Tax Cuts Could Hurt Moody’s U.S. Rating: Report — U.S. sovereign debt ratings from Moody’s Investor Service could be hurt by extended tax cuts in the long term, Reuters reported Tuesday. Moody’s lead analyst for U.S. sovereign debt, Steven Hess, told Reuters he is not concerned by an extension of the Bush tax cuts on the U.S.’s AAA rating over the next 18 months to two years, but he is worried about what happens after two years when the extensions are set to expire again. "We have long term concerns about the (U.S. credit) outlook and they are not yet being addressed. We’re waiting to see if they’re going to be addressed in the next couple of years," Hess told Reuters in an interview.
US Treasury Sets Record for Debt Sales at $2.116 Trillion – The U.S. Treasury set a record for borrowing in a calendar year after selling $32 billion of three- year securities to push its total note and bond sales to $2.116 trillion amid all-time high demand for the debt. Bond dealers and investors have bid $6.33 trillion at the auctions this year, or a record $2.99 for every dollar of debt sold. Treasuries tumbled today, pushing the 10-year note yield up the most since September 2008, after President Barack Obama agreed to extend tax cuts for two years and the three-year note sale drew the lowest demand since February. The fact that Treasury is able to issue all this paper and get it financed speaks to the fact that deleveraging in the private sector has been on-going and significant,”
Unemployment Insurance Rate To Rise – Nevada businesses will pay $136 million more in taxes in 2011 to try to put some cash back into the state’s Unemployment Insurance Trust Fund. That fund, which started this recession with a balance of more than $700 million, was depleted in October 2009 by benefit payments to record numbers of out-of-work Nevadans. Since then, Employment Security Division Administrator Cindy Jones said the state has had to borrow $579 million to cover checks for more than 100,000 on unemployment each week. Through the end of September this year, she said, the state collected $570 million from employers but paid out $1.8 billion. The situation forced the state Employment Security Council to recommend in October an increase in the average employer tax from 1.33 percent of wages to 2 percent. That recommendation was adopted Tuesday.
World Faces Oil Supply Crisis – Iran Opec Chief (Reuters) – Iran’s OPEC governor believes the world faces great uncertainties in security of energy supply and that the price of crude is still undervalued and set to hit $100 in the short term. In an interview with semi-official Iranian news agency Mehr published on Tuesday, Mohammad Ali Khatibi said: "The global markets are close to a crisis of uncertain oil supply." "The world is concerned about the security of energy supply due to the anticipation of a drop in global oil production and a drop in the supply from non-OPEC countries." When asked how he saw the oil price moving in 2011, he replied: "The supply of oil with at a price of $100 price is quite normal in short term."
US fiscal health worse than Europe: China cbank adviser – The U.S. dollar will be a safe investment for the next six to 12 months because global markets are focused on the euro zone’s troubles but the U.S.’s fiscal health is worse than Europe’s, an adviser to the Chinese central bank said on Wednesday. Li Daokui, an academic member of the central bank’s monetary policy committee, said that U.S. bond prices and the dollar would fall when the European economic situation stabilised. "For now, market attention is still on Europe and for the coming 6-12 months, it will not shift to the United States," Li said, when asked about U.S. President Barack Obama’s plan to extend tax cuts for all Americans.
Deal reached to avoid cut in doctors’ Medicare pay — When Democrats passed President Barack Obama’s health care overhaul, they used Medicare cuts to pay much of the cost of providing insurance to millions of uninsured. Now, lawmakers scrambling to stave off a scheduled 25 percent cut in doctors’ Medicare pay on Jan. 1 plan to reverse the flow. They’re tapping financing for the health care overhaul to keep Medicare from breaking down. The $19 billion will help pay doctors at current rates for another year. It will come mostly from tightening the rules on tax credits in the health care law that make premiums more affordable, according to an agreement reached Tuesday by Senate leaders of both parties.
US States Face `Cliff’ as Federal Stimulus Ending Opens $38 Billion Hole – U.S. states are preparing for more budget cuts next year as tax revenue isn’t likely to rebound enough to replace almost $38 billion in aid that will be gone as federal economic stimulus ends, according to a report. At least 31 states and Puerto Rico are forecasting deficits of $82.1 billion in the next fiscal year even as tax receipts are picking up, the National Conference of State Legislatures said today. Under a temporary mandate since 2009, the U.S. has provided economic aid to states, helping to pay government workers and shoulder the cost of the Medicaid program to provide health care for the poor. That aid will be gone, the group said. “Although a recovering national economy is helping to stabilize state revenues in fiscal year 2011, serious budget challenges await state lawmakers in the new year,” the group said today in the report. “This largely stems from fewer federal stimulus funds available for next year’s budgets.”
States Face Budget Shortfalls of $26.7 Billion – States are reporting billions in midyear budget shortfalls, and the crunch is likely to continue for at least several more years, a new report says. Fifteen states are facing combined budget gaps midway through their 2011 fiscal year totaling $26.7 billion, according to a National Conference of State Legislatures report to be released Wednesday. The other 35 states say they are on target with their budgets. At this time last year, 36 states reported a combined $28.2 billion shortfall.State government spending has begun to rise after falling sharply during the recession, in part because tax revenues are slowly on the mend as the economy recovers. Even so, revenues remain far below pre-recession levels, and many states face pressure to cut programs and raise taxes to cover yawning gaps in their budgets
Governor To Call Emergency Session – Governor Christine Gregoire says she will call state lawmakers into an emergency session later this month to deal with a billion-dollar hole in the state budget. Gregoire says she had not set a date but said it is likely it will get under way before Christmas. The governor made the announcement today after meeting for an hour with the Democratic and Republican leaders of the Legislature. She will meet with the leaders again Thursday then decide on a date for the start of the special session. Washington State is facing an estimated $1.1 billion deficit in its current budget and $5.7 billion in the 2011-13 biennium.
Greenlight’s Einhorn Says Global Sovereign Debt Crisis Looms – David Einhorn, president of hedge- fund operator Greenlight Capital Inc., said the global economy will face a sovereign debt crisis after governments around the world increased spending to deal with the fallout from the financial crisis. “We managed to transfer a lot of the problems from the private sector to the public sector,” Einhorn said in an interview with the Charlie Rose television show. “It’s created a very, very large budget deficit. And it’s created a monetary policy that’s extremely easy. It is eventually going to come to a tough spot.” The Federal Reserve’s decision to buy an additional $600 billion in Treasuries to lower borrowing costs and stimulate the economy will probably result in rising prices of basic goods for consumers and businesses, curtailing economic growth, according to Einhorn. “It’ll be counterproductive,” Einhorn said. “The goal of quantitative easing right now is to raise the inflation rate. If you do raise the price of clothing, it effectively lowers everybody’s standard of living and gives them less money to buy other things.”
Florida’s 2011-12 Budget Outlook Getting Gloomier -A legislative economist told the Senate Budget Committee on Tuesday that she expects a predicted $2.5 billion budget gap to widen because the state’s economic recovery has been slower than forecast. The panel’s chairman, meanwhile, hinted that Gov.-elect Rick Scott’s campaign promises for deep spending and tax cuts may run into trouble in the Legislature. State economists in September estimated the $2.5 billion difference between anticipated revenues and expenses ranging from high priority to critical for the 2011-12 budget year that begins July 1. "It sounds like it’s all bad, but the truth of the matter is we are starting to show improvement" in the economy,. "It’s just not as strong as we’d hoped it would be at this point."
Middle class falls short on retirement funds – The average American has saved less than 7 percent of his desired retirement nest egg and will likely have to keep working in retirement to supplement his income. Middle-class Americans think they need $300,000 to fund their retirement, but on average have only saved $20,000, according to a survey released on Wednesday by Wells Fargo & Co."Middle class" is defined as those aged 30 to 69 with $40,000 to $100,000 in household income or $25,000 to $100,000 in investable assets "Too many Americans have their heads in the sand in the face of obvious savings deficits," said Laurie Nordquist, director of Wells Fargo Institutional Retirement Trust. "Barring a miracle, a winning lottery ticket or a big inheritance, they’re going to be forced to dramatically cut back their lifestyles after retirement."
NYS Public Pension Costs Will Double In 5 Years: Report (Reuters) – New York State taxpayer-funded contributions to public pensions will "explode" in the next five years, forcing the state to divert resources from other services to meet the obligation, the Empire Center for New York State Policy said in a report on Tuesday. Taxpayer contributions to the New York State and Local Retirement Systems could double over the next five years, adding nearly $4 billion to annual taxpayer costs, according to the report by the nonpartisan think tank. Taxpayer contributions to the New York State Teachers’ Retirement System, which totaled $900 million this year, could reach $4.5 billion by 2016, the report said. "The run-up in pension costs threatens to divert scarce resources from essential public services during a time of extreme fiscal and economic stress for every level of government," the report said. "This is not just a matter of financial necessity but of basic fairness to current and future taxpayers — the vast majority of whom will never receive anything approaching the costly, guaranteed benefits available to public employees," it said.
New York State Pension $71 Billion Underfunded, Empire Center Report Says – New York state’s $132.8 billion pension plan is underfunded by $71 billion and annual taxpayer payments to keep it sound may more than double to almost $4 billion during the next five years, a report says. Increased payments are needed by the third-largest U.S. public pension to recover from a 26 percent decline in assets in the year ended March 31, 2009, and to cover benefits lawmakers increased over the past decade, the Empire Center for New York State Policy said. “The traditional pension system exposes taxpayers to intolerable levels of financial risk and volatility,” said the Albany-based center, a project of the Manhattan Institute, which opposes taxes and promotes outsourcing to private companies and reduced spending.
Social Security Fund Can Weather Tax Break – A plan that is projected to take $120 billion out of the Social Security trust fund would seemingly be one to draw the ire of deficit hawks.. President Barack Obama and congressional Republicans have agreed to temporarily reduce the payroll taxes that fund Social Security by two percentage points, to 4.2% from 6.2%, on the employee side. Other proposals would go even further. Two bipartisan plans to cut the deficit, the president’s National Commission on Fiscal Responsibility and Reform and the Bipartisan Policy Center’s Debt Reduction Task Force, advocated a one-year suspension of payroll taxes paid by both employers and employees, or 12.4% of covered wages. Social Security trustees had projected a deficit for 2011 even before the proposal to cut the payroll tax, though they had anticipated a surplus between 2012 and 2014. At the end of 2009, the Social Security trust fund had $2.34 trillion in assets, so the loss of $120 billion won’t immediately put the program in any kind of jeopardy.