Schwarzenegger Proposes $9.9B In Cuts SACRAMENTO (AP) — Gov. Arnold Schwarzenegger has declared a fiscal emergency and is asking lawmakers to meet in a special session to save the state $9.9 billion over the next two years. Schwarzenegger on Monday unveiled a plan that relies largely on cuts to health care and social services for the poor. About $7.4 billion of his proposal would come from cuts, include reducing cash assistance to needy families by 15.7 percent in April, then eliminating the entire welfare-to-work program in July. He is proposing to eliminate vision coverage and increasing monthly premiums for Healthy Families, a program that provides health coverage for children of low-income families. The governor also is asking the state to limit prescriptions and cap physician visits to 10 a year for Medi-Cal recipients.
German 10 year yields surpass 3% – Germany’s hear-no-evil, see-no-evil policy stance is now starting to backfire on its own bond market, as investors are uncertain about the scale of fiscal transfers; bond spreads are getting narrower as a result of higher German interest rates; Ireland passes the first round of the budget vote – average middle-income earner to be 3% worse off; Italy adopts 2011 budget; Straus-Kahn, and a string of other politicians and central bankers, criticise the EU’s piecemeal approach to crisis resolution; Olli Rehn says the EU “even more rigorous” stress tests’; Helmut Schmidt says Merkel and Schauble have no clue about international capital markets; Ken Rogoff says he expects restructuring; Wolfgang Munchau would welcome the emergency of anti-euro party in Germany, as this would clear the air; Martin Wolf, meanwhile, argues that the eurozone will very soon face its moment of truth. [more]
Economic Incompetence of the Political Class. – The sovereign debt crisis now threatening Europe, as well as major American states and cities, discloses the sheer incompetence of a political class that has over-promised, under-delivered and squandered vast amounts of their citizens’ wealth. Greece, Ireland, Spain, Portugal, California, Illinois, Los Angeles and Chicago are simply the poster children for what happens when elected officials engage in reckless and irresponsible management of their economies, their banking system or their respective government’s public finances. California’s budget deficit has soared to $25 billion, or more than 25% of total spending. And, according to a recent study, the City of Chicago’s unfunded pension liabilities total $45 billion, or more than $40,000 per household. Politicians may not be solely responsible for this fiscal mess. But they are responsible for using borrowed money to pay for current expenses until they had borrowed more than they now seem able to pay back.
In Search of Equilibrium – The best idea of 2010 came from the Himalayan mountain kingdom of Bhutan. Standing before world leaders in the United Nations General Assembly in September, Prime Minister Jigmi Thinley asked the decisive economic question of our time: “As all our people rise above the threats of basic survival, what will our collective endeavor be as a progressive society?” He proposed an answer. Let us, he said, make “the conscious pursuit of happiness” a new pillar of global cooperation, the “ninth Millennium Development Goal.” The world, indeed, is long on worries and short on happiness. The problem, as Prime Minister Thinley incisively explained, is not really a shortage of material goods, even in a year of economic recession. The world is richer than ever before in history; that is certainly the case in the richest countries, even those in a cyclical downturn. Happiness, according to Bhutan’s great tradition of Himalayan Buddhism, comes not from the raw pursuit of income but, in Thinley’s words, from a “a judicious equilibrium between gains in material comfort and growth of the mind and spirit in a just and sustainable environment.”
Dr. Doom Predicts Another $1 Trillion in Housing Losses As Nouriel Roubini heads to Athens to meet with investors and policymakers potentially about the debt crisis in Europe, the economist says he’s increasingly worried about a problem closer to home: America’s real estate mess. The country’s real estate problems are “underappreciated,” and banks could face another $1 trillion in housing-related losses, Mr. Roubini said in a phone interview with DealBook on Monday. At the same time, he played down the issues in Ireland, Greece, Portugal and Spain, calling the matter “contained” for now.
Nobody represents the American people – The disconnect between the actions of the government and public opinion is the central fact of American politics today. It doesn’t seem to matter whether liberal Democrats or conservative Republicans are in power. Only minor, marginal reforms ever take place. The basic outlines of American economic policy and foreign policy remain the same, even as Congress and the White House change hands. The changes promised by progressive Democrats and Tea Party Republicans are quickly discarded after the elections. The changes that do take place are often the opposite of those that majorities of Americans want. Most Americans want Social Security to be strengthened and American manufacturing protected. But the conversation among elites inside the Beltway-New York bubble is about cutting Social Security and more one-sided "free trade" deals with mercantilist nations that, unlike the U.S., protect and promote their domestic industries. Many Americans have come to the conclusion that nobody represents them in Washington anymore. They are right.
Economists Say Tax Cut Deal Won’t Stimulate the Economy Much – Obama got Republicans to agree to a year-long extension of unemployment benefits, and a year-long, two percentage point reduction in the payroll tax, meant to mimic a temporary extension of the tax breaks that were in the stimulus bill. Each of these concessions will inject much-needed demand into the economy. Could this silver lining be bright enough to make the extension of all the cuts worth it? According to progressive economists, it will help, but won’t make a huge dent. For starters, extending the Bush tax rates don’t provide any additional stimulus — you’d have to lower the rates from their current, Bush-era baseline to generate more stimulus. Letting them expire might have a contractionary impact, but keeping them in place won’t create more stimulus. Based on his back-of-the-envelope math, Dean Baker of the Center for Economic Policy Research told TPM that a year-long extension of the stimulus tax cuts "should lower the unemployment rate three to four tenths of a percentage point."In November, the Economic Policy Institute calculated that the a year-long extension of unemployment benefits would generate 700,000 jobs.
U.S. energy chief says improved car batteries 5 years off (Reuters) – Cars that run on batteries will begin to be competitive with ones that burn petroleum fuels in about five years, the U.S. energy secretary said at the annual U.N. climate talks. "It’s not like it’s 10 years off," Chu said at a press conference on U.S. clean energy efforts on the sidelines of the climate talks. "It’s about five years and it could be sooner. Meanwhile the batteries we do have today are soon going to get better by a factor of two." Chu is one of three Obama administration officials that will briefly visit the talks among 190 countries being held at a Mexican beach resort through December 10. Agriculture Secretary Tom Vilsack and Nancy Sutley, the head of the White House’s Council on Environmental Quality, are the other two. Chu’s Department of Energy, or DOE, is supporting several approaches seeking to improve car batteries. A battery race has developed between U.S. companies like Massachusetts-based A123 and ones in Asia, like China’s BYD, which Warren Buffett’s Berkshire Hathaway owns 10 percent of.