Archive for the ‘Economy’ Category

Wait — what?!? It’s OK to lie if you’re M7

Thursday, June 3rd, 2010

The bizarro writings of the JS’ John Schmid bless a local group’s just makin’ it up:

At its two Milwaukee factories, Super Steel LLC employs about 250 workers. But in a document to be released Thursday by the Milwaukee 7 economic-strategy consortium, Super Steel’s headcount inaccurately balloons to 500 – which amounts to a full 10% of the 5,000 jobs that the M-7 credits itself with helping to create or preserve.

The M-7 commemorates its first five years of operations with a civic gathering at We Energies’ downtown headquarters Thursday that will include top political and business leaders from the seven counties of metro Milwaukee. Emblazoned on each invitation is the group’s own tally of its success: “5 years, 5,000 Jobs, $300 million in Payroll = 1 Milestone Meeting.”

And even if those numbers are demonstrably inflated, the group’s leaders are in no mood to apologize for their arithmetic. Regardless of how many jobs the group has actually helped create or preserve, it can make one overriding claim: For the first time, someone is systematically trying to recruit investment and jobs into a region that many of its own residents often disparage as a Rust Belt town, a second sister to Chicago, an inhospitable tax hell.

“We’re the boots on the ground,” said Tim Sheehy, president of the Metropolitan Milwaukee Association of Commerce, one of the M-7’s primary organizers. “No one else is playing that role.”

In that context, the hyperbole in the job-creation document being released in conjunction with Thursday’s event is understandable.

The story goes on to report that M7 claims that it helped Super Steel retain 350 jobs. There are 250 jobs at the firm.

Yeah. Understandable.

Improvements to the mortgage relief plan

Friday, March 26th, 2010

President Obama is going to unveil a real mortgage relief plan, about three years after he should have.

It’s got some very good elements, but it is crying out for some income limits.

Here are the major elements of the plan, according to the Washington Post:

  • Banks and other lenders would have to reduce the payments to no more than 31 percent of a borrower’s income, which would typically be the amount of unemployment insurance, for three to six months. In some cases, administration officials said, a lender could allow a borrower to skip payments altogether.
  • The government will provide financial incentives to lenders that cut the balance of a borrower’s mortgage. Banks and other lenders will be asked to reduce the principal owed on a loan if the amount is 15 percent more than their home is worth. The reduced amount would be set aside and forgiven by the lender over three years, as long as the homeowner remained current on the loan.
  • The government will double the amount it pays to lenders that help modify second mortgages, such as piggyback loans, which enabled home buyers to put little or no money down, and home equity lines of credit.
  • More incentives will be paid to those lenders that find a way to avoid foreclosing on delinquent borrowers even if they can’t qualify for mortgage relief. For example, the administration is scheduled to launch a program next month encouraging lenders to have borrowers sell their homes for less than the mortgage balance in what is known as a short sale.
  • The FHA will offer incentives to lenders that reduce the amount borrowers owe on their primary mortgages by at least 10 percent.

All of those are much-needed measures, but should be limited. There is a fundamental difference between a family of four living on in a 1,500-square-foot house and a twosome living in a 3,500-square-foot monstrosity. Even if layoffs equalize the two households incomes, the former should simply be given more consideration. The couple in the bigger house has more options — like downsizing.

This proposed measure will provide a little relief, but probably less than will be hyped. A six-month mortgage grace period, in the form of lower payments, may really benefit those who can find a job within six months, but will only delay the inevitable for those who can’t and will cost taxpayers a tidy sum even for those not ultimately helped.

It also would be nice for the government to include a “stupid choices” factor that would disqualify homeowners who can’t make their mortgage payments because they made stupid choices — fancy car debt over a savings account, for example, or a $600,000 house on a $100,000 income.

It is, alas, unlikely that the federal government, which often moves with the grace of a large bulldozer, will make those fine distinctions. And this bailout will cause resentment, too.

CBO on Obama budget

Sunday, March 7th, 2010

Those who say the deficit is nothing to worry about are probably wrong. Maybe we shouldn’t worry today about squashing it today, when we are trying to climb out of a huge recession, but we should worry today about squashing it someday.

The Congressional Budget Office just released its analysis of President Obama’s 2011 budget, and its not totally reassuring.

The deficit would be $1.5 trillion this year and $1.3 trillion next year. There is a bit of good news — if one defines that term very, very loosely — buried in there. The deficit would be 10.3 percent of gross domestic product this year, but then tumble to 8.9% next year. The 2009 deficit was 9.9% of GDP.

Here’s the really scary thing: government debt would increase from 53 percent of GDP last year to 90 percent of GDP in 2020. Interest payments would increase dramatically.

The president also piles up some BS about the costs of the wars in Iraq and Afghanistan, estimating them at $50 billion after next year. CBO instead keeps them at the current $130 billion.

The best news, though, is the president’s health care reform would reduce the deficit by $.2 trillion.

Let’s do it, for reasons related both to ethics and economics.

Federal accounting just a mess

Monday, March 1st, 2010

The federal government is spending hundreds of billions of dollars to get us out of this recession, and promises to keep strict track of where it is going and how it is spent.

It’s just all those other trillions that the feds can’t fully explain.

Government bookkeeping is so bad that the Government Accountability Office can’t determine just exactly what our national fiscal condition is.

“Certain material weaknesses in internal control over financial reporting and other limitations on the scope of our work resulted in conditions that prevented us from expressing an opinion on the fiscal year 2009 and 2008 financial statements other than the Statements of Social Insurance,” Acting Comptroller Gene L. Dodaro reported last week, adding that “Material weaknesses resulted in ineffective internal control over financial reporting (including safeguarding of assets).”

Makes you feel happy about paying those federal income taxes, doesn’t it?

Reading Dodaro’s statement makes you wonder why some of these people have jobs. The GAO, Dodaro said, can’t render an opinion on the government’s financial statements for three big reasons:

(1) serious financial management problems at the Department of Defense (DOD) that have prevented DOD’s financial statements from being auditable, (2) the federal government’s inability to adequately account for and reconcile intragovernmental activity and balances between federal agencies, and (3) the federal government’s ineffective
process for preparing the consolidated financial statements. In addition, the financial statements of the Department of Homeland Security and the National Aeronautics and Space Administration for fiscal years 2009 and 2008 were not auditable or were not subjected to audit by agency auditors.

The federal government could not determine exactly how much in “improper payments” it was making, although the amount is estimated at $98 billion, nor could the government ”reasonably assure” that appropriate action is being taken to stop them.

The government also could not identify and resolve information security control deficencies or — ready for this one? — “effectively manage its tax collection activities.”

The GAO sounds a very loud warning that both parties in Congress have thus far elected to ignore:

Looking ahead, the federal government will need to determine the most expeditious manner in which to bring closure to its financial stabilization initiatives while optimizing its investment returns. In addition to managing these actions, problems in the nation’s financial sector have exposed serious weaknesses in the current U.S. financial regulatory system, which, if not effectively addressed, may cause the system to fail to prevent similar or even worse crises in the future. The current system, which was put into place over the past 150 years, is fragmented and complex and simply has not kept pace with the major financial structures, innovations, and products that emerged during the years leading up to the recent financial crisis. Consequently, meaningful financial regulatory reform is of utmost concern.

All this is really scary stuff, brought to the country by one of the most credible sources there is. Anybody in Washington listening?

Greece, Europe and the news

Monday, February 8th, 2010

It seems more likely than ever that we will have a double-dip recession, and that the debt crisis in Greece and Europe will help drag the world economy into the second trough.

So where was the press before the debt crisis hit last week? Why are we again, playing catch-up on such a hugely important development?