Archive for the ‘spending’ Category

Meltdown fallout: some parents rethink toy-buying

November 29, 2008

In a season that inspires earnest letters about toys, one notable batch is being sent not by kids to Santa’s workshop but by parents to the executive suites of real-world toy makers.

The message: Please, in these days of economic angst, cut back on marketing your products directly to our children.

By DAVID CRARY, AP National Writer

The letter-writing initiative was launched by the Boston-based Campaign for a Commercial-Free Childhood, which says roughly 1,400 of its members and supporters have contacted 24 leading toy companies and retailers to express concern about ads aimed at kids.

Jessica Luu, left, looks for deals as her friend's baby, Kaylee ... 
Jessica Luu, left, looks for deals as her friend’s baby, Kaylee Oliver, inspects a toy in the shopping cart, as shoppers at Toys ‘R’ Us at The Forum at Olympia Parkway in Selma, Texas look for the best savings on Black Friday, Nov. 28, 2008.(AP Photo/San Antonio Express-News, Bob Owen)

“Unfortunately, I will not be able to purchase many of the toys that my sons have asked for; we simply don’t have the money,” wrote Todd Helmkamp of Hudson, Ind. “By bombarding them with advertisements … you are placing parents like me in the unenviable position of having to tell our children that we can’t afford the toys you promote.”

The Toy Industry Association has responded with a firm defense of current marketing practices, asserting that children “are a vital part of the gift selection process.”

“If children are not aware of what is new and available, how will they be able to tell their families what their preferences are?” an industry statement said. “While there is certainly greater economic disturbance going on now, families have always faced different levels of economic well-being and have managed to tailor their spending to their means.”

Read the rest:
http://news.yahoo.com/s/ap/20081129/ap_
on_bi_ge/toy_worries;_ylt=AoWMb0EDdgDf8
Q0n2j_5kxGs0NUE

Massive Public Spending Hoped To End Global Recession

November 29, 2008

In a bid to jump-start the beleaguered global economy, countries around the world are introducing massive public spending programs aimed at creating millions of jobs, boosting the use of green energy and modernizing infrastructure in a way that could transform urban and rural landscapes.

The viability of some of the plans remains unclear. But observers say the number of countries moving in tandem underscores the perceived severity of the coming global recession and the view that governments must at least temporarily pick up the slack as the hard-hit private sector sheds jobs and cuts spending. 

 

By Anthony Faiola
Washington Post Staff Writer
Saturday, November 29, 2008; Page D01

It is time “to invest massively in infrastructure, in research, in innovation, in education, in training people, because it is now or never,” French President Nicolas Sarkozy said in a recent public address.

World leaders are pursuing a variety of strategies to tame the economic crisis, including moves to unclog credit markets, strengthen financial institutions and ease monetary policy. But fiscal stimulus packages, in particular, have emerged as a favorite tool of policymakers. Some countries’ plans are particularly bold: China is accelerating projects to build more nuclear power plants and a vast natural gas pipeline; Italy may erect the first bridge connecting Sicily to mainland Europe.

Read the rest:
http://www.washingtonpost.com/w
p-dyn/content/article/2008/11/28
/AR2008112802660.html?hpid=topnews

Fighting the Financial Crisis, One Challenge at a Time

November 18, 2008

WE are going through a financial crisis more severe and unpredictable than any in our lifetimes. We have seen the failures, or the equivalent of failures, of Bear Stearns, IndyMac, Lehman Brothers, Washington Mutual, Wachovia, Fannie Mae, Freddie Mac and the American International Group. Each of these failures would be tremendously consequential in its own right. But we faced them in succession, as our financial system seized up and severely damaged the economy.

By Henry M. Paulson, Jr.
Treasury Secretary
Op-Ed, The New York Times

Treasury Secretary Henry Paulson addresses a gathering of corporate ...
Treasury Secretary Henry Paulson addresses a gathering of corporate CEOs, Monday, Nov. 17, 2008. (AP Photo/J. Scott Applewhite)

By September, the government faced a systemwide crisis. After months of making the most of the authority we already had, we asked Congress for a comprehensive rescue package so we could stabilize our financial system and minimize further damage to our economy.

By the time the legislation had passed on Oct. 3, the global market crisis was so broad and so severe that we needed to move quickly and take powerful steps to stabilize our financial system and to get credit flowing again. Our initial intent was to strengthen the banking system by purchasing illiquid mortgages and mortgage-related securities. But the severity and magnitude of the situation had worsened to such an extent that an asset purchase program would not be effective enough, quickly enough. Therefore, exercising the authority granted by Congress in this legislation, we quickly deployed a $250 billion capital injection program, fully anticipating we would follow that with a program for buying troubled assets.

There is no playbook for responding to turmoil we have never faced. We adjusted our strategy to reflect the facts of a severe market crisis, always keeping focused on our goal: to stabilize a financial system that is integral to the everyday lives of all Americans. By mid-October, our actions, in combination with the Federal Deposit Insurance Corporation’s guarantee of certain debt issued by financial institutions, helped us to accomplish the first major priority, which was to immediately stabilize the financial system.

Read the rest:
http://www.nytimes.com/2008/11/18/opinion
/18paulson.html?_r=1

Global Financial Crisis, Intertwined Economies, Too Much Debt: Now What?

November 16, 2008

Barack Obama surely has one of the toughest leadership challenges any incoming president has ever faced. We’re in the midst of a terrible economic meltdown, the current administration has lost all credibility, the House of Representatives is full of knuckle-dragging Neanderthals, and the public is being whipsawed between free-market fundamentalists preaching the virtues of just letting the market rip and left-wingers who think we can punish Wall Street while protecting Main Street. It feels like a mess with no one in charge.
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Now is when we need a president who has the skill, the vision and the courage to cut through this cacophony, pull us together as one nation and inspire and enable us to do the one thing we can and must do right now:

Go shopping.

Obama can’t wait until Jan. 20 to weigh in on this. If we don’t stimulate the global economy fast enough and big enough, some of Obama’s inaugural balls might be held in soup kitchens.

When President Bush told us to go shopping after 9/11, he was right. We needed to stimulate the economy then. The problem was that the Bush economic team never turned off the green light and told people to “go saving.” So with easy credit seemingly endlessly available, American consumers saved virtually nothing and bid up housing prices to record levels. Retailers expanded stores and China expanded factories to accommodate all the shopping. It was quite a party. We had banks in America giving mortgages to people whose only qualification “was that they could fog up a knife,” one mortgage broker told me.

By Thomas Friedman
The New York Times

But when something seems too good to be true, it usually is. When these reckless mortgages eventually blew up, it led to a credit crisis. Banks stopped lending. That soon morphed into an equity crisis, as worried investors liquidated stock portfolios. The equity crisis made people feel poor and metastasized into a consumption crisis, which is why purchases of cars, appliances, electronics, homes and clothing have just fallen off a cliff. This, in turn, has sparked more company defaults, exacerbated the credit crisis and metastasized into an unemployment crisis, as companies rush to shed workers.

Governments are having a problem arresting this deflationary downward spiral — maybe because this financial crisis combines four chemicals we have never seen combined to this degree before, and we don’t fully grasp how damaging their interactions have been, and may still be….

Read the rest:
http://www.nytimes.com/2008/11/16/
opinion/16friedman.html?scp=1&sq=jaws&st=nyt


“You’re gonna need a bigger boat.”

Global Financial Crisis May Fuel Instability and Weaken U.S. Defenses

November 15, 2008

Intelligence officials are warning that the deepening global financial crisis could weaken fragile governments in the world’s most dangerous areas and undermine the ability of the United States and its allies to respond to a new wave of security threats. 

By Joby Warrick
Washington Post Staff Writer

U.S. government officials and private analysts say the economic turmoil has heightened the short-term risk of a terrorist attack, as radical groups probe for weakening border protections and new gaps in defenses. A protracted financial crisis could threaten the survival of friendly regimes from Pakistan to the Middle East while forcing Western nations to cut spending on defense, intelligence and foreign aid, the sources said.

The crisis could also accelerate the shift to a more Asia-centric globe, as rising powers such as China gain more leverage over international financial institutions and greater influence in world capitals.

Some of the more troubling and immediate scenarios analysts are weighing involve nuclear-armed Pakistan, which already was being battered by inflation and unemployment before the global financial tsunami hit. Since September, Pakistan has seen its national currency devalued and its hard-currency reserves nearly wiped out.

Read the rest:
http://www.washingtonpost.com/w
p-dyn/content/article/2008/11/1
4/AR2008111403864.html?hpid=topnews

Even if Obama’s Perfect, Economy May Continue to Drag

November 9, 2008

This is one hell of a way to win.

Barack Obama owes his victory in large measure to the prospect of the longest and deepest economic downturn in a quarter-century and perhaps since the Great Depression. If he performs well, he could become a great president. If he flubs it, he could get the same reception as Jimmy Carter. In the crassest political terms, it was good luck to have the financial crisis hit so close to the election. But Obama’s lucky streak will end in a hurry if he can’t find a way out of this mess. He will also have to manage expectations: Even if he does everything perfectly, we probably won’t turn the corner for 18 months, and the downturn could last far longer than that.

By Joseph Stiglitz
The Washington Post
Sunday, November 9, 2008; Page B03

The first task facing President-elect Obama, after eight years of misguided economic policies, will be to begin the recovery — or at least forestall a further decline. It won’t be easy. Some 1.2 million jobs have already been shed this year, and some three-quarters of a million Americans are about to exhaust their limited unemployment-insurance benefits. By October, only 32 percent of unemployed Americans were receiving unemployment checks. To make matters worse, when Americans lose their jobs, they typically lose their health insurance, too. Meanwhile, 3.8 million homes are under foreclosure, and states are facing massive revenue shortfalls; without assistance, they will have to cut spending, plunging the economy deeper into recession.

Obama keeps people guessing on missile shield amid Russian threats
AFP/File/Stan Honda

Read the rest:
http://www.washingtonpost.com/w
p-dyn/content/article/2008/11/0
6/AR2008110602997.html?hpid=
opinionsbox1

As a road to a better economy, an old idea gains ground

November 9, 2008

Building roads, bridges, power plants and other infrastructure builds jobs, pours concrete and makes the economy grow….China is considering a massive infratructure imporvement project right now….

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Often dismissed in favor of the quick-jolt stimulus, spending on bridges, streets and sewers is on the table again. Obama backs the public works idea, an echo of the FDR era.
By Richard Simon and Jim Puzzanghera
The Los Angeles Times
November 9, 2008
Reporting from Washington — As recently as a few months ago, the idea of trying to bolster the troubled economy by pumping money into public works projects such as roads and bridges was dismissed as too slow — not the quick pick-me-up that was needed.

But today, economists and policymakers are beginning to change their minds.

Most experts still think infrastructure spending is a slower way to put money in consumers’ hands than simply mailing out government checks the way President Bush did over the summer. What’s changed is that the economic crisis now looks to be so deep and likely to last so long that a stimulus plan that pumps out benefits for months and years seems to fit the situation — with the added bonus of providing long-term benefits to the country.

Skyline Drive and the Shenandoah National Park were built with federal dollars during the Great Depression

“Now we’re in a situation where it looks like we’re going to be in a prolonged downturn, so speed is still relevant, but it’s not the be-all end-all,” said Douglas W. Elmendorf, a former economist for the Federal Reserve Board, the Treasury Department and the Clinton White House.

Elmendorf, now a senior fellow at the Brookings Institution, co-wrote a paper in January arguing against infrastructure spending because it was not fast-acting enough. “The concern at the time was that it would be a very sharp, short drop in economic activity, and we wanted to try to prevent that,” he said recently.

Since then, the situation has changed, Elmendorf said — becoming more dire.


Above: Germany built the “Autobahn” during the depression and before the Hitler era using federal government money to create jobs and infrastructure

Infrastructure spending, which is supported by President-elect Barack Obama, is expected to be a centerpiece of a $60-billion to $100-billion stimulus package Democrats may bring before Congress in a postelection session later this month.

Lawmakers are looking at a wide range of projects, such as building new roads and repairing old ones, improving airports, and constructing schools and sewage treatment plants. They also are considering making funding available to help transit agencies buy buses and rail cars.

The focus will be on job-producing projects that can get underway quickly.

In a new twist, Obama and congressional leaders have talked about ensuring that a good chunk of the infrastructure spending goes to “green jobs,” providing funds for energy-efficiency projects, for example, promoting growth while reducing oil imports and greenhouse gas emissions.

Rep. James L. Oberstar (D-Minn.), chairman of the House Transportation and Infrastructure Committee, traces the history of infrastructure spending as economic stimulus to the massive public works programs launched by President Franklin D. Roosevelt in response to the Depression.

“From the Works Progress Administration of the Great Depression to the Accelerated Public Works Act of 1962 and the Local Public Works Capital Development and Investment Act of 1976, investment in public infrastructure has created and sustained jobs in difficult economic times,” Oberstar said recently, “and it can do so again today.”

Related:
China considering 730-bln-dollar transport investment

Read the rest:
http://www.latimes.com/news/nationworld/nation
/la-na-infrastructure9-2008nov09,0,7223067.story

Obama Should Make Haste Slowly

November 7, 2008

Festina lente. Make haste slowly. That was the motto of the revolutionary-minded young Augustus who soon grasped that he needed to build upon Rome’s past, rather than dismantle it.

Amid the celebration of the historic victory of Barack Obama, the country should now quit the bickering, appreciate a fair and peaceful transference of power, and unite behind its new commander in chief.

By Victor David Hanson
The Washington Times

But in turn our new President Obama would do well to heed that ancient Roman wisdom, appreciating that the real world after Nov. 4 is not exactly the same as its frequent caricature during the hard-fought campaign.

John McCain promised to cut taxes on all. Mr. Obama promised to raise them on some. But neither plan fully appreciated that we are now buried deep under trillions of dollars of debt – and need both more revenue and less expenditure.

An Obama administration, like it or not, must cede to the laws of physics: America will have to pay down debt while not raising taxes too high at a time of recession. That balancing act will make it hard to borrow additional billions for more promised federal spending.

“Hope and change” may have implied an easy transition to our clean, cool solar and wind future. But for a while longer, America’s envisioned new electric cars will still require old-fashioned natural gas, coal and nuclear power to generate electricity to charge them.

Economic slowdown, conservation and public promises to drill more oil and natural gas have already helped to collapse world oil prices and saved us billions. And before we talk of ending the coal industry, we should thank our lucky stars that America has the world’s most plentiful supply of coal to transition us to alternate sources of energy.

We need more regulation of both Wall Street and Fannie Mae and Freddie Mac, which all went feral and turned on us during both the Clinton and Bush administrations. Yet European leaders are faced with far worse financial meltdowns than we are – and their problems have nothing to do with American excess or George Bush.

The dollar is climbing against the Euro because market analysts realize that for all our sins, American financial institutions are still far less exposed than those elsewhere in the world, and our free-market system far more flexible to recover from excess and grow the economy.

Some have called for the Wall Street bailout to be just the first, rather than the last, large federal takeover of American finance. But again, we should remember that despite a looming recession, Americans are still collectively the most affluent and free citizens in the world – precisely because our unique free-market system creates enormous wealth and draws in more capital and talent than elsewhere on promises of commensurate individual rewards. President Obama need not give radical chemotherapy to an ill economy that does not have a fatal cancer.

The shooting war in Iraq is ending. President Obama can continue to withdraw American troops slowly on the basis of a growing victory, rather than rashly and harnessed to an artificial timetable. In time, a Democratic administration could assert that a constitutional government in Iraq and an unprecedented defeat of al Qaeda in the heart of the ancient caliphate enhanced U.S. security at home and abroad – and are achievements to be claimed rather than simply reckless acts to be abruptly abandoned.

For all the campaign charges of unfairness, America currently has the most progressive tax system in the world, in which the top 5 percent of wage earners pay over 60 percent of all federal income taxes. President Obama will raise rates, as promised. Yet he might consider that Americans in the past came to accept the Clinton income tax hike to 40 percent on the top bracket – but may well balk at adding unprecedented increases in payroll taxes on top of all that. That combination could mean a sizable tax raise on many of those self-employed who already pay nearly half their income in various taxes – and gut rather than just shear the sheep.

Read the rest:
http://www.washingtontimes.com/news/2008/nov/
07/make-haste-slowly/

Pentagon Expects Cuts in Military Spending

November 3, 2008

After years of unfettered growth in military budgets, Defense Department planners, top commanders and weapons manufacturers now say they are almost certain that the financial meltdown will have a serious impact on future Pentagon spending.

By Thom Shanker and Christopher Drew
The New York Times
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Across the military services, deep apprehension has led to closed-door meetings and detailed calculations in anticipation of potential cuts. Civilian and military budget planners concede that they are already analyzing worst-case contingency spending plans that would freeze or slash their overall budgets.

The obvious targets for savings would be expensive new arms programs, which have racked up cost overruns of at least $300 billion for the top 75 weapons systems, according to the Government Accountability Office. Congressional budget experts say likely targets for reductions are the Army’s plans for fielding advanced combat systems, the Air Force’s Joint Strike Fighter, the Navy’s new destroyer and the ground-based missile defense system.

Even before the crisis on Wall Street, senior Pentagon officials were anticipating little appetite for growth in military spending after seven years of war. But the question of how to pay for national security now looms as a significant challenge for the next president, at a time when the Pentagon’s annual base budget for standard operations has reached more than $500 billion, the highest level since World War II when adjusted for inflation.

US Secretary of Defense Robert Gates said that Afghanistan's ...
Above: U.S. Secretary of Defense Gates. AFP/Pool/File/Haraz N. Ghanbari

On top of that figure, supplemental spending for the wars in Iraq and Afghanistan has topped $100 billion each year, frustrating Republicans as well as Democrats in Congress. In all, the Defense Department now accounts for half of the government’s total discretionary spending, and Pentagon and military officials fear it could be the choice for major cuts to pay the rest of the government’s bills.

Read the rest:
http://www.nytimes.com/2008/11/03/washington/
03military.html?_r=1&hp&oref=slogin

Entitlement spending set to soar to mind-boggling heights

November 3, 2008

The federal deficit is expected to more than double to $1 trillion next year, but budget experts concerned about the fiscal impact of Social Security, Medicare and Medicaid think 2009 will be remembered as the good old days.

By David Dickson
The Washington Times

Now that the first of the nation’s 76 million baby boomers have reached age 62 and begun to collect their Social Security checks, the demographic time bomb no longer seems such a distant threat. Indeed, baby boomers will begin filing Medicare claims in 2011, just as the next president begins his campaign for a second term.

Judged by the proposals of Sen. John McCain, Arizona Republican, and Sen. Barack Obama, Illinois Democrat, to address the potentially catastrophic fiscal explosion, neither presidential candidate seems prepared to deal with the long-term fiscal tsunami that has been gathering force for years.

“If they implemented their policies as stated, they would make the deficit and the national debt problems worse,” said David Walker, the former comptroller general who headed the Government Accountability Office (GAO). “My hope is that the winning candidate has an epiphany,” he told The Washington Times.

“Beyond the current crisis, the biggest economic question facing the candidates is the threat to the long-term fiscal health of the country caused by changing demographics and soaring health care costs,” said Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget. “What is striking in the presidential campaign is the notable absence of a discussion about how to address these long-term challenges.”

Because the candidates are focusing on the current economic crisis, “they’re not talking about the long-term entitlement problems,” said Diane Lim Rogers, chief economist of the Concord Coalition, a nonpartisan organization concerned about the challenges facing America’s unsustainable entitlement programs. “They have not got very specific. They rarely bring up Medicare and Social Security in their speeches today except to criticize the other’s proposals.”

Addison Wiggin, executive producer of the debt documentary “I.O.U.S.A.” and co-author of a prescient 2006 book, “Empire of Debt: The Rise of an Epic Financial Crisis,” said he is “greatly disappointed by the fact that the candidates won’t discuss the entitlement crisis before the election. They won’t talk about it because they can’t get votes that way. They’re getting a free pass.”

Long-term budget challenges

The Congressional Budget Office’s latest annual report examining “The Long-Term Budget Outlook” details the problem. The CBO reported that federal spending on the three largest entitlement programs (Social Security, Medicare and Medicaid) was on track to increase from 8.4 percent of gross domestic product in 2007 to 18.1 percent in 2050 and 25 percent or more in 2082.

Although Social Security today is significantly larger….

Read the rest:
http://www.washingtontimes.com/news/2008/nov/03/into-the-wild-blue-yonder/