U.S. Economic/Financial News
Army Corps Budget Cuts To Blame for Levee Failures
"The Army Corps of Engineers' geotechnical capabilities were cut. Their budget was squeezed; their manpower was reduced; ... their experiment station downsized. This attrition has effects." So responded Dr. Raymond Seed, University of California at Berkeley engineer, and leader of the National Science Foundation's investigation team into what caused some levees in the New Orleans vicinity to fail during Hurricane Katrina. Seed testified as one of four witnesses at the Nov. 2 Senate Committee on Homeland Security and Government Affairs hearing on "Hurricane Katrina: Why Did the Levees Fail?" In opening the hearings, Committee chair Sen. Susan Collins (R-Maine) said that levee failure, caused by "poor design," caused an increase in the flooding when Hurricane Katrina struck New Orleans Aug. 29. Collins was open to exploring the question.
However, Connecticut Sen. Joseph Lieberman, the ranking Democrat on the committee, led a furious assault against the Army Corps, saddling it with the levee failures, and after calling the situation "infuriating," asserted, "This ultimately has to lead our committee to ask some very tough questions of the Army Corps."
This assertion by Lieberman was rebutted by Dr. Seed, who stated his own assessment of why the levees failed, including, in some cases, the role the Army Corps played, but also stated that in many instances, the Corps did an excellent job, but was boxed in by slashed budgets, and the way the levee system works. For example, there were breaches/crevasses in the 17th Street and London Ave. levees, which were the focus of much of the hearing. The breaks seem to have been caused by storm water getting under the muddy soil upon which the levees are built, going to the other side, and shifting the soil, so that in one case, the levees were pushed back by 35 feet.
Dr. Seed pointed out that the Army Corps had proposed building floodgates on these canals, to cut off the storm surge. But the local levee boards as well as the local drainage boards rejected that proposal, so the Corps, "against its will," according to Seed, was forced to build linings for the levees, which did not work as well. There are actual problems that must still be seriously looked at, yet should not become a matter for public posturing.
Sen. George Voinovich (R-Ohio), a member of the bipartisan "Gang of 14" who blocked Dick Cheney's nuclear option last spring, intervened into this debate, by pointing out that, in 1999 constant dollars, the Army Corps budget had been reduced by more than half in recent years. "Don't point fingers at the Army Corps. The fault is ourselves in this Senate," he insisted.
Will Delphi Collapse Blow Out Credit Derivatives Bubble?
The Financial Times Nov. 1 warned that the collapse of U.S. auto-parts maker Delphi may blow out the credit derivatives bubble. The FT notes that credit derivatives are ostensibly backed up by real bonds, and since Delphi was a "so-called reference entity" for credit derivatives, leading to "tens of thousands of separate deals, worth tens of billions of dollars, the collapse of Delphi leaves many more contracts out there than there are real Delphi bonds." This is the first test of such a crisis. When Northwest Airlines went under last month, the seven investment banks which held most of the credit derivatives easily agreed in an auction on the markdown for the bonds underlying their credit-derivative contracts, making it possible to settle in cash. An auction for Delphi was scheduled for Nov. 4, but only a handful of the tens of thousands of derivatives holders had signed up. No one knows what will happen if they have to come up with non-existing real bonds.
Lyndon LaRouche commented that this is but one of the many likely events which could blow out the system on any given Friday. (For more on the Delphi debacle, see InDepth, this issue.)
Reid: 'A Budget Is a Moral Document'
Senate Democratic leader Harry Reid, in his opening floor speech Nov. 3, slammed the President for his irresponsible budget and reconciliation bills. Reid commented, "In essence, Mr. President, a budget is a moral document. Unfortunately, the Republican budget is an immoral document."
He denounced the current budget resolution process as an immoral attempt to give huge tax breaks to the rich, while cutting programs for the poor and middle class, including:
* Medicare and Medicaid$27 billion
* Agriculture support$3 billion
* Housing subsidies
* Food stamps
* Other health-care programs
* Child-support enforcement
* Student loans
In denouncing the Bush budget slashing, Reid cited a group of religious leaders, including Bishop Mark Hanson of the Evangelical Lutheran Church in America, which is urging the House and Senate to oppose the budget reconciliation process.
Public-Health Experts Condemn House Budget Cuts
Among other injurious provisions, the House plan, which slashes more than $11 billion from Medicaid, allows states to cut critical screening and services for children that would prevent life-long disabling medical conditions.
"These cuts are wholly unacceptable," said Dr. Georges C. Benjamin, executive director of the American Association of Public Health, in a press release Oct. 18.
Seasonal Flu Is Here, But Vaccine Is Not
State health departments have cancelled thousands of flu-shot clinics, as vaccine supply concerns have arisen in all 50 states, according to an October survey by the National Association of County and City Health Officials. Annual influenza kills (an underestimated) 36,000 people, hospitalizes over 200,000 people, and causes an over $10 billion-a-year loss in productivity in the United States, yet the nation lacks basic infrastructure and regulations for orderly and timely distribution of flu vaccine to high-priority patients first.
According to the Centers for Disease Control and Prevention, the seasonal flu has already spread sporadically in 13 states, New York City, and Puerto Rico, and can be found throughout the Texas region, where supplies ran out last week.
Many institutions in Virginia ran out of supplies at the end of October. Public-health clinics can't borrow vaccine to treat the sickest patients first (as the Centers for Disease Control advises, but does not require), because neighboring jurisdictions are in the same crisis. Family practitioners, even those who ordered this season's vaccine back in April, are turning away patients, because the vaccine still hasn't arrived. Lack of regulation leaves public health in chaos, but private companies, such as Maxim Health Systems, that supply big corporate customers and chain-retail stores, received their full orders of vaccine first.
Senate Passes Bipartisan Amtrak Amendment
The U.S. Senate passed a bipartisan amendment to fund Amtrak, the national passenger rail system, by a vote of 93-6, according to the website of Sen. Patrick Leahy (D-Vt) Nov. 3. The amendment, known as the Passenger Rail Investment and Improvement Act of 2005, will spend $1.9 billion per year for six years to ensure critical infrastructure investment and set up Federal/state grants to build rail projects.