a small person like me – people who are just trying to make ends meet – it seems like the rights are being taken away.” Kimberly Clark, a laid off union organizer, says her post-tax unemployment benefit of $275 a week already is consumed by her rent, utility and phone bills. She’s been searching for work since November 2009, and she’s only a couple of months away from needing the extended benefits that Missouri is poised to reject. “The mentality is we’re just creating a bunch of lazy people, and that is not true,” said Clark, 48 of St. Louis. The National Employment Law Project says its supporters sent 15,000 emails in a roughly 24-hour period from Tuesday to Wednesday urging Missouri senators to allow a vote on the legislation reauthorizing the extended jobless benefits. But Sen. Brian Nieves, a Republican from Washington, Mo., who is popular among tea party activists, said he has no intention of compromising his position. “The people have been crystal clear for about the last two years in saying that they expect us to at least start the process of weaning ourselves off of the federal government,” Nieves said. ___ Associated Press writers Wes Duplantier in Jefferson City, Josh Loftin in Salt Lake City, Brian Witte in Annapolis, Md., Sean Murphy in Oklahoma City, Emily Wagster Pettus in Jackson, Miss., Nomaan Merchant in Little Rock, Ark., Melinda Deslatte in Baton Rouge, La., and Matt Gouras in Helena, Mont., contributed to this report.

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Wendell Potter: Insurers’ Cynical Calculations on the Cost of Doing Business

March 31, 2011

Since you likely don’t pay as much attention to the behavior of insurance companies as I do, you probably are not aware that CIGNA, my last employer, was fined $600,000 by the North Carolina Department of Insurance earlier this week for, among other things, not charging its customers correctly. In addition to the fine CIGNA has been ordered to pay, the company will have to shell out several hundred thousand dollars in refunds to North Carolina employers whom regulators say were charged too much over a three-year period. It was the second largest fine ever levied by the state’s regulators, the largest being a $1.8 million fine in 2003 against Blue Cross Blue Shield of North Carolina for underpaying claims for emergency care. The news about the CIGNA fine was picked up by a few media outlets in the state, but not many. And it got almost no press coverage outside of the state. That didn’t surprise me. Having served as head of PR for two of the country’s largest health insurers — CIGNA and Humana — I know from personal experience that such fines are not widely considered newsworthy. Insurers know this, and so, annoying as being charged with breaking the law might be, they largely shrug off the fines and the threat of a day’s worth of bad publicity that occasionally accompany them. They are perfectly willing to risk being caught because they long ago realized that the fines are never severe enough to make them radically change the way they do business. Such a change would involve dealing more honestly with both their customers and the doctors who provide care to the people they insure. Insurers know too that most state regulatory agencies are not sufficiently resourced to effectively monitor their behavior, although the main responsibility of state insurance departments is actually to protect the interests of consumers against predatory practices. Because of this often-inadequate oversight, insurers realize that the chances of getting caught are, in many states, pretty slim. And they consider the infrequent and inconsequential fines they have to pay when they do get caught just another cost of doing business. Considering that the five largest health insurers made a combined $11.7 billion in profits last year, the fines are little more than chump change. When I learned about the most recent fine against CIGNA, I decided to do a search of other recent actions against insurers by various state regulatory agencies — actions you probably haven’t heard about. Here’s a sampling from just the last six months: Horizon Blue Cross Blue Shield of New Jersey was fined500,000 and ordered to pay8 million to doctors and other providers for taking too long to pay claims Humana was fined100,000 for “numerous deficiencies and violations” in its business practices in Kentucky, particularly in the way it deals with doctors and chiropractors Aetna, Anthem Blue Cross of California, Blue Shield of California, CIGNA, Health Net, Kaiser Permanente and UnitedHealthcare were collectively fined nearly5 million for late or inaccurate payment of claims to doctors and hospitals Health Net was fined375,000 by the Connecticut Department of Insurance “for failing to safeguard personal information” of policyholders Aetna was fined850,000 and UnitedHealth was fined1.9 million by New York regulators for not providing policyholders with required information and for not paying claims in a timely manner UnitedHealth was assessed nearly10 million in fines in California for paying claims incorrectly, losing documents and medical records, failing to respond to member appeals in a timely manner and failing to resolve disputes with providers These are the cases that were reported by at least one news outlet. If I had gone further back in time and gone directly to state insurance departments rather than relying on news reports, I would have found many, many more. And of course, these are just violations that regulators caught. Many states are so inadequately resourced that insurers’ misdeeds frequently go unnoticed, and many states have comparatively few regulations on the books to protect consumers in the first place. I mention this for two reasons. One is that insurers frequently complain that they are over-regulated, that as a consequence of having to comply with various state regulations designed to protect us, they have to charge us all more in premiums. The other reason is that one of the health care reform ideas favored by many Republicans — allowing insurers to sell their products across state lines — would make matters much worse for most consumers and health care providers. Here’s why: if insurers were allowed to do what the GOP proposes, they would set up operations in the states that have the fewest regulations and consumer protections and the flimsiest history of fining insurers for violating what scant regulations are on the books. It would encourage what consumer advocates call a “race to the bottom.” Regulators in the states that do pay attention to problems like insufficient claims payments or ignoring appeals for denial of care would have no jurisdiction over the plans sold in other states. The threat of fines and bad publicity insurers now face for violating regulations would essentially be a thing of the past. Yes, premiums might go down for a while, but bad behavior on the part of insurers — and the deadly consequences of that bad behavior — undoubtedly would go up. So the next time you hear a politician say that reducing regulations and allowing the sale of health insurance across state lines would go a long way toward controlling health care costs, think of the real cost of such a solution. It’s no wonder that most state insurance commissioners think it is a lousy idea. (This was also published by the Center for Public Integrity at publicintegrity.org.)

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White House Takes Back Billions From Florida Allocated For High-Speed Rail

March 11, 2011

WASHINGTON — The Obama administration says it’s taking back the $2.4 billion allocated to Florida for high-speed trains and is inviting other states to apply for the money. Transportation Secretary Ray LaHood said in a statement Friday that he will make the funds available through competitive bidding to states eager to develop high-speed rail corridors. The Florida project would have connected Tampa and Orlando with high-speed trains. But Gov. Rick Scott, a Republican, said he didn’t want to obligate the state to pay for what could be expensive operating costs for the line. LaHood’s actions appeared to put an end to the on-again, off-again negotiations between Scott and supporters of the project trying to find a formula to keep it alive.

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Ellen Brown: How Wisconsin Can Turn Austerity Into Prosperity: Own a Bank

March 7, 2011

Public sector man sitting in a bar: “They’re trying to take away our pensions.” Private sector man: “What’s a pension?” – Cartoon in the Houston Chronicle As states struggle to meet their budgets, public pensions are on the chopping block, but they needn’t be. States can keep their pension funds intact while leveraging them into many times their worth in loans, just as Wall Street banks do. They can do this by forming their own public banks, following the lead of North Dakota — a state that currently has a budget surplus. Public workers are not going quietly into that good night of state budgets balanced at the expense of union benefits. After three weeks of protests in Wisconsin, convictions remain strong and pressure is building. Fourteen Wisconsin Democratic lawmakers said Friday that they are not deterred by threats of possible arrest and of 1,500 layoffs if they don’t return to work. President Obama has charged Wisconsin’s Governor Scott Walker with attempting to bust the unions. But Walker’s defense is: “We’re broke. Like nearly every state across the country, we don’t have any more money.” Among other concessions, Governor Walker wants to require public employees to pay a portion of the cost of their own pensions. Bemoaning a budget deficit of $3.6 billion , he says the state is too broke to afford all these benefits. Broke Unless You Count the $67 Billion Pension Fund . . . That’s what he says, but according to Wisconsin’s 2010 CAFR (Comprehensive Annual Financial Report), the state has $67 billion in pension and other employee benefit trust funds, invested mainly in stocks and debt securities drawing a modest return. A recent study by the PEW Center for the States showed that Wisconsin’s pension fund is almost fully funded, meaning it can meet its commitments for years to come without drawing on outside sources. It requires a contribution of only $645 million annually to meet pension payouts. Zach Carter, writing in the Huffington Post, notes that the pension program could save another $195 million annually just by cutting out its Wall Street investment managers and managing the funds in-house. The governor is evidently eying the state’s lucrative pension fund, not because the state cannot afford the pension program, but as a source of revenue for programs that are not fully funded. This tactic, however, is not going down well with state employees. Fortunately, there is another alternative. Wisconsin could draw down the fund by the small amount needed to meet pension obligations, and put the bulk of the money to work creating jobs, helping local businesses, and increasing tax revenues for the state. It could do this by forming its own bank, following the lead of North Dakota, the only state to have its own bank — and the only state to escape the credit crisis. This could be done without spending the pension fund money or lending it. The funds would just be shifted from one form of investment to another (equity in a bank). When a bank makes a loan, neither the bank’s own capital nor its customers’ demand deposits are actually lent to borrowers. As observed on the Dallas Federal Reserve’s website , “Banks actually create money when they lend it.” They simply extend accounting-entry bank credit, which is extinguished when the loan is repaid. Creating this sort of credit-money is a privilege available only to banks, but states can tap into that privilege by owning a bank. How North Dakota Escaped the Credit Crunch Ironically, the only state to have one of these socialist-sounding credit machines is a conservative Republican state. The state-owned Bank of North Dakota (BND) has allowed North Dakota to maintain its economic sovereignty, a conservative states-rights sort of ideal. The BND was established in 1919 in response to a wave of farm foreclosures at the hands of out-of-state Wall Street banks. Today the state not only has no debt, but it recently boasted its largest-ever budget surplus . The BND helps to fund not only local government but local businesses and local banks, by partnering with the banks to provide the funds to support small business lending. The BND is also a boon to the state treasury. It has a return on equity of 25-26% , and it has contributed over $300 million to the state (its only shareholder) in the past decade. This is a notable achievement for a state with a population less than one-tenth the size of Los Angeles County. In comparison, California’s public pension funds are down more than $100 billion — that’s billion with a “b” – or a third of the funds’ holdings, following the Wall Street debacle of 2008. It was, in fact, the 2008 bank collapse, not overpaid public employees, that caused the crisis that shrank state revenues and prompted the budget cuts in the first place. Seven States Are Now Considering Setting Up Public Banks Faced with federal inaction and growing local budget crises, an increasing number of states are exploring the possibility of setting up their own state-owned banks, following the North Dakota model. On January 11, 2011, a bill to establish a state-owned bank was introduced in the Oregon State legislature ; on January 13, a similar bill was introduced in Washington State ; on January 20, a bill for a state bank was filed in Massachusetts (following a 2010 bill that had lapsed); and on February 4, a bill was introduced in the Maryland legislature for a feasibility study looking into the possibilities. They join Illinois , Virginia , and Hawaii , which introduced similar bills in 2010, bringing the total number of states with such bills to seven. If Governor Walker wanted to explore this possibility for his state, he could drop in on the Center for State Innovation (CSI), which is located down the street in his capitol city of Madison, Wisconsin. The CSI has done detailed cost/benefit analyses of the Oregon and Washington state bank initiatives, which show substantial projected benefits based on the BND precedent. See reports here and here . For Washington State, with an economy not much larger than Wisconsin’s, the CSI report estimates that after an initial startup period, establishing a state-owned bank would create new or retained jobs of between 7,400 and 10,700 a year at small businesses alone, while at the same time returning a profit to the state. A Bank of Wisconsin Could Generate “Bank Credit” Many Times the Size of the Budget Deficit Economists looking at the CSI reports have called their conclusions conservative. The CSI made its projections without relying on state pension funds for bank capital, although it acknowledged that this could be a potential source of capitalization. If the Bank of Wisconsin were to use state pension funds, it could have a capitalization of more than $57 billion – nearly as large as that of Goldman Sachs . At an 8% capital requirement, $8 in capital can support $100 in loans, or a potential lending capacity of over $500 billion. The bank would need deposits to clear the checks, but the credit-generating potential could still be huge. Banks can create all the bank credit they want, limited only by (a) the availability of creditworthy borrowers, (b) the lending limits imposed by bank capital requirements, and (c) the availability of “liquidity” to clear outgoing checks. Liquidity can be acquired either from the deposits of the bank’s own customers or by borrowing from other banks or the money market. If borrowed, the cost of funds is a factor; but at today’s very low Fed funds rate of 0.2%, that cost is minimal. Again, however, only banks can tap into these very low rates. States are reduced to borrowing at about 5% — unless they own their own banks; or, better yet, unless they are banks. The BND is set up as “North Dakota doing business as the Bank of North Dakota.” That means that technically, all of North Dakota’s assets are the assets of the bank. The BND also has its deposit needs covered. It has a massive, captive deposit base, since all of the state’s revenues are deposited in the bank by law. The bank also takes other deposits, but the bulk of its deposits are government funds. The BND is careful not to compete with local banks for consumer deposits, which account for less than 2% of the total. The BND reports that it has deposits of $2.7 billion and outstanding loans of $2.6 billion. With a population of 647,000, that works out to about $4,000 per capita in deposits, backing roughly the same amount in loans. Wisconsin has a population that is nine times the size of North Dakota’s. Other factors being equal, Wisconsin might be able to amass over $24 billion in deposits and generate an equivalent sum in loans – over six times the deficit complained of by the state’s governor. That lending capacity could be used for many purposes, depending on the will of the legislature and state law. Possibilities include (a) partnering with local banks, on the North Dakota model, strengthening their capital bases to allow credit to flow to small businesses and homeowners, where it is sorely needed today; (b) funding infrastructure virtually interest-free (since the state would own the bank and would get back any interest paid out); and (c) refinancing state deficits nearly interest-free. Why Give Wisconsin’s Enormous Credit-generating Power Away? The budget woes of Wisconsin and other states were caused, not by overspending on employee benefits, but by a credit crisis on Wall Street. The “cure” is to get credit flowing again in the local economy, and this can be done by using state assets to capitalize state-owned banks. Against the modest cost of establishing a publicly-owned bank, state legislators need to weigh the much greater costs of the alternatives – slashing essential public services, laying off workers, raising taxes on constituents who are already over-taxed, and selling off public assets. Given the cost of continuing business as usual, states can hardly afford not to consider the public bank option. When state and local governments invest their capital in out-of-state money center banks and deposit their revenues there, they are giving their enormous credit-generating power away to Wall Street.

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Video: Pfizer-Backed Bills Threaten Medicaid Generic Savings

March 4, 2011

March 4 (Bloomberg) — At least four states are considering legislation backed by Pfizer Inc. that would impede the efforts of Medicaid and private insurers to save money by widening the use of generic drugs. The measures would ban pop-up messages and other prompts designed to alert doctors to generic equivalents when they use software to prescribe medications electronically. Bloomberg’s Megan Hughes reports. (Source: Bloomberg)

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Top 11 States To Find A Job

March 1, 2011

Gallup has published its latest Job Creation Index, providing a state-by-state comparison of which states predominately hired, fired, and stood pat in 2010. As the U.S. job market struggled, the highest-ranking states relied on one of three industries: agriculture, natural resource extraction, or federal government work. But not all jobs — or state economies — are created equal, and many of the states on Gallup’s list often create low-paying jobs. Arkansas, for example, ranks fifth best on Gallup’s Job Creation Index, but its median household income is a $39,392, good for second-worst in the country. Maryland, on the other hand, might rank lower on the index, but it has the third-highest median household income in the country. Gallup based its rankings on nearly 200,000 interviews conducted only with employed adults. Interviewees said whether their company was hiring, not changing in size or laying off workers. The Job Creation Index number represents that difference between “the percentage reporting an expansion and the percentage reporting a reduction in their workforces.” To give you a better picture of the job situation in the states below, we’ve included household income data from the Census , unemployment rates from the Bureau of Labor Statistics and GDP per capita from the Bureau of Economic Analysis. For the full Gallup report, click here . What do you think ? Where would you move in order get a job?

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Dean Baker: Greenspan’s Incompetence Badgers Wisconsin’s Workers

February 21, 2011

Alan Greenspan has been strangely missing from the fierce battle over the future of public sector unions in Wisconsin and other states. His absence is strange because he bears more responsibility for the current conflict than anyone else alive. The reason is simple. Mr. Greenspan’s incredible incompetence in allowing the $8 trillion housing bubble to grow unchecked created the fiscal crisis that is gripping Wisconsin and most other states. To be clear, states always face financial stress in economic downturns. Most states had to struggle to balance their budgets in 2001-2002 and earlier in the earlier 1990-1991 recession. During a recession tax revenues fall. Consumers buy less, which means less sales tax revenue. Workers earn less money, which means less income tax. And property values fall, leading to less property tax revenue. At the same time the need for state programs increases. Unemployed and underemployed workers are more likely to need public benefits like unemployment insurance, Medicaid, Temporary Assistance for Needy Families (TANF) and other public support programs. Recessions are part of capitalism and responsible leaders prepare for cyclical downturns. However this recession is no ordinary downturn. The recession officially began in December of 2007, so it is now 37 months since the start of the downturn. At this point following the 2001 recession, the economy was down 1.5 million jobs from the pre-recession level. Thirty-seven months after the start of the 1990-1991 recession the economy had generated 1.1 million more jobs than the pre-recession level. At this point following the 1981-82 recession, the worst prior recession of the post-war period, the economy had 5.5 million more jobs than before the recession. By comparison the number of jobs now stands 7,700,000 below its pre-recession level. Furthermore, no one is projecting that this gap is about to be closed in the next several years. There should be zero doubt: this downturn is the reason that Wisconsin has a budget crisis. Perhaps Wisconsin’s leaders can be blamed for not recognizing that the economy was being managed by complete incompetents – and planning accordingly – but this is the story of the state budget crisis. According to the Congressional Budget Office , the economy is operating at more than 6.4 percentage points below its potential level of output. If Wisconsin’s state economy was 6.4 percent larger, and its revenues increased accordingly, it would have more than $4 billion in additional revenue in its coffers over the next two years. This increase in revenue would easily cover the projected deficit. This is even before we add in the savings from lower payouts for unemployment insurance and other benefits that would follow from a return to normal levels of unemployment. In short, there can be little dispute that Wisconsin’s budget crisis is Alan Greenspan’s work. The allegations of the union bashers can easily be shown to be nonsense. Wisconsin’s public sector workers are paid no more than their private sector counterparts. They tend to get somewhat better pensions and health care coverage, but this is offset by lower pay for comparably skilled workers. Nor has there been an explosion of public sector employment under the period in which Democrats governed the state. The last budget prepared by former governor Jim Doyle projected 69,038 full-time equivalent (FTE) positions for the state in 2011, an increase of 1.4 percent from the 68,092 FTE number in 2003, the year when Doyle took office. It takes some very inventive arithmetic to make a 1.4 percent increase in employment over 8 years into a bloated state workforce. How does it change anything if we know that Greenspan (last seen being feted at the Brookings Institution) is the real villain in the Wisconsin budget crisis? First, it should turn the heat where it belongs: Washington. The problem of the downturn is a lack of demand. A lack of demand is solved by spending money. We have to get our elected representatives to ignore the shrill whining of the Wall Street deficit hawks. We need sufficient stimulus from the public sector to overcome the falloff of more than $1.2 trillion in spending from the private sector that resulted from the collapse of the housing bubble. If members of Congress are too intimidated to do what is needed to fix the economy, then Wisconsin’s legislators should do what common sense dictates: follow the money. Rather than taking pay and benefits from schoolteachers and firefighters, it makes sense to take money from the people who have it. This means taxing Wisconsin’s wealthy and its corporations. The tax increase only needs to be temporary; since the state budget should be fine once the economy recovers. Of course the wealthy and the corporations will claim that they will leave the state and stop hiring, but these are not people who are known for their truthfulness. They are known for their money. If these big winners in the downturn are forced to share more of their wealth until the economy recovers then maybe they will put more pressure on Congress to support the sort of stimulus needed to get the economy back on track. This would be a real win-win for just about everyone.

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June Carbone: The Real Job Killers? State Budget Crises.

January 20, 2011

Cross-posted from New Deal 2.0 . I sit on the Faculty Senate of a large Midwestern university. Every meeting for the past year has been consumed with planning for this year’s budget crisis. For those insulated from Washington politics, the timing is curious. The economy is improving. State revenues are increasing. Yet this year will be the worst in over a decade for cuts to higher education, school teachers in the suburbs, police in crime-ridden cities, and bridge and infrastructure repair everywhere. Virtually every state will be affected. The cumulative impact will worsen unemployment and may be enough to trigger the feared double dip recession, touching off a new round of economic misery. In this context, Congressional debate of the misnamed “Repealing the Job Killing Health Care Act” is a tragic distraction from the immediate source of job losses — the rejection of the economic lessons that have kept the economy on track since the Great Depression. As Paul Krugman explained in his critique of the euro in this week’s New York Times Magazine , national fiscal policy and state spending are fundamentally different, whether in Europe or the U.S. Spending at the national level includes automatic correctives. Run federal deficits too high for too long, the dollar falls, imports become more expensive and the demand for American goods increases. States, however, cannot print money and they are rightly subject to balanced budget provisions that require that they slash expenses when revenues fall. Economists have accordingly maintained since the New Deal that federal spending should be counter-cyclical — a recession is the time to spend money to create jobs. Policy makers since Richard Nixon have further argued that much of the counter-cyclical spending should go to the states; they are closer to people’s needs and more directly hurt by falling revenues. So if the concern is jobs, counter-cyclical federal spending implemented through a Republican idea — revenue sharing — should be the new Congress’ first priority. It would forestall the job slashing taking place in statehouses throughout the country and do more to reduce unemployment than any proposal currently on the table. Sign up for weekly ND20 highlights, mind-blowing stats, event alerts, and reading/film/music recs. Yet no one is talking about revenue sharing. President Obama proposed some aid to the states as part of his original stimulus package, but Republicans pared those measures back in favor of tax cuts that contributed less to job preservation. When the Republicans insisted on running up the deficit through tax cuts for the wealthy, the president responded with more tax cuts for everyone else — but not the spending most directly tied to jobs. The bailout of financial fat cats lasted long enough to bring back high corporate profits and rising stock market prices. Yet assistance to the states is being cut off at a time likely to forestall economic recovery. The results reject the conventional economic wisdom of the last half century and inflict needless misery on the teachers, policemen, and construction workers who form the backbone of the country. While China undertakes massive public investment in schools, universities, technology, roads and a 21st century infrastructure, we are dismantling the institutions essential to our ability to compete. The token fight to repeal health care is a distraction from the job demolition derby underway in the states as a direct result of federal cutbacks. Yet the connection between ideologically driven federal policy and state layoffs does not even seem to merit notice in the scores of stories about layoffs, tuition increases and reduced crime protection. It is time to focus attention on the real job killers and hold them accountable.

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Rubenstein/Trinity JV Buys NASCAR Plaza in Charlotte

January 13, 2011

Rubenstein Partners, a Philadelphia-headquartered private real estate investment management and advisory firm, formed joint ventures with local investment and development companies to invest $70 million in properties in four states on behalf of Rubenstein Properties Fund LP, an office fund that has sat quietly for nearly four years. The fund will follow up with an additional $30 million in the assets. The four transactions closed in the fourth quarter…

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Rubenstein Closes $70 Million in Investments in Q4 2010

January 13, 2011

Rubenstein Partners, a Philadelphia-headquartered private real estate investment management and advisory firm, formed joint ventures with local investment and development companies to invest $70 million in properties in four states on behalf of Rubenstein Properties Fund LP, an office fund that has sat quietly for nearly four years. The fund will follow up with an additional $30 million in the assets. The four transactions closed in the fourth quarter…

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Rubenstein Closes $70 Million in Investments in Q4 2010

January 13, 2011

Rubenstein Partners, a Philadelphia-headquartered private real estate investment management and advisory firm, formed joint ventures with local investment and development companies to invest $70 million in properties in four states on behalf of Rubenstein Properties Fund LP, an office fund that has sat quietly for nearly four years. The fund will follow up with an additional $30 million in the assets. The four transactions closed in the fourth quarter…

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AP Analysis: Jobs Crisis Still Strong, Economy Will Continue Struggling

January 12, 2011

Higher unemployment and foreclosure rates, especially in South Atlantic and Mountain states, raised the nation’s economic stress in November, according to The Associated Press’ monthly analysis. One month after economic stress reached an 18-month low nationally, it rose in three-quarters of the 3,141 counties the AP analyzed and in 39 states. Unemployment and foreclosures edged up in more than two-thirds of the states. Bankruptcies rose in half the states. Florida, in particular, is struggling. Its recovery has lagged behind those of other states that were also ravaged by the housing bust, such as Arizona and California, because Florida’s economy is less diversified. And Colorado, Idaho and other Mountain states have suffered from a loss of drilling, tourism and construction jobs. The AP’s index calculates a score from 1 to 100 based on unemployment, foreclosure and bankruptcy rates. A higher score signals more stress. Under a rough rule of thumb, a county is considered stressed when its score exceeds 11. The average county’s score in November was 10.3, up from 9.9 in October. It was the highest reading since August’s 10.3 score. Nearly 40 percent of the nation’s counties were deemed stressed, up from a little more than one-third in October. Nationally, the unemployment rate ticked up to 9.8 percent in November from 9.7 percent in October. In December, the rate slipped to 9.4 percent. For all of 2010, the economy added about 1.1 million jobs – far fewer than are normally created after a severe recession. Many economists expect twice as many net jobs to be created this year. But most think the unemployment rate will remain around 9 percent by year’s end. Federal Reserve Chairman Ben Bernanke said last week that it could take up to five years for unemployment to drop to a historically normal rate of around 6 percent. States that were hit especially hard when the real estate bubble burst – California, Florida, Arizona and Nevada – will likely continue to suffer. A big reason is the loss of construction jobs that aren’t coming back. “We are not looking for a big bounceback,” says David Wyss, chief economist at Standard & Poor’s in New York. Nevada has been stuck with the highest monthly Stress score since it surpassed Michigan in March 2008. The AP index dates to October 2007. In November, economic pain worsened in Nevada, which posted a score of 21.96. Nevada was followed by Florida (17.14) and California (16.42). Rounding out the five-most-stressed states, Michigan (14.83) and Arizona (14.6) saw some easing of economic distress. North Dakota (4.05) was again the least-stressed state in November. It was followed by South Dakota (5.17), Nebraska (5.27), Vermont (6.29) and New Hampshire (7.11). But all the healthiest states except Nebraska suffered higher stress from October to November. Over the past three months, Florida has endured the sharpest increase in economic pain. It surpassed California and Michigan to become the second-most-stressed state based on the AP’s index. Florida also has suffered the third-sharpest increase in stress over the past 12 months, exceeded only by the Mountain states of Colorado and Utah. “It’s the housing crisis, combined with a lack of manufacturing and other industries,” David Denslow, a University of Florida economist, says of the state’s troubles. Colorado, Idaho and other Mountain states fell into recession later than much of the country did, once mining and construction jobs evaporated, tourism fell and their second-home markets fizzled. “Late in, late out,” says Richard Wobbekind, an economist at the University of Colorado at Boulder. “We haven’t seen the pickup yet.” Fewer people migrating to Idaho, for example, led to a drop of more than 21,000 construction jobs, says Bob Fick, a spokesman for Idaho’s Labor Department. Other industries, such as electronics manufacturing, also suffered losses from the recession. Their troubles contributed to a nearly 6 percent drop in Idaho’s employed work force over the past three years. “In 2007, when everything was starting to look like there was a recession, we still had Californians up here buying houses like it was nobody’s business,” Fick says. “The bottom didn’t really fall out until later.” Counties with heavy concentrations of workers in hotel and food services and real estate endured the sharpest increases in stress in November. Among those with at least 25,000 residents, Imperial County, Calif. (33.15) fared worst. Next were Yuma County, Ariz. (26.91); Lyon County, Nev. (26.75); Nye County, Nev. (25.21); and Yuba County, Calif. (24.18). By contrast, stress declined the most in counties with many workers in wholesale trade, transportation, financial services, insurance and support jobs. Ward County, N.D. (3.29) was deemed healthiest in November. It was followed by Sioux County, Iowa (3.71); Buffalo County, Neb. (3.74); Brown County, S.D. (3.96); and Brookings County, S.D. (3.98). ___ Schneider reported from Orlando, Fla., Crutsinger from Washington.

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Illinois May Borrow 15B

January 1, 2011

Illinois Governor Pat Quinn is looking to borrow 15 billion to pay overdue bills and balance the biggest budget deficit in the states history

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Larry Beinhart: Why the Stimulus Package Failed

November 9, 2010

The stimulus package failed because it consisted mostly of tax cuts. Tax cuts are among the very worst ways to create jobs and certainly the most expensive. The stimulus package authorizes 787 billion dollars. According to the official website ( Recovery.gov ) $565 billion has actually been spent or credited. There are three categories of “stimulus.” Citing amounts spent, they are: $243.4 billion in tax cuts. $154.5 billion in contracts, grants, and loans. This is what we actually think of as a stimulus, construction and research projects. $166.8 billion in entitlements. This is mostly money to the states to help with unemployment insurance. Estimates of jobs “saved and created” by the package range from 800,000 to 2.4 million (both from the Congressional Budget Office), with other estimates at 1.25 million (IHS/Global Insight), 1.06 million (Macroeconomic Advisors), and 1.59 million (Moody’s). Let’s use Moody’s estimate (sort of the high middle, and independent) and round it off to 1.6 million jobs “saved and created.” That’s $353,125 per job. I’m sorry, but that’s ridiculous. It’s obscene. If you have an essentially unlimited line of credit, as the government essentially does, it would appear relatively easy to create jobs. “Hey, you, over there on the unemployment line, wanna work cleaning up our national parks? Yeah, we’ll give you a twenty dollar rake, some biodegradable garbage bags, and twenty bucks an hour.” That happens to be 47 cents an hour over the average wage. No national parks or monuments in your neighborhood? All right, there are lots of empty lots and abandoned homes due to the housing market collapse. “Let’s clean ‘em up. Same deal. That’s forty thousand a year. You can live on that.” Presumably the government will be decent about it and pay the usual benefits — social security, unemployment insurance, workman’s comp, and so on — which adds $8.11 an hour. That’s a little less than $17,000 a year, making a total cost of $57,000 per year, per job. Jobs don’t exist in a vacuum, not even sweeping the streets by hand with a broom. There has to be a certain number of overhead costs. Not counting salaries of supervisors and such (which would be part of the job creation numbers), not counting benefits (already in there), 15 percent is a very generous number, for another $8,550, a total of $65,550 per job. So that’s what a “created” job should cost. About $65,000. If you actually want to “create jobs,” that’s how you should do it. Go out and create them. But that’s not how we do things. We were not goddamn Communists. Or even socialists. We’re capitalists. So we give out contracts to private enterprises and grants to universities and other institutions. Construction projects, one of the primary forms of job creation has lots of costs beside labor. They have machinery, materials, a variety of business expenses (accounting, insurance, legal, etc.), the purchase of land and so on. Labor accounts for 20-30 percent of a construction contract. Let’s take the low end, 20 percent, and assume that a construction job is one of those $65,000 wages plus benefits for a full year jobs, and the cost of that job then becomes $325,000. That’s pretty close to the $353,125 per job number we got using the Moody’s estimate. Except that all those other construction costs (excluding land purchase, which should be less relevant here) involve additional labor. For example, materials are manufactured, a certain portion of them here, in the US. Truckers transport them. Building supply company employees handle them. Machinery is built (some portion of it here), and maintained (all of it here). The construction company pays it’s staff and the professionals (lawyer and accountants), and so on. All those people buy food (keeping supermarket workers employed), buy other stuff, pay their bills, and so on. This is the famous Keynesian multiplier effect. It’s also very difficult to calculate how many non-site, indirect jobs does a construction project support with all its other spending. In the figures we’re using, that 80% of the costs. It’s reasonable to say that at least half of that goes into people’s pockets as it moves down the line. If we figure it that way, it should probably cost about $130,000 per job. Let’s go back to the breakdown. First let’s take out the aid to the states for unemployment insurance assistance. Obviously that doesn’t add jobs. It helps people. It goes to keeping the community afloat, but it doesn’t create a whole lot of jobs. Let’s take out the tax cuts. Just as an academic exercise, for the moment. That leaves projects, grants, and loans. $154.5 billion. If we have 1,600,000 jobs created and saved, and divide it into the money spent on projects, it comes out at $96,562 per job. That actually makes sense. It’s expensive. But it makes sense. Direct job creation, or job creation through contracts (like road building), has a multiplier effect. Each job creates more jobs, both through the support jobs and through the spending by the people who are employed. Job creation through tax cuts works the opposite way. The price per job is multiplied many times over. In this last election cycle, Carl Paladino was running against Andrew Cuomo for governor of New York. One of the charges that Cuomo leveled against him was that he got $1.4 million in tax breaks but created only one job from that. The implication was that Paladino was a sleazy rip-off artist. At best. He may be, but it is only a particularly vivid example of how the tax cuts to job creation equation actually works. We are still arguing about extending the Bush Tax Cuts. The Bush Tax Cuts cost about two trillion dollars. They were originally labeled and promoted as “jobs and stimulus” packages. Let’s take him at his word. Over the course of his two terms 1.1 jobs were created. That didn’t even keep up with population growth. It also cost $1,818,182 per job. Close to the same numbers that Paladino was working with. The Obama White House, a prisoner of the prevailing ‘tax cuts stimulate the economy and create jobs’ theology, passed a stimulus bill that was 40 percent tax cuts, 30 percent unemployment insurance, and only 27 percent actual stimulus. That’s why it didn’t work. That’s not even the bad news. Here’s the bad news. The tax cuts are still in effect. The odds are they will be extended, even for the very wealthiest. Here’s worse news. There’s only one thing stupider than cutting taxes to create jobs. It’s to cut spending. In the recent NY governor’s race, for example, both leading candidates promise to cut spending. That means cutting jobs. That’s happening state by state all around the country. Not only does cutting jobs mean, in a very direct one-to-one way, fewer jobs, it has a negative multiplier effect. It means there are fewer people with money to spend on the things that create jobs for other people.

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Richard Barrington: The 10 Best States for Retirement (PHOTOS)

October 26, 2010

“Best of” lists are usually based on subjective points. When choosing our 10 best and worst states to retire, we went with the objective. Earlier this week, MoneyRates.com published a list of the 10 worst states for retirement . This list was based on a combination of quantifiable factors including: Economics (factoring in cost of living, unemployment, and average state and local tax burden) Climate Crime rate Life expectancy Now, the good news. MoneyRates.com has compiled a list of the 10 best states for retirement. You’ll find the MoneyRates.com list is not all geared to one set of priorities — it isn’t, for example, a list of 10 warm-weather states — but instead should have something for everybody. Some of the choices might surprise you, but when you look over the criteria, you can decide which states have the most appealing characteristics for your tastes. Then join the discussion on the best and worst states for retirement on the MoneyRates.com blog. The original article can be found at MoneyRates.com: 10 Best States for Retirement PHOTOS: Data sources: ACCRA Cost of Living Index, the Bureau of Labor Statistics, the Tax Foundation, the National Oceanic and Atmospheric Administration, MSNBC, the U.S. Census Bureau, Bloomberg Businessweek

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Video: Bair Sees Better Clarity on Foreclosures in a Month: Video

October 22, 2010

Oct. 22 (Bloomberg) — U.S. Federal Deposit Insurance Corp. Chairman Sheila Bair talks about the states’ investigation into foreclosures and the FDIC’s tools that can be used to liquidate complex financial firms if they collapse. Bair speaks with Carol Massar on Bloomberg Television’s “InBusiness With Margaret Brennan.” (Source: Bloomberg)

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40 States Bank On Rising Tax Revenue In 2011

September 28, 2010

WASHINGTON — The vast majority of state governments are anticipating a rise in tax revenues this year after two years of sharp drops. Analysts caution that most states will face large budget gaps in the next few years. Forty states forecast having an increase in tax receipts in the current fiscal year, according to a forthcoming report by the National Conference of State Legislatures. Slow economic growth is boosting proceeds from income and sales taxes. That could reduce the impact of states’ budget struggles on the economy. State budget shortfalls have led to widespread layoffs, tax increases, spending cuts and other measures that have restrained economic growth. “We do think 2010 is the bottom and we are at a turning point,” said Corina L. Eckl, director of the fiscal affairs program at the NCSL and author of the report. Still, state officials aren’t without enormous challenges. States will lose federal stimulus money in coming years and will struggle to close large budget gaps. Tax revenues are well below pre-recession level. High unemployment puts heavy demand on state-run social service programs. “Stability and growth in tax collections is very good news,” the report said. “But in the near term it will not be enough to propel states out of their fiscal difficulties.” Overall, states raised taxes and cut spending to eliminate budget gaps that totaled $84 billion for fiscal year 2011, which in most states began July 1. The NCSL forecasts a total gap of $72 billion in fiscal year 2012 and $64 billion in 2013. That means more job cuts and tax increases could still be needed. Meanwhile, the Nelson A. Rockefeller Institute of Government said in a report last month that state tax collections rose in the April-June period. But they are still about 17 percent below the same period two years earlier. Many states project it will take years for tax revenue to return to where it was before the recession began. Sixteen states say it will take at least two more years – until fiscal year 2013 or 2014 – while four states don’t expect to return to pre-recession levels until fiscal 2015. California doesn’t expect revenues to return to their peak levels for five more years, or fiscal 2016. That’s the longest of any state. State budget struggles have held back the economy, even after the recession ended in June 2009. State governments have cut 43,000 jobs since August 2008. Cuts in services and funding for local education have led to thousands of additional cuts at local schools and among private contractors doing business with the states. In previous downturns, state government employment has been a relatively safe haven. States have also raised tax rates and cut spending to make up for lost revenue. Both moves can further slow economic activity. Half the states raised taxes in 2009 by a total of $28.6 billion, the NCSL report estimates. Cuts in state and local spending reduced economic activity for three straight quarters, from the middle of last year through the first quarter of 2010, the Commerce Department estimates.

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Health Insurers Drop Coverage For Children Ahead Of New Rules

September 21, 2010

Health plans in at least four states have announced they’re dropping children’s coverage just days ahead of new rules created by the healthcare reform law, according to the liberal grassroots group Health Care for America Now (HCAN).

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Leo Hindery, Jr.: Treasury Secretary Geithner — ‘Spinning’ Out of Control

August 17, 2010

I thought it was bad enough when Larry Summers, the director of the National Economic Council, declared last December 13 that the Great Recession of 2007 was ” over ” simply because GDP grew minimally in the second quarter of 2009 following several quarters of decline. This despite the fact that GDP growth became a thoroughly discredited stand-alone measure of economic vitality fully two decades ago when globalization began to expose the weaknesses in our top-down, supply side-driven economy. But Treasury Secretary Timothy Geithner, from an even higher administration perch, has consistently evidenced the same proclivities as Mr. Summers, and over an even broader range. Two weeks ago, Geithner had the temerity to say: “Business investment and consumption — the two keys to private demand — are getting stronger, better than last year and better than last quarter. “Even the surge in imports, which lowered the rate of increase of GDP, actually reflects healthy and growing American demand. “American families are saving more, paying down their debt and borrowing more responsibly. “The auto industry is coming back, and the Big Three — Chrysler, Ford and General Motors — are now leaner, generating profits despite lower annual sales. “The White House and Congress helped save 8.5 million jobs.” This is egregious ‘spinning’ — and it’s out of control. Almost every day, Mr. Geithner gilds the economy’s lily in inappropriate attempts to delude American workers into believing that: business investment is in fine shape when in fact businesses are sitting on an unprecedented $2 trillion of cash precisely because of ‘uncertainty’; the “surge in imports” is “healthy” when in fact it is an ongoing nightmare (i.e., just in June the overall U.S. trade deficit in goods and services surged 19% to a 21-month high of $49.9 billion); income inequality is not so unequal when in fact it is at its highest level since 1928; the “auto industry is coming back” when in fact most of its vigor is coming from cutting domestic employment in favor of offshoring; and “8.5 million” jobs have been saved by the White House when just a few weeks ago Geithner himself used the figure of “3 million” for jobs created and saved. These several assertions of Geithner’s aren’t just disingenuous and disrespectful — they’re also dangerous, especially his implicit suggestion that consumers should once again feel comfortable ‘borrowing and spending’. If they become commonly embraced by the American people before there are significant economic reforms and successful major job creation initiatives, then that double-dip recession that many of us fear may be coming will arrive in a very big way and it could turn into the second longest L-shaped recession in our country’s history. Here are some additional truths about our economy, over and above the sad income inequality truths that now hang over our nation like a plague: The real unemployment rate is 18.3%, not the 9.5% official rate the administration uses. The number of real unemployed workers in all four categories of unemployment is 29.3 million, not the administration’s one-category-only figure of 14.6 million. Since the start of the Obama administration, the number of real unemployed workers has increased by 4.6 million. By contrast, the economy needs to add around 150,000 new jobs each month simply to keep up with population growth. In real terms the all-important “jobs gap” is 21.3 million new jobs. The average number of weeks unemployed is at least 34.2, and the number of workers unemployed a half year or longer is at least 10.1 million. Mr. Geithner’s rhetorical deceptions mask the in effectiveness of the only two potentially meaningful job-creation initiatives — aid to the states and the bailout of Detroit — that he and Summers largely put together, while letting him ignore the several initiatives, including trade reform, which could actually create, relatively quickly, millions of jobs. In early 2009, Geithner and his colleagues promised that the stimulus package would materially help turn around the states’ crushing budget woes, which is critical because the states remain the foundation of much of America’s job stability and significant job creation. Yet even with the $26 billion of emergency aid just approved by Congress, for the years 2009 to 2012 the states will have had to confront around $275 billion in budget deficits. For the fiscal year ending next June, 46 of them will have to close budget shortfalls aggregating $100 billion or so. Without significant further federal intervention, in the amounts originally contemplated, the states’ bleak fiscal and unemployment positions will ” continue to erode and hurt the U.S. economy through 2060 “, according to a recent report by the U.S. Government Accountability Office. A much needed promise, yes, but actual, meaningful assistance, not so much. Then there is Treasury’s bailout of Detroit. Or better said, its bailout of ‘Detroit-cum-Mexico’. The bailout of the U.S. auto industry by Treasury was indisputably appropriate. But what was indisputably in appropriate was the almost complete absence of any meaningful “quid” for the massive financial “quo” we gave the industry. Despite the staggering $85 billion bailout of General Motors and Chrysler, U.S. automobile production will actually decline over the next decade because of further offshoring, mostly to Mexico, by the two rescued automakers and by Ford — even now, the three U.S. automakers and their associated parts manufacturers have a $46 billion trade deficit with the rest of the world. Congressman John Dingell of Michigan has written that, “the U.S. automakers benefitted greatly from federal largesse and they should feel morally compelled to retain and create as many domestic jobs as possible.” Obviously the automakers don’t agree, nor, when it had the opportunity, did Treasury demand that they do so. Here are a few more truths: GM has invested a staggering $4.1 billion in Mexico over just the last four years, and after quickly shedding thousands of American jobs in the ‘bailout’, it recently announced a further $500 million investment in its Ramos Arizpe, Mexico plant to produce a new vehicle and a new line of engines there. Chrysler announced in February that it will spend $550 million to retool its Toluca, Mexico factory to assemble the subcompact Fiat 500 model. Ford has announced $3 billion in new investments throughout northern Mexico just since 2008. Driving all of this home is the statement two weeks ago from Ed Whitacre, the Chairman and CEO of General Motors. Whitacre, it is said, is so eager to rid GM of the ” stigma ” of being government owned that he wants Treasury to sell its entire stake in the company during GM’s upcoming initial public offering of stock. ” We want the government out, period ,” he has said. When Mr. Whitacre speaks of “stigma” I think he means that he doesn’t want any scrutiny of his company’s ongoing offshoring moves, which should have been largely prohibited by Treasury in return for the massive government aid which saved his company’s bacon. He probably also means he doesn’t want Congress scrutinizing the company’s embarrassing purchase three weeks ago, for $3.5 billion , of AmeriCredit, a subprime lender which, at a time of unprecedented ‘financial illiteracy’ and continuing financial chicanery, is committed, as the New York Times wrote, to “extending loans and leases to [GM] customers with questionable credit”. After recently visiting three auto plants in a single week, President Obama told workers at a Ford plant, “I wish [the adversaries] could see the pride you take in building these great American-made cars. Don’t bet against the American worker; don’t lose faith in the American people; don’t lose faith in American industry.” Yet the way Tim Geithner put the auto bailout together, the future of the domestic automobile industry won’t only be about American workers and American-made cars. In fact, Mexico’s share of North American auto production will rise to 19% over the next decade, from an average of 12% from 2000 to 2009, while the U.S. will lose these 7 percentage points. No one smart lacks confidence in American workers. What I lack is confidence in a Treasury Department that, with little advice from industry experts, used tens of billions of dollars of taxpayer monies to bail these companies out, but didn’t restrict them from offshoring American jobs and buying shady subprime lenders while still owing money to the government. Mr. Geithner should also have been using his office to advocate for jobs programs for the five million or so out-of-school unemployed youth and for large-scale infrastructure spending using a “national infrastructure bank” that could fund infrastructure improvements away from the annual federal budget. Other than youth jobs programs and trade reform, the benefits of which would be very quickly realized and instantly accredited to the economy, the biggest near-term job creation opportunity is in rebuilding old and building new infrastructure, of which we need a staggering $3 trillion worth. And for each $1 billion devoted to this need we would create at least 25,000 and up to 45,000 permanent, mostly high quality jobs. The impetus for what needs to get done in infrastructure was the collapse, three years ago, of a major bridge in Minneapolis which killed 13 people. Yet in those three years — 18 months under Bush and now 18 months under Obama — the number of “structurally deficient” bridges in Minnesota has actually increased from 1,156 to 1,206. Nationwide, there are a staggering 71,000 substandard and thus dangerous bridges, virtually the same number as in 2007, which the Federal Highway Administration says will alone take $100 billion to bring up to par. However, last year’s stimulus package, which Geithner and Summers largely designed and shepherded, earmarked a meager $3.1 billion for bridges and only de minimus amounts for the other ‘$3-trillion-minus-$3-billion’ of needed work. And, notably, it provided no foundation funding for that all-important national infrastructure bank. So, as in baseball, here’s my box score on Tim Geithner: two pop ups to the catcher re: the States and Detroit, and then two swinging strikes on infrastructure and youth unemployment. (As you can see, I gave him the benefit of two more swings at the ball even after his two early outs.) The Ur Union of Unemployed (UCubed) repeated its call for Secretary Geithner to resign following the news that in June and July hundreds of thousands of additional jobs were lost. “These figures are the very best we can expect from a Geithner-led economy – stumbling and uncertain job growth for years,” said Rick Sloan, Acting Executive Director. “America’s jobless simply can no longer afford his slow-as-molasses approach to job creation.” UCubed and I don’t expect Mr. Geithner to create the millions of jobs we need today in order to again be fully employed — as Harry Truman would have said, that’s the President’s job, plus Congress’. But we and countless others committed to a fully employed economy do expect him as Treasury Secretary to completely understand the issue and embrace its importance and to frame effective, U.S. advantaged solutions for the President. And since he doesn’t seem to be able to do any of this, I agree with Mr. Sloan that he should resign — immediately. Leo Hindery, Jr. is Chairman of the US Economy/Smart Globalization Initiative at the New America Foundation and a member of the Council on Foreign Relations. Currently an investor in media companies, he is the former CEO of Tele-Communications, Inc. (TCI), Liberty Media and their successor AT&T Broadband. He also serves on the Board of the Huffington Post Investigative Fund.

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Leo Hindery, Jr.: Treasury Secretary Geithner — ‘Spinning’ Out of Control

August 17, 2010

I thought it was bad enough when Larry Summers, the director of the National Economic Council, declared last December 13 that the Great Recession of 2007 was ” over ” simply because GDP grew minimally in the second quarter of 2009 following several quarters of decline. This despite the fact that GDP growth became a thoroughly discredited stand-alone measure of economic vitality fully two decades ago when globalization began to expose the weaknesses in our top-down, supply side-driven economy. But Treasury Secretary Timothy Geithner, from an even higher administration perch, has consistently evidenced the same proclivities as Mr. Summers, and over an even broader range. Two weeks ago, Geithner had the temerity to say: “Business investment and consumption — the two keys to private demand — are getting stronger, better than last year and better than last quarter. “Even the surge in imports, which lowered the rate of increase of GDP, actually reflects healthy and growing American demand. “American families are saving more, paying down their debt and borrowing more responsibly. “The auto industry is coming back, and the Big Three — Chrysler, Ford and General Motors — are now leaner, generating profits despite lower annual sales. “The White House and Congress helped save 8.5 million jobs.” This is egregious ‘spinning’ — and it’s out of control. Almost every day, Mr. Geithner gilds the economy’s lily in inappropriate attempts to delude American workers into believing that: business investment is in fine shape when in fact businesses are sitting on an unprecedented $2 trillion of cash precisely because of ‘uncertainty’; the “surge in imports” is “healthy” when in fact it is an ongoing nightmare (i.e., just in June the overall U.S. trade deficit in goods and services surged 19% to a 21-month high of $49.9 billion); income inequality is not so unequal when in fact it is at its highest level since 1928; the “auto industry is coming back” when in fact most of its vigor is coming from cutting domestic employment in favor of offshoring; and “8.5 million” jobs have been saved by the White House when just a few weeks ago Geithner himself used the figure of “3 million” for jobs created and saved. These several assertions of Geithner’s aren’t just disingenuous and disrespectful — they’re also dangerous, especially his implicit suggestion that consumers should once again feel comfortable ‘borrowing and spending’. If they become commonly embraced by the American people before there are significant economic reforms and successful major job creation initiatives, then that double-dip recession that many of us fear may be coming will arrive in a very big way and it could turn into the second longest L-shaped recession in our country’s history. Here are some additional truths about our economy, over and above the sad income inequality truths that now hang over our nation like a plague: The real unemployment rate is 18.3%, not the 9.5% official rate the administration uses. The number of real unemployed workers in all four categories of unemployment is 29.3 million, not the administration’s one-category-only figure of 14.6 million. Since the start of the Obama administration, the number of real unemployed workers has increased by 4.6 million. By contrast, the economy needs to add around 150,000 new jobs each month simply to keep up with population growth. In real terms the all-important “jobs gap” is 21.3 million new jobs. The average number of weeks unemployed is at least 34.2, and the number of workers unemployed a half year or longer is at least 10.1 million. Mr. Geithner’s rhetorical deceptions mask the in effectiveness of the only two potentially meaningful job-creation initiatives — aid to the states and the bailout of Detroit — that he and Summers largely put together, while letting him ignore the several initiatives, including trade reform, which could actually create, relatively quickly, millions of jobs. In early 2009, Geithner and his colleagues promised that the stimulus package would materially help turn around the states’ crushing budget woes, which is critical because the states remain the foundation of much of America’s job stability and significant job creation. Yet even with the $26 billion of emergency aid just approved by Congress, for the years 2009 to 2012 the states will have had to confront around $275 billion in budget deficits. For the fiscal year ending next June, 46 of them will have to close budget shortfalls aggregating $100 billion or so. Without significant further federal intervention, in the amounts originally contemplated, the states’ bleak fiscal and unemployment positions will ” continue to erode and hurt the U.S. economy through 2060 “, according to a recent report by the U.S. Government Accountability Office. A much needed promise, yes, but actual, meaningful assistance, not so much. Then there is Treasury’s bailout of Detroit. Or better said, its bailout of ‘Detroit-cum-Mexico’. The bailout of the U.S. auto industry by Treasury was indisputably appropriate. But what was indisputably in appropriate was the almost complete absence of any meaningful “quid” for the massive financial “quo” we gave the industry. Despite the staggering $85 billion bailout of General Motors and Chrysler, U.S. automobile production will actually decline over the next decade because of further offshoring, mostly to Mexico, by the two rescued automakers and by Ford — even now, the three U.S. automakers and their associated parts manufacturers have a $46 billion trade deficit with the rest of the world. Congressman John Dingell of Michigan has written that, “the U.S. automakers benefitted greatly from federal largesse and they should feel morally compelled to retain and create as many domestic jobs as possible.” Obviously the automakers don’t agree, nor, when it had the opportunity, did Treasury demand that they do so. Here are a few more truths: GM has invested a staggering $4.1 billion in Mexico over just the last four years, and after quickly shedding thousands of American jobs in the ‘bailout’, it recently announced a further $500 million investment in its Ramos Arizpe, Mexico plant to produce a new vehicle and a new line of engines there. Chrysler announced in February that it will spend $550 million to retool its Toluca, Mexico factory to assemble the subcompact Fiat 500 model. Ford has announced $3 billion in new investments throughout northern Mexico just since 2008. Driving all of this home is the statement two weeks ago from Ed Whitacre, the Chairman and CEO of General Motors. Whitacre, it is said, is so eager to rid GM of the ” stigma ” of being government owned that he wants Treasury to sell its entire stake in the company during GM’s upcoming initial public offering of stock. ” We want the government out, period ,” he has said. When Mr. Whitacre speaks of “stigma” I think he means that he doesn’t want any scrutiny of his company’s ongoing offshoring moves, which should have been largely prohibited by Treasury in return for the massive government aid which saved his company’s bacon. He probably also means he doesn’t want Congress scrutinizing the company’s embarrassing purchase three weeks ago, for $3.5 billion , of AmeriCredit, a subprime lender which, at a time of unprecedented ‘financial illiteracy’ and continuing financial chicanery, is committed, as the New York Times wrote, to “extending loans and leases to [GM] customers with questionable credit”. After recently visiting three auto plants in a single week, President Obama told workers at a Ford plant, “I wish [the adversaries] could see the pride you take in building these great American-made cars. Don’t bet against the American worker; don’t lose faith in the American people; don’t lose faith in American industry.” Yet the way Tim Geithner put the auto bailout together, the future of the domestic automobile industry won’t only be about American workers and American-made cars. In fact, Mexico’s share of North American auto production will rise to 19% over the next decade, from an average of 12% from 2000 to 2009, while the U.S. will lose these 7 percentage points. No one smart lacks confidence in American workers. What I lack is confidence in a Treasury Department that, with little advice from industry experts, used tens of billions of dollars of taxpayer monies to bail these companies out, but didn’t restrict them from offshoring American jobs and buying shady subprime lenders while still owing money to the government. Mr. Geithner should also have been using his office to advocate for jobs programs for the five million or so out-of-school unemployed youth and for large-scale infrastructure spending using a “national infrastructure bank” that could fund infrastructure improvements away from the annual federal budget. Other than youth jobs programs and trade reform, the benefits of which would be very quickly realized and instantly accredited to the economy, the biggest near-term job creation opportunity is in rebuilding old and building new infrastructure, of which we need a staggering $3 trillion worth. And for each $1 billion devoted to this need we would create at least 25,000 and up to 45,000 permanent, mostly high quality jobs. The impetus for what needs to get done in infrastructure was the collapse, three years ago, of a major bridge in Minneapolis which killed 13 people. Yet in those three years — 18 months under Bush and now 18 months under Obama — the number of “structurally deficient” bridges in Minnesota has actually increased from 1,156 to 1,206. Nationwide, there are a staggering 71,000 substandard and thus dangerous bridges, virtually the same number as in 2007, which the Federal Highway Administration says will alone take $100 billion to bring up to par. However, last year’s stimulus package, which Geithner and Summers largely designed and shepherded, earmarked a meager $3.1 billion for bridges and only de minimus amounts for the other ‘$3-trillion-minus-$3-billion’ of needed work. And, notably, it provided no foundation funding for that all-important national infrastructure bank. So, as in baseball, here’s my box score on Tim Geithner: two pop ups to the catcher re: the States and Detroit, and then two swinging strikes on infrastructure and youth unemployment. (As you can see, I gave him the benefit of two more swings at the ball even after his two early outs.) The Ur Union of Unemployed (UCubed) repeated its call for Secretary Geithner to resign following the news that in June and July hundreds of thousands of additional jobs were lost. “These figures are the very best we can expect from a Geithner-led economy – stumbling and uncertain job growth for years,” said Rick Sloan, Acting Executive Director. “America’s jobless simply can no longer afford his slow-as-molasses approach to job creation.” UCubed and I don’t expect Mr. Geithner to create the millions of jobs we need today in order to again be fully employed — as Harry Truman would have said, that’s the President’s job, plus Congress’. But we and countless others committed to a fully employed economy do expect him as Treasury Secretary to completely understand the issue and embrace its importance and to frame effective, U.S. advantaged solutions for the President. And since he doesn’t seem to be able to do any of this, I agree with Mr. Sloan that he should resign — immediately. Leo Hindery, Jr. is Chairman of the US Economy/Smart Globalization Initiative at the New America Foundation and a member of the Council on Foreign Relations. Currently an investor in media companies, he is the former CEO of Tele-Communications, Inc. (TCI), Liberty Media and their successor AT&T Broadband. He also serves on the Board of the Huffington Post Investigative Fund.

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The 8 Best States To Lose Your Job

July 22, 2010

Now that Congress is set to restore $33 billion worth of unemployment benefits to 5 million qualified Americans , we are reminded that not all unemployed persons will be treated equally. Unemployment benefits are determined at the state level and can vary wildly, based on one’s previous earnings. The national average is $309 a week for 26 weeks, totaling $8,034 a year. But many states pay much more. We sifted through data from state labor departments to find out which ones offered the most attractive unemployment packages. Where is the payout the worst? Mississippi, where you’d have to live off of $235 a week . Though it sounds obvious, we should note here that unemployment benefits are NOT a reason to quit your dead-end job. After all, only those who were laid off, meet minimum wage requirements and prove to be actively job searching qualify for theese benefits. Check out the states with the most generous unemployment benefits:

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Karie Meltzer: What’s Bigger Than a Texas Ego?

July 14, 2010

The Texas economy, apparently. Today, CNBC named The Lone Star State America’s Top State for Business in 2010. We topped Virginia, who won last year. But, a look at where we stand in other areas leaves me feeling underwhelmed about this victory. The categories CNBC used are: * Cost of Doing Business (450 points) * Workforce (350 points) * Quality of Life (350 points) * Economy (314 points) * Transportation & Infrastructure (300 points) * Technology & Innovation (250 points) * Education (175 points) * Business Friendliness (175 points) * Access to Capital (50 points) * Cost of Living (25 points) Texas has a lot going for it economically, including 64 Fortune 500 companies (more than any other state), and a stronger real estate market than the rest of the country… not that that’s saying much these days. Governor Rick Perry often attributes our success to the state’s low tax, low regulation economy — especially compared to California. Texas is going into the 2011 legislative session with a budget deficit of up to $17 billion . Compared to other states that ain’t too bad, but state agencies are hustling to slash their budgets at Perry’s request, and no one is going to be surprised when health care, education and the environment get buried under border security, energy, etc. Wait, did I just say “state agency” and “hustling” in the same sentence? Even the booming capital city of Austin is in the middle of a shortfall between $18 and $28 million. Still, citizens typically applaud the Texas system of doing business. A poll produced by the Texas Politics Project at UT earlier this year shows that 18 percent of Texans strongly believe that the Texas state government serves as a good model for other states, and 39 percent somewhat agree. In addition, 47 percent of people who feel the Texas economy is improving agree that Texas is a good economic roll model for other states and 32 percent of people who think the Texas economy is declining also think we’re a good roll model. The story of Texas and CNBC rankings isn’t all a cowboy fairy tale. Texas didn’t rank so high when it came to education. In fact, not even in the top five. We ranked 30th. I wonder if it has anything to do with the infamous State Board of Education ? All they seem to do for us lately is bring in a lot of national media and cause uproar and embarrassment. (Though when it comes to Texas politicians and the national press, uproar and embarrassment are two words that readily come to mind. Wasn’t it our governor who said the BP oil spill was an act of God?) Texas has historically led the way when it comes to technology and business, and that’s certainly commendable. But, we aren’t setting any positive records in the arenas of education, the environment or health care. In fact, we’re stuck at the bottom of those barrels, bragging about our economy while we hang out there. Aside from our low CNBC education rating, we’re number 39 in America’s Health Ratings, which is sad for a state with such a strong economy. We’re also the 13th most obese state. Although we’re leading the pack with renewable energy, a Forbes list placed Texas as the 34th greenest state. Come on, this is Texas. Texans are resourceful, compassionate, hard-working and arrogant as hell. We should be dominating in education, health care and the environment. But for now, we’ll continue blowing smoke about our economy.

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Need A Job? Try Canada, Where Hiring Is Booming And Home Prices Are Rising

July 9, 2010

Stubbornly high unemployment rates got you down? Not sold on the economic recovery? Look no further than America’s polite neighbor to the north, where jobs numbers are surging and home prices have been rising steadily for nearly a year. Last month, Canada, a nation with roughly one tenth of our population, created about 10,000 more new jobs than America. Yes, Canada’s economic recovery is outpacing our own. In terms of sheer job creation, June saw Canada create jobs at a pace that was five times the rate predicted by economists, Bloomberg News reports. Canada added 93,200 jobs in June, while U.S. private employers added just 83,000. Thanks to strong hiring in the service sector, Canada’s unemployment rate fell to 7.9 from 8.1 percent, while America’s unemployment rate came in at 9.5 percent in June, falling only because of a large exodus of Americans looking for work. All told, the U.S. lost 125,000 jobs in June because of a wave of Census layoffs. Real estate prices tell a similar story. After 10 straight monthly gains, Canadian home prices rose 0.3 percent in May, reports Bloomberg News. In the States, things are somewhat bleaker. Many areas showed small home price gains in May, , but in many other areas prices remain close to their April 2009 lows , according to the latest data from the widely-watched S&P/Case-Shiller index. Canadian real estate broker Royal LePage predicts Canada’s home prices could rise an average of 6.8 percent in 2010. Meanwhile, the IMF, though remaining relatively upbeat on the U.S. housing and job markets, warned that the foreclosure crisis could lead to a double-dip in home prices .

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State Budget Crisis: 46 States Facing ‘Greek-Style Deficits’

June 25, 2010

Even as the U.S. appears to be on the mend — gross domestic product has climbed three straight quarters — finances in Arizona, Illinois, New Jersey, New York and other states show few signs of improvement. Forty-six states face budget shortfalls that add up to $112 billion for the fiscal year ending next June, according to the Center on Budget and Policy Priorities, a Washington research institution. State spending is 12 percent of U.S. GDP. “States are going to have to cut back spending and raise taxes the same way Greece and Spain are,” says Dean Baker, co- director of the Center for Economic and Policy Research in Washington. “That runs counter to stimulating the economy and will put a big damper on the recovery in the latter half of this year.”

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Google Wi-Fi Data Collection Discussed by Law Enforcement in 30 States

June 16, 2010

By Karen Freifeld and Joel Rosenblatt June 16 (Bloomberg) — Google Inc. ’s collection of data via Wi-Fi networks was the subject of a conference call among law enforcement officials from 30 U.S. states, according to Connecticut Attorney General Richard Blumenthal . “We’re looking to establish where, when, why, for how long and for what purpose there was this collection of information on wireless networks,” Blumenthal said yesterday in an interview. The call included representatives of the states’ attorneys general. The discussion reflects widening concern among law enforcement over the way Google handles user information. The company said last month it mistakenly gathered data from open wireless networks while it was capturing images of streets and houses for its Street View service, a product that lets users view photographs of an area online. Blumenthal has demanded that Mountain View, California- based Google inform his office of any data gathered from his state’s residents and businesses without permission, the attorney general said this month. Google owns the world’s largest search engine . “This was a mistake, but we don’t believe we did anything illegal,” Google said in an e-mailed statement. “We’re working with the relevant authorities to answer their questions and concerns.” Illinois was among the states that joined in last week’s call led by Blumenthal. Illinois in Talks “We did participate in a conference call with other attorneys general regarding Google,” said Robyn Ziegler, a spokeswoman for Illinois Attorney General Lisa Madigan . Additional information wasn’t immediately available, she said. The U.S. Federal Trade Commission said last month that it is reviewing Google’s data gathering. An Oregon judge has ordered the company turn over similar data collected in that state, including any e-mails, files or digital phone records, according to court documents. Also this month, Google said it was turning over to regulators in Germany, France and Spain data it mistakenly collected from unsecured Wi-Fi networks. Those countries are investigating Google’s data-gathering practices after the company said in May that its cars used to photograph roadsides for its Street View mapping service inadvertently recorded information. Prosecutors in the German city of Hamburg opened a criminal investigation. Authorities in Italy, Canada and the Czech Republic also have begun inquiries. The Oregon case is Vicki Van Valin v. Google, 10-00557, U.S. District Court, District of Oregon (Portland). To contact the reporters on this story: Karen Freifeld in New York at kfreifeld@bloomberg.net ; Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net .

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U.S. States Face `Staggered’ Recovery With Up to Four Years of Budget Woes

April 16, 2010

By Catarina Saraiva and Michael Marois April 16 (Bloomberg) — U.S states face a “staggered” recovery even as the national economy shows signs of stabilizing, Susan Urahn, a managing director at the Pew Center on the States, told investors on a conference call. States may also have to contend with three to four more years of budget woes, said Laura LaRosa, director of fixed income at Glenmede Investment & Wealth Management in Philadelphia, on the call today. “When the recovery comes, it’s going to be staggered and slow when you look across the states,” Urahn said. “The lag happens because it takes time for the states’ unemployment rates to come down to pre-recession levels.” To contact the reporter on this story: A. Catarina Saraiva in New York at asaraiva5@bloomberg.net

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Unpaid Internships Investigated: ‘Mostly Drudgery’ Means Employers Must Usually Pay, Say Regulators

April 2, 2010

Convinced that many unpaid internships violate minimum wage laws, officials in Oregon, California and other states have begun investigations and fined employers. Last year, M. Patricia Smith, then New York’s labor commissioner, ordered investigations into several firms’ internships. Now, as the federal Labor Department’s top law enforcement official, she and the wage and hour division are stepping up enforcement nationwide.

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Steve Rohleder: Too Big to Fail? Amidst Fiscal Crisis, Governments Must Take Dramatic Actions

March 22, 2010

Governments and the services they provide the public are being threatened as never before by fiscal crises in every corner of the globe. While countries have been able to withstand deficits in the past, the scale and uncertainty of current financial challenges are testing the ability of governments to meet even their most basic commitments to citizens. Governments at every level around the world are finding it difficult, if not impossible, to balance revenues and expenditures. In the US, 48 out of 50 states face budget shortfalls in 2010 and even larger shortfalls are projected for 2011. California’s shortfall, alone, is almost $52 billion, a staggering 56% of the state’s general fund budget. And the states of Arizona, Nevada, Illinois, New York and New Jersey are not far behind. The situation in the states mirrors the situation being faced by Greece and Portugal (each with populations of 11 million, roughly the same as Ohio with 11.5 million) or Ireland (with 4.5 million people, about the same as Louisiana or South Carolina.) Greece is seeking its own bailout, but imagine the consequences if California, Texas or Ohio were to fail. In addition to determining how to stay solvent as revenues plummet, the public sector must overcome two huge hurdles impeding their success: a crisis of confidence among citizens in the government’s ability to meet their needs, and a political crisis that is eroding public support for meaningful reform and creating inertia at the legislative level. While fixing its own problems, government must help citizens wrestle with increasing debt, unemployment, shrinking pensions and foreclosures. Before anything can be fixed, government leaders must be willing to face up to today’s economic reality by exercising strong and decisive leadership, regardless of the political ramifications, in order to restore public confidence. Political decisions are fraught with consequences that carry over into the next election cycle. However, there’s no way to fix problems without demonstrating the courage to lay out real solutions — no matter how unpopular — that are easy for citizens to understand. In the short-term, this may require such painful actions as reducing or freezing salaries and benefits. Longer term, however, the public sector has much to gain by adapting innovative solutions that have been used by the private sector and some governments to rethink and reshape the way governments work. For starters, government must aggressively apply the technology and innovation that can increase efficiency and reduce operating costs. Successful companies that embrace these principles not only survive economic downturns, but enter the recovery in a stronger position. There’s no reason why governments cannot do this as well. One time-tested solution that began in the private sector is the sharing of back-office services across agencies — human resources, accounting, purchasing, fleet management and information technology. New York is considering merging and consolidating seven agencies and authorities, a move that could save an estimated $14.8 million per year. And, the state of Washington has eliminated at least 75 commissions and boards and closed 25 drivers’ license centers across the state, replacing them with online kiosks. On the job front, the German Labor Agency — Bundesagentur für Arbeit — has had tremendous success with a Virtual Labor Market. The system links job seekers, employers and employment agencies with job training and employment opportunities, and has become the largest e-government application in Europe with more than a million users every day. To date, more than 5 million workers have found jobs through the virtual market. With 30+ gubernatorial races in this year’s elections, incumbents and new governors should look at the German system and consider other innovative solutions to ease persistent and historically high unemployment rates. It’s clear that solutions do exist. But again, it will take courage and tenacity by our public sector leaders to shed old ways of doing business, embrace innovation and ensure that government will be able to join in the recovery that has already begun in the private sector. The fiscal issues facing the government are difficult, but solvable. Rapid and concerted action can pull governments back from the brink. When recovery does come, however, government leaders must avoid the temptation to slip back into the old ways of doing business. Everything they do now must focus on building an operation that can be sustained in any economic environment. We can only hope they choose the right path. Nobody wants to find out if governments are really too big to fail.

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Alan Schram: Public Finance Crisis

February 21, 2010

The Wall Street Journal recently wrote that more and more municipalities are so strapped for cash, they are considering a chapter 9 filing. Chapter 9 is a seldom-used part of U.S. bankruptcy law that gives municipalities protection from creditors (the largest Chapter 9 case was filed in 1994, when Orange County, Calif., lost $1.6 billion on interest rates derivatives). As tax revenues decline due to harsh economic realities, many cities and counties find it increasingly difficult to meet their interest payments on municipal bonds. Unfortunately, people still believe that municipal bonds are safe, low risk alternative to cash, because historically they experienced low default rates. But with the increasing strain on cities, the old standards no longer apply (and if interest rates rise, which they inevitably must, that would further erode prices of all fixed income instruments). Moreover, a recent Pew Center study shows state pensions have a $1 trillion gap in funding their obligations to pension and health care promised to state employees. In eight states, more than a third of the total liability was unfunded. Two states, Illinois and Kansas, had less than 60% of the assets they need to meet their pension obligations (Illinois alone has an unfunded liability of more than $54 billion). As far as healthcare liabilities go, 41 states are less than 10% funded. The real numbers are worse, because the Pension Plans’ assumptions for future investment returns are between 7.25% to 8.5%. Those assumptions are simply outlandish. It makes no sense for everyone to expect to get 8% returns safely out of an economy that is growing about 3% per annum, unless employing the use of leverage or taking interest rate and foreign currency risk. We cannot all grow faster than the underlying economy. With extremely low interest rates, what seemed like reasonable projections for a portfolio of stocks and bonds are now far too high. With the 10 year T Bills currently yielding less than 4%, expecting the states to earn such a huge margin over the risk-free rate seems like something the Mad Hatter would say to Alice, when she comes to his tea party in Wonderland. Why are pension assumptions worth quibbling over? Because current pension accounting allows pension plans to use an estimate of expected future returns instead of actual returns to compute periodic pension costs. Annual differences between actual and expected returns are accumulated and amortized over time. As a rule of thumb, every 1% less in performance requires an extra 10% in annual funding to counteract. So the difference between 8% to 6% would be very significant. And as Mike Shedlock of Global Economic Trade Analysis notes, many of the states in deepest trouble have the highest pension plan assumptions. Once a state doles out a retirement benefit, it is difficult to rescind it. Pensions are considered contracts, and are thusly protected by law. Even if they weren’t, the political ramifications of touching the “Third Rail” are daunting. No politician would be willing to effectively end their career by alienating government employees and unions in suddenly revoking their benefits. After all, state employees have a point when they say that would be grossly unfair. They have been counting on their retirement benefits for years, and those were always considered part and parcel of their compensation. Yet we can no longer afford these benefits. Reckless politicians in previous generations joined the Gadarene rush and granted generous pension plans, early retirement ages and liberal health benefits. They grew inexorably and as a result, municipalities and states are now at the brink of insolvency. The City of Los Angeles might run out of cash by this summer. California itself has long been in fiscal crisis mode. And at some point our political leaders and the public will have to choose between terminating the social contracts with state employees, ending basic services such as the police or fire departments, or defaulting on their obligations to municipal bond holders. Alan Schram is the Managing Partner of Wellcap Partners, a Los Angeles based investment firm. Email at aschram@wellcappartners.com.

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Ellen Brown: AIG-Gate: The World’s Greatest Insurance Heist

February 6, 2010

Rumor has it that Timothy Geithner is on his way out as Treasury Secretary, due to his involvement in the AIG scandal that is now unraveling in hearings before the House Oversight and Reform Committee. Bob Chapman writes in The International Forecaster : Each day brings more revelations of efforts of the NY Fed and Goldman Sachs to hide the details of the criminal conspiracy of the AIG bailout … This is a real crisis on the scale of Watergate. Corruption at its finest. But unlike the perpetrators of the Watergate scandal, who wound up facing jail time, Geithner evidently has a golden parachute waiting at Goldman Sachs, not coincidentally the largest recipient of the AIG bailout. At least that is the rumor sparked by an article by Caroline Baum on Bloomberg News, titled “Goldman Parachute Awaits Geithner to Ease Fall.” Hank Paulson, Geithner’s predecessor, was CEO of Goldman Sachs before coming to the Treasury. Geithner, who has come up through the ranks of government, could be walking through the revolving door in the other direction. Geithner has been under the House microscope for the decision of the New York Fed, made while he headed it, to buy out about $30 billion in credit default swaps (over-the-counter derivative insurance contracts) that AIG sold on toxic debt securities. The chief recipients of this payout were Goldman Sachs, Merrill Lynch, Societe Generale, and Deutsche Bank. Goldman got $13 billion , roughly equivalent to its bonus pool for the first 9 months of 2009. Critics are calling the New York Fed’s decision a back-door bailout for the banks, which received 100 cents on the dollar for contracts that would have been worth far less had AIG been put through bankruptcy proceedings in the ordinary way. In a Bloomberg article provocatively titled “Secret Banking Cabal Emerges from AIG Shadows,” David Reilly writes: [T]he New York Fed is a quasi-governmental institution that isn’t subject to citizen intrusions such as freedom of information requests, unlike the Federal Reserve. This impenetrability comes in handy since the bank is the preferred vehicle for many of the Fed’s bailout programs. It’s as though the New York Fed was a black-ops outfit for the nation’s central bank. The beneficiaries of the New York Fed’s largesse got paid in full although they had agreed to take much less. In a November 2009 article titled “It’s Time to Fire Tim Geithner,” Dylan Ratigan wrote: [L]ast November . . . New York Federal Reserve Governor Tim Geithner decided to deliver 100 cents on the dollar, in secret no less, to pay off the counter parties to the world’s largest (and still un-investigated) insurance fraud — AIG. This full payoff with taxpayer dollars was carried out by Geithner after AIG’s bank customers, such as Goldman Sachs, Deutsche Bank and Societe Generale, had already previously agreed to taking as little as 40 cents on the dollar. Even after the GM autoworkers, bondholders and vendors all received a government-enforced haircut on their contracts, he still had the audacity to claim the “sanctity of contracts” in the dealings with these companies like AIG. Geithner testified that the Fed’s hands were tied and that the bank could not “selectively default on contractual obligations without courting collapse.” But if it was all on the up and up, why all the secrecy? The contention that the Fed had no choice is also belied by a recent holding in the Lehman Brothers bankruptcy, in which New York Bankruptcy Judge James Peck set aside the same type of investment contracts that Secretaries Paulson and Geithner repeatedly swore under oath had to be paid in full in the case of AIG. The judge declared that clauses in those contracts subordinating other claims to the holders’ claims were null and void in bankruptcy. “And notice,” comments bank analyst Chris Whalen , “that the world has not ended when the holders of [derivative] contracts are treated like everyone else.” He calls the AIG bailout “a hideous political contrivance that ranks with the great acts of political corruption and thievery in the history of the United States.” If you tell a lie big enough and keep repeating it, said Joseph Goebbels, people will eventually come to believe it. The bailout of Wall Street initiated in September 2008 was premised on the dire prediction that if major counterparties in the massive edifice of derivative contracts were allowed to fall, the whole interlocking house of cards would collapse and take the economy with it. A hijacked Congress dutifully protected the derivatives game with taxpayer money while the real economy proceeded to collapse, the financial sector choosing to put their money into this protected form of speculative betting rather than into the more mundane and risky business of making loans to struggling businesses and homeowners. In the end, $170 billion of federal funds went to AIG and the banks feeding at its trough. Meanwhile, a survey of state finances by the Center on Budget and Policy Priorities think tank found that state governments face a collective $168 billion budget shortfall for fiscal 2010. If the money used to bail out AIG and the banks had been used to bail out the states instead, the states would not be facing insolvency today. There is no law against gambling, but there is a law against fraud. In Watergate, a special prosecutor was appointed to bring criminal charges; but times seem to have changed.

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Jesse Strauss: Will 2010 Be the Year We Revive Corporate Democracy?

January 22, 2010

While a lot of attention has been paid to government’s efforts to reign in systematic risk in the financial system and increase oversight, very little has been written about the mechanisms by which our corporate economy will “self correct” after the failures of the past few years. That’s unfortunate because reforming the way corporations govern themselves is key to avoiding another crisis. Although slightly under the radar, in 2010, the Securities and Exchange Commission is set to unveil new rules that will recalibrate the balance of power between corporate management and shareholders by, hopefully, requiring corporations to adopt “proxy access” rules. Proxy access refers to the ability for shareholders who meet certain thresholds (amount of shares owned and the length of continuous ownership are two of the most prominent) to use management’s proxy to nominate their own directors and, in some cases, recommend changes to the corporation’s by-laws for the purpose of changing the way directors are nominated. In the corporate governance universe, proxy access is one of the few ways shareholders, as opposed to management, can actively govern a corporation. The contours of the debate are stark but are little known out side the insular world of corporate boards, activist shareholders and the lawyers and consultants who love (and loath) both. You see, for a long time the Securities and Exchange Commission (and the federal government as a whole) has supported a proxy access regime that, essentially, disenfranchised shareholders and empowered management. The prevailing idea was what is called “private ordering:” every corporation was free to determine its own proxy access rules without any “public” interference. Most corporations simply decided that the best proxy access was no proxy access. Shareholders could always try to take matters into their own hands and force the corporation to adopt fair proxy access rules but that rarely happens because of the myriad ways that corporations can prevent changes to their by laws by shareholders. For good measure, SEC Rule 14a-8 requires corporations to have some semblance of proxy access. But Rule 14a-8 is so loophole ridden that its almost a farce. For example, under the current rule corporations are allowed to exclude shareholder proposals that relate to elections (so no insurgent director nominees needed to be included on management’s proxy) and corporations are permitted to exclude proposals that “are improper under State law.” That last one is a doozy: turns out that the Model Business Corporation Act, the template for most States’ Corporations Law, says that by-law amendments requiring mandatory proxy access are prohibited. (There is some change afoot because Delaware, where many large corporations are incorporated, recently changed its law. However, the fact that the law can vary from State-to-State is itself problematic since those differences create large transaction costs for diversified investors. That is a topic for another post). I like government and believe in democratic law making, but things like that make me wonder: who writes this stuff? The proposed rule changes would create a “public ordering” of proxy access rules. Public ordering means that every company would be required to have some form of proxy access so shareholders could nominate their own directors using management’s proxy (basically, the names of shareholder nominated directors would appear next to the slate of management/board nominated directors). Companies would be able to “opt-out” of the rule (the default rule would allow for proxy access) but only by a vote of their shareholders where the benefits of proxy access are full disclosed. An alternate proposal would amend SEC Rule 14a-8 to that it no longer allows corporations to exclude shareholder proposals for proxy access from management’s proxy. The latter (permitting access to management’s proxy for the purposes of proposing proxy access) is sort of a modified “public ordering:” it would, essentially, require companies to ask shareholders whether they want proxy access (to “opt-in”), although the default rule would be no access. Modified public ordering might do the trick but its fraught with risk. If the SEC adopts a rule that requires shareholders to place proxy access proposals on their proxies (an “opt-in regime”) you can be sure that corporations will attempt to short circuit the process by proposing their own “watered down” proxy access rules. This is not some hypothetical threat: in fact, some of the “great minds” of corporate governance are proposing, in part, just that. Examples of “watered down” proxy access proposals include those are merely precatory (fancy legal word for “optional”) and those with prohibitively high ownership and length-of-holding-requirements). I believe that the proxy access rules yeilded by an opt-in system with a default no access rule would yield would be a little short of worthless to shareholders. The SEC needs to adopt a uniform proxy access rule (“public ordering”) that every company must adopt – a default access rule with the ability to “opt-out” if shareholders so desire. Of course, my opinion is not shared by most of the lawyers and consultants who advise corporations on governance issues: they oppose public ordering and tend to support various opt-in proposals. I regard their opposition as somewhat suspect because most of these lawyers and consultants do a lucrative business in custom tailoring corporate by-laws to be resistant to shareholder demands. Its possible that some genuinely fear that some malignant force will infiltrate corporate boards and will, somehow, do a worse job running American corporations than the current crop of directors. As with most conspiracy theories, the hard evidence for that threat is lacking. For one, many large investors are “buy-and-hold” pension funds looking for a sound investment and a steady return for the pensioners whose retirement funds they have a fiduciary obligation to maintain (and U.S. equities are probably one of the less risky investments these funds are in). Whatever their motives, the anti-public ordering gang’s reasoning doesn’t stand up well under scrutiny. On the first spin of the anti-public ordering “Wheel-Oh-Excuses” we land on the idea that a company should not be required to adopt a “one size fits all approach” but rather should be permitted to “opt-in” to the rule if its right for them, or design their own. That would make proxy access the only SEC rule that is, essentially, “voluntary.” A voluntary rule is unworkable and the idea that companies can decide whether to adopt or reject a financial regulation designed to protect investors requires a degree of intellectual contortion that I find unbecoming. There is nothing stopping boards from adopting proxy access now but, by one count, only three companies (out of the thousands registered) have actually put in place a workable proxy access rule. Besides which, if a company believes that the SEC uniform rule is inappropriate for them it can always design its own proxy access rule that conforms to whatever minimal protections are provided by the publicly ordered proxy access regime. In other words, the SEC’s “one-size-fits-all” suit is made with a lot of elastic. A second objection is, perhaps, more interesting and more intellectually honest: under principles of federalism, corporate governance should be left to the States. Its an old argument that has a simple retort: State control of corporate governance has lead to a “race to the bottom” where management has been able to pick and chose where to incorporate based on the States with the weakest protections for shareholders. While apologists for corporate America celebrate this system, I think it’s a boon for hucksters. Professor Bainbridge of UCLA, an expert in these matters, gives a spirited defense to the idea of State control of corporate governance matters . Unfortunately, if you read his posting as a whole, it has a glaring inconsistency: the first part of the post talks glowingly about the benefits of a strong board insulated from outside pressures (even going so far as to deride the generally non-controversial idea of cumulative board voting because it, allegedly, exacerbates majority-minority splits and leads to board dysfunction) while the second part seems to indicate that shareholders are willing to pay a premium for corporate governance structures that have generous shareholder protections. At the risk of starting an argument with someone far smarter than me, I don’t think it really adds up. There is also a three-card-monte element to the argument since Professor Bainbridge should be well aware that the ability for shareholders to nominate directors in the first place is an issue of State law (a few States actually prohibit it, a silly prohibition that rests with those retrograde State legislatures to address). However, the proposed proxy access rules address disclosure of the nominees on management’s proxy. That distinction is critical because disclosure issues have been governed by the Feds since at least the 1930s. Perhaps the most insidious of the arguments against a uniform rule is what I will call the “love you to death” argument: corporate democracy is about choice, so shareholders should have a choice to adopt their own rules even if that means that shareholders can disenfranchise themselves. (Pause for a head scratch). While that’s all well-and-good, there are so many ways that management stymies shareholder control that requiring shareholders to select their own proxy access regime (“opt-in”) without a default access rule means that there probably won’t be one. Finally, I would be remiss if I did not mention that some observers think that a uniform proxy access rule violates something called the Administrative Procedure Act. While this may or may not be true, I’ve been practicing law long enough to know that every legal opinion has a counter-opinion and, in any event, the APA, being a creature of Congress, can certainly be amended if it’s the only true legal obstacle to corporate democracy. How to sum this up? Well, let me try it this way: Proxy access relates to the most fundamental aspects of corporate governance which is the ability of shareholders to run the corporations that they own. If the economy was humming along and American corporations were still the strongest and best run in the world you’d probably be entitled to relegate proxy access to “that’s interesting” category or, for that matter, the “that’s really boring” category. However, when American corporations are losing their global competitiveness at an alarming rate or just plain failing (General Motors, Chrysler, AIG, Lehman Brothers, Bear Stearns… and the list goes on, sadly) compliancy is not an option. Pay attention as the debate heats up in the coming months.

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Sarah Thomas Is NCQA’s New Vice President for Public Policy and Communications

January 11, 2010

WASHINGTON, DC–(Marketwire – January 11, 2010) – The National Committee for Quality Assurance (NCQA) today welcomed Sarah Thomas as its Vice President for Public Policy and Communications. She will be responsible for directing NCQA’s relations with Congress, federal agencies and the states, as well as NCQA’s work with the media and other external audiences. “Sarah is a seasoned leader with deep experience developing and implementing innovative health care policy,” said NCQA President Margaret E. O’Kane. “She will be an asset to NCQA. I’m thrilled to welcome her to our team.”

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Southern States Losing Population As Recession Alters Migration Patterns, According To U.S. Census Bureau Data

December 25, 2009

The recession has had a profound effect on migration patterns in the U.S., reversing the flow of people to former housing-boom states such as Florida and Nevada, the latest data from the Census Bureau show. In the year ending July 1, 2009, Florida — once the top draw for Americans in search of work and warmer climes — lost more than 31,000 residents to other states, the Census Bureau reported Wednesday. Nevada lost nearly 4,000. The numbers are small compared with the states’ populations, but they reflect a significant change in direction: In the year ending July 2006, Florida and Nevada attracted net inflows 141,448 and 41,640 people, respectively.

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Video: BNP’s Whichello Says Dubai Woes Won’t Spread Across Gulf

November 27, 2009

Nov. 27 (Bloomberg) — Robert Whichello, head of emerging market debt at BNP Paribas SA, talks with Bloomberg’s Rishaad Salamat about the impact of Dubai’s debt proposal on other states in the Gulf region

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