A Tale Of Two Christmases – The government propaganda machine has been particularly busy as Christmas approaches. Retails sales were said to be up 0.8% in November, which yields a year-over-year increase of 7.7%. These sales are not inflation-adjusted, so they’re up "only" 6.9% excluding gasoline sales. (Average national gas prices have gone up about 10 cents per gallon over the last month, and now stand at $2.984.) And if we "deflate" retail sales using the price producer index (PPI) instead of the consumer price index (CPI), sales are actually falling. The official "good news" has led some commentators to debunk the "myth" of deleveraging, whereby it is now said that American "consumers" are actually re-leveraging, not shedding debt. If you really want to understand the debt issues, read my posts The Worst Is Yet To Come In Housing and Descending The Household Debt Mountain. Even if spending is not rising at nearly the rate the official propaganda suggests, and may actually be falling, the natural question which arises is who is doing all this spending? Both anecdotal evidence and polling data suggest that the well-off are doing most of it. Consider Economic recovery leaving some behind this Christmas by a staff reporter at the Washington Post. I hope you have a strong stomach, or lacking that, a handy place nearby where you can throw up.
"The Economy" — America’s Great Lie
– The greatest tragedy to emerge from the Great Recession and its aftermath is the accelerating destruction of America’s Middle Class and the swelling ranks of the poor. This tendency was well underway in the decades leading up to 2008, but the recession cemented the deal. It’s A Great Time To Be Rich
, says Business Week
, but there’s never been a worse time to be anything else. Those in the media and the government always refer to "The Economy" as a monolithic entity in which we all participate. That’s the Great Lie, for there are two economies in the United States, one where the wealthy or well-off live and another where everyone else struggles to survive. I have called this America’s New Gilded Age
. 77% of those living in the "Main Street" economy live paycheck-to-paycheck
, but you would never know it listening to glowing reports about November’s retail sales numbers
. As I demonstrated in A Tale Of Two Christmases
, it is spending by the rich that is driving those numbers.
Emergency Unemployment Benefits Reauthorized – Thousands of Washington’s jobless workers may continue to receive up to 99 weeks of benefits, now that Congress and the president have reauthorized a federal unemployment benefits program that expired last month. “This is welcome news for unemployed workers who are having a hard time finding a job,” said Joel Sacks, Deputy Commissioner for the Employment Security Department. “We need to keep a safety net in place until the economy gathers more steam.”For the past year, eligible jobless workers could receive up to 99 weeks of unemployment benefits, collected in this order: up to 26 weeks of regular benefits, up to 53 weeks of emergency unemployment compensation (EUC) and up to 20 weeks of extended benefits. Today’s action extends the EUC program, but does not expand the total weeks available. Therefore, people who have already collected all of their EUC benefits are not eligible for these additional benefits. Depending on where individuals are in their claims cycle, they will fall primarily into two categories – those who are eligible for more benefits and those who are not.
The crisis is already back
– Eurozone bond spreads have shot up since the European Council on Friday, due to Moody’s downgrade, and disenchantment with the eurozone’s political leadership; Spanish and Portuguese spreads are up by 50 basis points, Irish spreads by 70 basis point; the euro tanked against the dollar; another factor has been the IMF’s assessment of Ireland, in which it expresses doubts about the country’s solvency; German banks have the greatest exposure, Belgium has the greatest exposure relative to its own GDP; the ECB raises concern about Dublin’s bailout legislation, fearing about status of its collateral; Pimco says the delay of crisis resolution until 2013 ensures that the crisis will continue; Phillipe Mabille says the periphery will not be able to cope with the high interest rates; Estonia opposes a single bond; Wolfgang Munchau argues that the maxim of German policy is not the preservation of the eurozone, but limited liability. [more]
Christie Says ‘Day of Reckoning’ Has Arrived for State Budgets
— New Jersey Governor Chris Christie said U.S. states face a “day of reckoning” as they contend with looming budget deficits in the wake of the longest recession since the 1930s. Christie, who cut $1.3 billion in aid to schools and municipalities this year to close a $10.7 billion deficit, said states’ pension and debt costs have grown to be “unsustainable.” Benefits, education and health care will be reduced in many states, he said in an interview aired last night on CBS Corp.’s “60 Minutes.” “The day of reckoning has arrived,” said Christie, 48, a first-term Republican. Areas such as education and pensions “were third rails of politics. We are now left with no alternatives.”
Inside Arizona Politics: Budget deficit posing even bigger threat to education?
– As bad as the state’s financial problems have been the past two years, the crisis is likely to come to a head in 2011. When state legislators are sworn in on Jan. 10, they will immediately start working on solutions to wipe more than $2.2 billion in red ink off the books. And, unlike in past years, the federal government won’t be opening up its checkbook to give the state money in order to stave off deep budget cuts. The first order of business will be an estimated $840 million deficit in the current fiscal year. Legislative leaders are already crafting a plan to fill that hole and lawmakers will likely vote on it by the end of January. Attention will then shift to a $1.4 billion shortfall in the upcoming budget year, which begins in July. And, despite what voters were told earlier this year when they headed to the polls in overwhelming support of a temporary sales tax increase, there are almost certain to be massive cuts to education.
For California schools, next year stands to be worse
— School districts already have crammed more students into classrooms, shortened the school calendar and stopped buying new textbooks. As bleak as things are for California schools, however, next year stands to be worse. K-12 schools and community colleges could receive at least $2.2 billion less because of lower state tax rates in 2011, state budget analysts say. To make matters worse, many districts will have less federal aid to rely upon. The reduction seems to be a foregone conclusion at the Capitol because the state’s projected 18-month budget shortfall – as great as $29 billion – would otherwise be higher. So districts are bracing for another round of teacher furloughs, school closures and the elimination of programs outside the core teaching mission.
California’s teaching force shrinks, as K-12 population set to grow The formulas are both as simple at second-grade arithmetic and as advanced as a college economics course. Just as California’s K-12 population is beginning to nudge up, the state is poised to lose a wave of teachers to baby-boomer retirements, layoffs and burnout. Meanwhile, the number of people seeking teaching credentials to fill those spots is dropping dramatically. "This is the steepest decline we’ve seen," It all feeds concern that California — whose school-age population is predicted to grow 4 percent in eight years — will soon lack an adequate pool of qualified teachers, particularly those who can teach science, math and elementary school. Although some of the teaching-force decrease is the result of declining enrollment in schools, Gaston said, "The changes we’re seeing in the classroom reflect a budget crisis that is much more severe than we’ve seen before."
Students bear brunt of state budget deficit – Parents in Colorado may want to start putting more money into their kids’ college fund. Almost all of the universities and colleges in our state are considering double digit tuition increases next year to overcome cuts in state funding. Jill Brake of the Colorado Commission on Higher Education worries that the legislature’s decision to balance the state budet on the backs of colleges and universities is already pricing out students. "Our college system really will be only for the elite because we will not be able to offer funding for financial aid and (the College Opportunity Fund) and some of those things," Brake said. Senate Majority Leader John Morse, (D) Colorado Springs says he and his fellow lawmakers must balance the budget, and with a billion dollar deficit, higher education is low hanging fruit."Everything has gotten big cuts, but higher education isn’t constitutionally or federal law protected and so therefore it is a pot of money that we have the option of cutting,"
Parker taking city pension cuts battle to Legislature
– Instability in its three pension systems is the greatest threat to Houston’s financial solvency, city officials and financial analysts say. Within three years, according to an actuarial study commissioned by the city, the pension for firefighters will require the city to contribute 45 percent of its payroll costs for that retirement plan, a burden Mayor Annise Parker says is unsustainable. The other two plans are in even worse shape. The police and municipal employee pensions are underfunded by $2.1 billion, roughly the equivalent of what the city spends annually for public safety and general operations. "The bottom line is the whole system is completely unsustainable with current benefit levels and the city’s financial position,"
Morici: Downgrade US Treasuries to Junk
(CNBC) As Washington spends and borrows, the Treasury will have to offer higher rates on new 20 and 30 year bonds, making comparable securities issued in 2010 and earlier worth less in the resale market. That interest rate risk makes U.S. Treasury securities lousy investments. For rating agencies, Washington’s monopoly on printing dollars makes difficult assigning a conventional rating between AAA and D on its bonds. Those can’t default but investors’ capital is still at grave risk.Perhaps a special grade: “F” –flee now before you get stuck—is appropriate for the junk sold by the U.S. Treasury."
State debt for jobless benefits looming
– Although the battle over extending unemployment benefits has been solved in Washington, Ohio still has no way to repay the $2.3 billion borrowed from a federal loan fund to continue the jobless benefits through the recession. Without a reprieve from Congress, that bill comes due next year, at the same time state leaders will be grappling to close a projected $8 billion shortfall in the two-year state budget that begins in July. Rising unemployment and lingering recession in many parts of the country have drained state unemployment funds across the nation. Thirty states, including Ohio, and the Virgin Islands currently are borrowing from the federal fund, owing a combined $41.7 billion as of Dec. 13, according to the U.S. Department of Labor. Four other states have paid back their loans.
California has needed the most help, more than $9 billion, while Midwestern states, including Ohio, make up four of the top eight borrowers.
Cuts in Subsidies Quadruple Gas Prices in Iran
- After midnight on Sunday, the price of subsidized gasoline jumped to 38 cents a liter from 10 cents a liter. Similar increases went into effect for compressed natural gas and diesel fuel, with subsidy reductions for other commodities expected to be phased in gradually. Security forces with riot shields took positions at gas stations in Tehran, bracing for a possible repeat of the unrest that followed the introduction of gasoline rationing in 2007, but there were no reports of violence. Policy makers have described the program as a “rationalization” or “targetization” of Iran’s vast and inefficient subsidies system, but some analysts fear it could increase living costs for millions of middle- and low-income households.
A Physicist Solves the City
– West illustrates the problem by translating human life into watts. “A human being at rest runs on 90 watts,” he says. “That’s how much power you need just to lie down. And if you’re a hunter-gatherer and you live in the Amazon, you’ll need about 250 watts. That’s how much energy it takes to run about and find food. So how much energy does our lifestyle [in America] require? Well, when you add up all our calories and then you add up the energy needed to run the computer and the air-conditioner, you get an incredibly large number, somewhere around 11,000 watts. Now you can ask yourself: What kind of animal requires 11,000 watts to live? And what you find is that we have created a lifestyle where we need more watts than a blue whale. We require more energy than the biggest animal that has ever existed. That is why our lifestyle is unsustainable. We can’t have seven billion blue whales on this planet. It’s not even clear that we can afford to have 300 million blue whales.” The historian Lewis Mumford described the rise of the megalopolis as “the last stage in the classical cycle of civilization,” which would end with “complete disruption and downfall.” In his more pessimistic moods, West seems to agree: he knows that nothing can trend upward forever.“The only thing that stops the superlinear equations is when we run out of something we need,” West says. “And so the growth slows down. If nothing else changes, the system will eventually start to collapse.
Success of Appliance Rebate Program Raises Questions about Environment, Economy
- In Thursday’s press release (“Appliance Rebate Program Exceeds All Expectations, Benefits Thousands of Marylanders”
), the Maryland Energy Administration
(MEA) applauds the success of the Energy Efficient Appliance Rebate Program. This program “encouraged residents to replace outdated, inefficient appliances in their homes with ENERGY STAR-rated equivalents,” according to the press release. The MEA administered rebates for “more than 18,500 clothes washers, 4,500 refrigerators and 6,000 central air conditioners and air sources heat pumps,” according to Thursday’s press release. Funded by the American Recovery and Reinvestment Act, the MEA estimates the program will save $19.6 million and 9,000 MWh. The program, which ended on November 12, 2010, does more than demonstrate the commitment of Marylanders to saving energy. It also raises a few important questions. What role should the federal and state government play in promoting energy efficiency and responsible environmental stewardship? Can programs to promote energy efficiency help enliven our economy?
The U.S.S. Prius – And what could save America’s energy future — at a time when a fraudulent, anti-science campaign funded largely by Big Oil and Big Coal has blocked Congress from passing any clean energy/climate bill — is the fact that the Navy and Marine Corps just didn’t get the word. God bless them: “The Few. The Proud. The Green.” Semper Fi. Spearheaded by Ray Mabus, President Obama’s secretary of the Navy and the former U.S. ambassador to Saudi Arabia, the Navy and Marines are building a strategy for “out-greening” Al Qaeda, “out-greening” the Taliban and “out-greening” the world’s petro-dictators. Their efforts are based in part on a recent study from 2007 data that found that the U.S. military loses one person, killed or wounded, for every 24 fuel convoys it runs in Afghanistan. Mabus’s argument is that if the U.S. Navy and Marines could replace those generators with renewable power and more energy efficient buildings, and run its ships on nuclear energy, biofuels and hybrid engines, and fly its jets with bio-fuels, then it could out-green the Taliban — the best way to avoid a roadside bomb is to not have vehicles on the roads — and out-green all the petro-dictators now telling the world what to do.
Seoul Unveils Levy on Banks’ Foreign Debt
- South Korea unveiled its plan for a levy on banks’ foreign-currency debt, joining its Asian neighbors in trying to stem speculative foreign capital inflow. Seoul will impose a levy on the balance of foreign-currency-denominated debt, excluding foreign-currency deposits, of Korean banks and local branches of foreign banks, possibly from the second half of next year, financial authorities said in a joint statement Sunday. The announcement came after the International Monetary Fund gave its blessing for emerging economies to adopt capital-control measures at the latest summit of the Group of 20 industrial and developing nations in early November. It also follows two plans by Seoul this year to lower the adverse effect of rapid flows of foreign capital.