U.S. Economic/Financial News
States Resort to Theft To Balance Budgets
Aug. 3 (EIRNS)As the disintegration of the national economy makes it impossible for states to balance their budgets, some states are resorting to taking money from anywhere they can find it, even if it's earmarked for other needs. California is the most blatant in this, as the budget signed by Gov. Arnold Schwarzenegger, last week, mandates that the state will take $1.7 billion in economic redevelopment funds meant for city and county budgets. The budget also takes millions more in gas and property tax receipts from local coffers. Representatives of the League of California Cities (CAC) called the this an "irresponsible Ponzi scheme" and argued that it was illegal. The CAC and Los Angeles County have announced that they are preparing a lawsuit to stop the seizure of funds, on the grounds that it is unconstitutional. Last April, the CAC won a lawsuit against an earlier effort by the state to seize $350 million in redevelopment funds.
If the seizures go through, municipalities in California will have even more difficulty trying to balance their budgets and meet their responsibilities.
Other states are looking at funds earmarked for specific purposes to replace lost general fund revenues. Texas has $3.7 billion in such funds that will be spent instead to balance the next two-year budget. This includes money, mostly from fines and levies, and dedicated to providing electricity discounts for low-income customers, reimbursing hospitals for providing uncompensated care, and reducing CO2 emissions, and even gasoline taxes dedicated to road building.
In New Hampshire, a state judge overruled an effort by Gov. John Lynch to use $110 million from a fund dedicated to helping physicians get malpractice insurance, to balance the budget.
2009 Tax Year Receipts Set for 18% Decline, Biggest Drop Since 1932
Aug. 3 (EIRNS)The Associated Press today released results of its new analysis of U.S. Treasury data, showing that Federal tax receipts are plunging at a year-on-year rate of 18% this fiscal year (which ends on Sept. 30), the largest rate of collapse since 1932, during the Great Depression. According to AP's survey of data available for the first three-quarters of the Federal budget year (Oct. 1-June 30), through June this year:
* Individual Internal Revenue Service receipts are down 22% from same time a year ago.
* Corporate IRS receipts are down 57%.
* Social Security tax receipts might post a decline for FY2009, "for only the second time since 1930."
* "Medicare taxes are on pace to drop for only the third time ever."
The AP study went back to 1913, the year that the Federal income tax began, in conjunction with the creation of the Federal Reserve System.
Are Tent Cities Obama's Answer to the Housing Crisis?
Aug. 2 (EIRNS)They may not be made of tarpaper any more, but in cities, the modern equivalent of Hoovervilles are springing up everywhere, as homeless and unemployed people are ending up in tent cities.
* A tent city with about 40 residents has set up on state-owned land under a bridge in East Providence, R.I. The camp had originally been set up across the river in Providence about four months ago, then moved because it was threatened by a construction project. John Freitas, the camp's leader, blasted Gov. Donald Carcieri (R), who has said he won't allocate any state land for the homeless, despite the obvious fact that there isn't enough shelter space for them.
* A tent city in Champaign, Ill., lost a zoning appeal and will have to seek an alternate location. About 15 people were living behind a local Catholic Worker House.
* In Washington State, the state supreme court ruled that the city of Woodinville should have given a hearing to those who would erect a tent city for the homeless at a local church. A homeless advocacy group had planned a tent encampment for 60 to 100 people, and the city responded by imposing a moratorium on temporary use permits in the area.
* In New York City, dozens of activists built a tent city on property owned by JPMorgan Chase in East Harlem, to protest the lack of housing for the poor.
* In Fresno, Calif., local officials say they have resettled most of the 150 residents of a tent city that they closed on July 30. Now they are moving to close two more with Federal stimulus money.
* In Las Vegas, police are breaking up a tent city that housed 300 people at one point, but is now down to about 50.
Regulators Refuse To Bow Before Obama 'Bank Czar'
Aug. 4 (EIRNS)Treasury Secretary Timothy Geithner on July 31 assembled a meeting of financial regulators, whom he cursed at for not toeing the Administration's line on the "reform" of the financial regulatory matrix. According to today's Wall Street Journal, those present included Sheila Bair, head of the FDIC (and a vocal critic of the design of the reform), Fed chairman Ben Bernanke, and Mary Shapiro, head of the Securities and Exchange Commission. At issue is the consolidation of regulatory oversight into a single National Bank Supervisor, who would be housed at the Federal Reserve. Obama's plan, created by Larry Summers and the National Economic Committee, would also consolidate the Offices of Thrift Supervision (OTS) and the Comptroller of the Currency (OCC), supervisor of federally chartered banks, into the new NBS office.
This provided the subtext for a hearing of the Senate Banking and Commerce Committee, where the OCC's John Dugan and the OTS's John Bowman testified, along with Bair and Fed Board member Dan Tarullo. No one backed down to Treasury's demand, giving another lump to the already bruised ego of President Obama. Bair and others repeatedly brought up the fact, that a consolidated regulator, "as in Europe" is no guarantee against a banking crash.