Feeds:
Posts
Comments

Archive for the ‘finance’ Category

Doom-and-gloom scenarios

By Paul B. Farrell, MarketWatch
ARROYO GRANDE, Calif. (MarketWatch) — What is next? If the “Great Depression 2” scenario plays out, what’s after 2011? Recovery? A new bull? How can you protect your money? Or are we all helpless victims of the raging winds of fate and Wall Street’s self-serving brand of capitalism.
Let’s review several scenarios in the bright lens of Akira Kurosawa’s classic 1950 film, “Rashomon,” at once an ancient Kabuki morality play, a tense modern courtroom drama, and a revealing documentary on human psychology. In “Rashomon” we witness the murder of a Samurai warrior and a rape through the eyes of several witnesses, each swearing they saw what “really happened.”
We “see” these tragedies in a forest through the eyes of a Woodcutter, Priest, Samurai’s Wife, the accused Bandit, and the Samurai, speaking through a Medium. But as “the facts” unfold, the lies and contractions of biased minds are exposed and the truth becomes increasingly blurred. In the end, we are still wondering: What really happened?
Similarly, today we’re asking; “What really happened to America, so fast?” With Bush, Paulson, Bernanke and their Reaganomics ideology? To my 401(k), my CDs, my kid’s college fund, my retirement nest egg. To the great American dream? What happened?
Nightmare scenario No. 1: No exit, a never-ending disaster
Remember former Goldman Chairman John Whitehead? He “sees” a tragic ending: This Reagan Deputy Secretary of State and former New York Fed chairman “sees” America burning through trillions, over many years: “Nothing but large increases in the deficit … worse than the Depression.”
He worries that “tomorrow is the day Moody’s and S&P will announce a downgrade of U.S. government bonds.” Politicians and public are delusional, promising huge new programs plus tax cutting: “This is a road to disaster.’ Like Sartre’s existential tragedy, “No Exit,” he says: “I don’t see a solution.”
If this dialogue emerged in “Rashomon,” deep in the forest, I could “see” Whitehead pointing a finger at Treasury Secretary Henry Paulson, accusing him of terrible deeds.
Nightmare scenario No. 2: Washington’s unsustainable deficits
True to the “Rashomon” narrative Warren Buffett “sees” America sinking in a swamp of unsustainable debt to justify our excessive spending — government, consumer, corporate.
Remember Buffett’s famous farmer’s story: “We were taught in Economics 101 that countries could not for long sustain large, ever-growing trade deficits.” America “has been behaving like an extraordinarily rich family that possesses an immense farm. In order to consume 4% more than they produce, that’s the trade deficit, we have, day by day, been both selling pieces of the farm and increasing the mortgage on what we still own.”
Like his farmers, we borrowed $700 billion a year to live high on the hog, selling off American assets. Now foreign sovereign funds own trillions of our assets. Today Uncle Warren’s story is less a children’s fairy tale and more a “Rashomon” tragedy.
Nightmare scenario No. 3: The endless 100-year bear market
Robert Prechter’s a brilliant market forecaster and editor of the Elliott Wave Theorist newsletter. As early as 1978 he predicted the “raging bull market of the 1980s.” Many laughed. Then tech roared and he became “Guru of the Decade.”
In the “Rashomon” cast he’s credible. And ahead again: He “saw” the future in his “At the Crest of the Wave: A Forecast of the Great Bear Market.” Today’s darkening markets ride his “wave” theories: Rapidly unfolding, accelerating and intensifying economic cycles. First the dot-com crash, then the subprime housing bull, the credit meltdown, now the coming “Great Depression 2.”
In the ’90s, Prechter had another vision from deep in the forest. Again we ignored him. No more. The same wisdom that let him “see” the 1980’s bull years before it took off, may accurately predict the coming 100-year bear market well ahead of time.
Nightmare scenario No. 4: Pentagon ‘warfare defines human life’
In “Rashomon” they see all, we nothing. In courtrooms, lawyers deceive, suppress the truth. Paulson and Fed Chairman Ben Bernanke are masters of deception in the courtroom of public opinion, as descendents of former Defense Secretary Donald Rumsfeld.
One intentional leak (obviously designed as a tactic to stoke public fear and create budget support for the DOD’s war machine) surfaced in the early days of the Iraq War. Fortune analyzed a classified military report, the Pentagon’s “Weather Nightmare:” “Climate could change radically and fast. That would be the mother of all national security issues … massive droughts, turning farmland into dust bowls and forests to ashes … by 2020 there is little doubt that something drastic is happening … an old pattern could emerge; warfare defining human life.”
Today, as a “Great Depression” and a “100-year Bear Market” become more real than a “Rashomon” sequel, ask yourself: Are there too many people? Too few resources? Too many competing special interests? In America? Worldwide? Are we all too greedy to compromise? Are we then left vulnerable to Paulson’s multiple Reaganomics “weapons of financial mass destruction,” land mines surviving his exit in bailout “sleeper cells,” left to sabotage government budgets, taxpayers and the future of America?
Nightmare scenario No. 5: Too many people, too few resources
The Earth supports 6.5 billion people. The United Nations predicts there will be 9.1 billion by 2050, all competing against 400 million Americans for ever-scarcer resources. The L.A. Times says that a U.N. report “paints a near-apocalyptic vision of Earth’s future: hundreds of millions of people short of water, extreme food shortages in Africa, a landscape ravaged by floods and millions of species sentenced to extinction.”
Today’s news suggests we may already be there, for the population explosion is the mother of all bubbles, a “nuclear” bomb that will explode all other bubbles, ushering onto the “Rashomon” stage a reality far beyond a 100-year bear, on a desolate, post-apocalyptic WALL-E planet Earth.
Nightmare scenario No. 6: Star Trek’s bold new ‘end of days’
One “Star Trek: The Next Generation” episode haunts me, much like “Rashomon.” In it past and future collide. Set in the 23rd century, “Inner Light” gives us a brief end-of-days look at the star-crossed future of two civilizations, one boldly exploring new worlds, the other leaving behind but a small sad trace of its mysterious disappearance. Two planets, which is our metaphor?
The Enterprise encounters a probe floating in space. Suddenly an energy beam zaps Captain Picard. He wakes up on an alien planet. Recovering from a fever he is “Kamin,” can’t recognize his “wife.” Friends think he’s delusional, mumbling about being a starship captain. Trapped in this parallel universe, time passes. Memories of his prior life fade. He falls in love with his wife, raises a family, kids, grandkids, lives the peaceful life he only imagined in space.
But his new planet’s resources gradually disappear. Temperatures rise. Water scarcer. Desert lands spread. The Pentagon scenario? Near the end, he watches a missile soar into space, an intergalactic time capsule, a final record of a once-great civilization.
Suddenly the probe turns off. Picard awakes on floor of the Enterprise bridge. Twenty minutes passed. Engine power returns. They continue boldly going where no one has gone before, left with memories of a simple life on a dying planet that vanished eons ago. Ask yourself: Are we boldly going anywhere? Will someone, someday be reading our probe?
Nightmare scenario No. 7: No-Growth Economics vs. Neo-Capitalism
While Goldman former Chairman Whitehead gave up, there is still a solution, one way to dodge the “Great Depression 2,” the “100-Year Bear.” I reviewed this scenario in a recent issue of Adbusters magazine, where legendary economist Herman Daly was recently named “Man of the Year.”
The Center for the Advancement of the Steady State Economy” says this new greener economic theory calls for “stabilized population and consumption. Such stability means that the amount of resource throughput and waste disposal remains roughly constant.” In this theory, all systems are in balance.
“The key features of a steady state economy are: sustainable scale, in which economic activities fit within the capacity provided by ecosystems; fair distribution of wealth; and efficient allocation of resources.”
This new economics may be what sustains the Star Trek culture in the 23rd century, but unfortunately, it is unlikely to get broad support in today’s free market Reaganomics capitalism, let alone support from America’s political parties or any sovereign nations in today’s highly competitive international arena … at least not until we’ve gone past the point of no return, like that mysterious planet recorded on the probe discovered in the 23rd century by Star Trek’s Captain Picard.
As in “Rashomon,” we “see” many competing scenarios, “seen” through many competing “eyes.’ Yet, for the victims, the end game is always tragically irreversible. We may, however, find some comfort in the “wave theory,” for all waves emerge, ripple, oscillate, accelerate until they inevitably self-destruct and fade.
Earth appears destined to accelerate to 9 billion … exhausting Earth’s resources … in a self-destructive Pentagon global warfare scenario … driven by another Great Depression … and 100-year bear market. In the end Whitehead said it all: “This is a road to disaster … I don’t see a solution.”
Probe dims, fade to black. Or will we finally wake up … and take command of our starship?
Advertisements

Read Full Post »

Read Full Post »

By Elizabeth Rhodes

houseprices.gifEconomics 101 teaches that prices should drop when the supply increases dramatically, but the Seattle area’s housing market keeps confounding that conventional wisdom.

Prices of King County houses and condominiums last month increased 9 percent compared to a year earlier — even while the number of available properties grew 51 percent.

Likewise, the number of homes for sale was up 57 percent in neighboring Snohomish County and 47 percent in Pierce County, according to July numbers released Monday by the Northwest Multiple Listing Service.

This continues a trend that has persisted for several months.

Yet prices in all counties rose, also continuing a trend, though at a slower pace than the double-digit rates of a year ago.

Windermere Real Estate general manager Matt Deasy says that until recently he expected the significant increase in the number of homes for sale to halt the continuing rise in prices. “I would have said appreciation would stop,” Deasy said.

But so far that hasn’t happened.

Why rising inventory isn’t having the anticipated effect is hard to pin down, but there are theories.

All revolve around the idea that an increase in the number of for-sale homes isn’t necessarily a negative factor that would cause prices to fall.

Theory 1: Last year the number of homes for sale was unusually low, so this year’s increase isn’t an overabundance that’s flooding the market and driving down prices. That’s true in close-in Seattle and Eastside neighborhoods where buyer demand is strong enough to handle increased inventory, particularly in the more affordable price ranges.

In the Ballard and Green Lake neighborhoods, for example, buyers last month bid up the median list price of $450,000 (for houses, condos and town homes combined) to a median sales price of $453,000. Homes priced below the median sell briskly.

Theory 2: Move-up buyers, who were reluctant to put their homes on the market last year for fear they wouldn’t be able to find a replacement, are doing so now, and that’s increasing inventory. Mortgage rates below 7 percent are helping them make the move.

Theory 3: Having heard that sales are slowing, many buyers feel they can take their time. They aren’t snapping up houses as fast as they did in 2005 and 2006, so houses are sitting longer on the market.

Indeed, July pending sales — deals agreed to last month but not yet finalized — were down 6.5 percent in King County compared with the previous July. They dipped 14.2 percent in Snohomish County and 15.8 percent in Pierce County.

That gave buyers in some areas a distinct advantage.

“People are able to shop around for quality and value,” said David Milot, broker-owner of RE/MAX Metro Realty. “Anything substandard is not being snapped up.”

Theory 4: Inventory is building because overpriced homes no longer can count on playing the “catch-up game.”

“Two years ago, if a seller wanted to [insist on a maximum] price, it might sit on the market for a couple of months, then appreciation would catch up and it would sell,” Deasy noted. Now they may wait awhile but will eventually drop their price to land a sale.

What role the national subprime-mortgage meltdown may be playing here is hard to gauge.

There’s no way to know how many of the 12,902 houses and condos for sale last month in King County were on the market because their mortgages were resetting to unaffordably high payments.

As for foreclosures, King County had 335 foreclosure auctions last month, according to Foreclosures.com.

That’s a per capita foreclosure rate of 0.31 percent, far below the national rate of 0.81.

Meanwhile, appreciation continues to grow, particularly in King County.

Single-family-home prices have crept up every month this year, rising from January’s median $429,495 to July’s median of $481,000.

Median house prices in Snohomish County have bobbled up and down, from a low of $356,000 in February to June’s high of $381,000 before dipping to $370,165 last month. Temporary dips are common.

Pierce County has seen median house prices rise from $272,500 in January to $288,950 in July.

Read Full Post »

By Robert Powell

Planning for retirement is hard enough. Add to it the fact that there are so many myths about what one needs or doesn’t need prior to or during retirement and things get really complicated.

To its credit, the Center for Retirement Research at Boston College, as part of its latest effort to quantify the degree to which Americans are at risk when it comes to retirement, has addressed what the top money myths about retirement and what the truth of the matter is.

Here’s a look those myths and the realities and some reaction to those realities.

 

Myth: People need to replace 100% of their preretirement income in retirement.

 

Reality: Most people need between 65% to 85% to be secure, says Boston College.

My thoughts: This is and will likely continue to be one of the great debates of the early 21st century. Many organizations and experts generally agree with Boston College, but increasingly experts say people should consider replacing 100% of their preretirement income, especially in light of longer life expectancies and potential health-care costs.

The debate around how much income Americans need to replace is more than academic. In fact, the degree to which Americans replace the right amount is the degree to which they maintain the same standard of living in retirement as they had prior to retirement.

There are, however, other studies that suggest that none of it matters as much as academicians would have us believe, that people generally adapt to their circumstances without any adverse affects. For instance, I can recall at least one study that showed that people ultimately adjust their lifestyle to whatever their income is in retirement and that they remain generally happy with their retirement despite a lower standard of living.

 

Myth: People will have enough resources to meet their needs when they retire.

 

Reality: Almost 45% of working-age households are at risk of failing to meet this objective, according to the center’s new National Retirement Risk Index.

I have no doubt that many American workers are ill-prepared for retirement right now. But here’s the real deal with this and other research that suggests that Americans are destined for a retirement that is anything but golden: The more we say people need to save more or work longer, the more likely that Americans will in fact start to save more and work longer. And when that happens, the problem — is it a prediction or a forecast? — will diminish over time. (Consider, for instance, the recent Newsweek magazine article that revisited its prediction some 20 years ago about the state of marriage.)

 

Myth: Younger workers will be better prepared in retirement than baby boomers.

 

Reality: Younger workers are more vulnerable — nearly half of households are at risk.

My two cents on this is that younger workers will be prepared for retirement. The reasons? Baby boomers had the social contract around retirement plans and policies change in midstream Boomers grew up thinking that they would have traditional pension plans as their parents did. Boomer grew up thinking they would have retiree health-care benefits as their parents did. Boomers went to work never really being told that they would be responsible for their retirement. That’s not the case with younger workers.

Younger workers are entering work force with no such illusions. Younger workers know they are responsible for their retirement. Younger workers may not be saving enough, but they know they have to. And I suspect younger workers will step up their savings when they see first hand how destitute the baby boom generation will be in retirement. Once they see firsthand the adverse effects of not saving enough money, they will do what’s needed.

Unfortunately, it’s a sad commentary on America that we often have to wait for an “emergency” to take the right actions. (Does anyone believe that we could have developed alternative energy sources long before the price of gasoline reached $3 a gallon?)

The issue to consider about younger workers is this. They may not have much left over to save for retirement after they get done with nondiscretionary expenses, such as health care and housing.

 

Myth: Social Security will still replace 42% of an average worker’s earnings.

 

Reality: Net Social Security replacement rates will drop to 30% by 2030, adjusting for the rising normal retirement age, taxation of benefits and higher Medicare premiums.

Here’s a case where Americans of all ages are simply misinformed about Social Security. Study after study suggests that Americans don’t have a handle on when Social Security begins, how much better off they might be if they delay retirement or how much of their income Social Security replaces.

On the other hand, more and more workers, especially younger workers, are not even factoring Social Security into their retirement plans. That could be a good thing since Social Security, for that cohort, might become what it was always meant to be — a supplement to other sources of income in retirement.

 

Myth: Although 401(k)s are the most common type of employer-sponsored pension, traditional defined-benefit plans still cover a large share of the work force.

 

Reality: In 2003, only 10% of all private-sector workers with pensions were covered solely by a defined-benefit plan.

It’s possible that Americans might get the exact percent wrong, but it’s clear they have gotten the message that traditional pension plans have gone the way of the dodo bird.

 

Myth: 401(k)s have allowed workers to save significant amounts for retirement.

 

Reality: In 2004, the typical household head approaching retirement had only $60,000 in 401(k) and IRA accounts, which translates into less than $400 per month in retirement.

The typical household has that amount, but the average worker in their 60s has more than $100,000. To be sure, given a 4% withdrawal rate, that amount still doesn’t translate into the retirement of one’s dreams. But it’s more than the average household.

 

Myth: If today’s workers save as much relative to their income as their parents, their retirement will be secure.

 

Reality: Current workers must save more because of the demise of traditional pensions, rising longevity, soaring health-care costs, and falling asset returns, says Boston College.

No argument here.

 

Myth: People can rely on the equity in their house to finance their retirement.

 

Reality: Retirees need somewhere to live, so they can tap only a portion of their house’s value with a reverse mortgage — about 45% at current interest rates and less if rates rise from today’s low levels.

Again, no argument here. Those who think they can convert the equity in their home into an income stream have not crunched all the numbers.

 

Myth: It’s too hard to save enough for retirement.

 

Reality: If workers consistently set aside 6% of their paychecks (with a 3% employer match), invest prudently and leave the money alone, they should have enough.

Again, the key word is consistently. Most people don’t start saving until it’s too late. And by the time it’s too late, some studies suggest that people need to save 15% to 20% just to make up for what they didn’t save when they were young workers.

 

Myth: Given the trends in retirement income, people will have to work until they drop.

 

Reality: Working to age 67 — and not drawing income from Social Security or 401(k)s — would allow most people to have a secure retirement, says Boston College.

That may be true for half of working Americans. But the other half will — due to some sort of shock — will not be able to work until they are 67.

Read Full Post »

By Alister Bull

America may still think of itself as the land of opportunity, but the chances of living a rags-to-riches life are a lot lower than elsewhere in the world, according to a new study published on Wednesday.

The likelihood that a child born into a poor family will make it into the top five percent is just one percent, according to “Understanding Mobility in America,” a study by economist Tom Hertz from American University.

By contrast, a child born rich had a 22 percent chance of being rich as an adult, he said.

“In other words, the chances of getting rich are about 20 times higher if you are born rich than if you are born in a low-income family,” he told an audience at the Center for American Progress, a liberal think-tank sponsoring the work.

He also found the United States had one of the lowest levels of inter-generational mobility in the wealthy world, on a par with Britain but way behind most of Europe.

“Consider a rich and poor family in the United States and a similar pair of families in Denmark, and ask how much of the difference in the parents’ incomes would be transmitted, on average, to their grandchildren,” Hertz said.

“In the United States this would be 22 percent; in Denmark it would be two percent,” he said.

The research was based on a panel of over 4,000 children, whose parents’ income were observed in 1968, and whose income as adults was reviewed again in 1995, 1996, 1997 and 1999.

The survey did not include immigrants, who were not captured in the original data pool. Millions of immigrants work in the U.S, many illegally, earnings much higher salaries than they could get back home.

Several other experts invited to review his work endorsed the general findings, although they were reticent about accompanying policy recommendations.

“This debunks the myth of America as the land of opportunity, but it doesn’t tell us what to do to fix it,” said Bhashkar Mazumder, a senior economist at the Federal Reserve Bank of Cleveland who has researched this field.

Recent studies have highlighted growing income inequality in the United States, but Americans remain highly optimistic about the odds for economic improvement in their own lifetime.

A survey for the New York Times last year found that 80 percent of those polled believed that it was possible to start out poor, work hard and become rich, compared with less than 60 percent back in 1983.

This contradiction, implying that while people think they are going to make it, the reality is very different, has been seized by critics of President Bush to pound the White House over tax cuts they say favor the rich.

Hertz examined channels transmitting income across generations and identified education as the single largest factor, explaining 30 percent of the income-correlation, in an argument to boost public access to universities.

Breaking the survey down by race spotlighted this as the next most powerful force to explain why the poor stay poor.

On average, 47 percent of poor families remain poor. But within this, 32 percent of whites stay poor while the figure for blacks is 63 percent.

It works the other way as well, with only 3 percent of blacks making it from the bottom quarter of the income ladder to the top quarter, versus 14 percent of whites.

“Part of the reason mobility is so low in America is that race still makes a difference in economic life,” he said.

Read Full Post »

By Kevin G. Hall

Congress this week is likely to trim federal spending and insist with a straight face that government spending is under better control.

It’s not.

“The facts are not partisan, and they’re not ideological,” said David Walker, the nation’s comptroller general. He should know. He’s the nation’s chief accountant and signs off on the government’s balance sheet. America’s fiscal future, he said, “is worse than advertised.”

Even though the White House and Congress pledge to trim $35 billion to $50 billion in spending over five years, that’s chicken feed. The government spends more than $2.5 trillion every year. Congress’ savings would trim less than half of 1 percent of annual spending.

Walker, along with budget experts from across the political divide, believe Congress is shifting deck chairs on a sinking financial ship. Lawmakers are making symbolic spending cuts while skirting the real drains on the federal budget.

In addition, Republicans intend to make tax cuts permanent, which would drain $70 billion in revenues through 2010 — more than the spending cuts Congress is struggling to find.

And that’s only the tip of the iceberg. The real problem is that the government’s unfunded liabilities — items that include everything from public debt to promised Medicare and Social Security benefits — are growing at staggering rates.

Those liabilities totaled $20.4 trillion in 2000. They reached $43.3 trillion by 2004, after President Bush and Congress increased spending and cut taxes.

When the government next reports these numbers Dec. 15, the total is expected to reach $46 trillion to $50 trillion.

How much is $50 trillion? About $166,000 for each of the almost 300 million Americans.

This imbalance between what government takes in and what it spends is the federal budget deficit. It totaled $319 billion in fiscal 2005, which ended Sept. 30.

To bridge that shortfall, the government takes on additional debt, 46 percent of it now held by foreigners, especially the governments of Japan and China.

The gross national debt is now more than $8 trillion. The government owes itself much of that in accounts such as the highway trust fund. When IOUs in those accounts come due, the government just issues itself some more debt.

The net national debt — the amount that must be financed by borrowing in capital markets, which affects interest rates and the economy — is a mind-boggling $4.6 trillion.

“Unless the situation is reversed, at some point, these budget trends will cause serious economic disruptions,” Federal Reserve Chairman Alan Greenspan told Congress’ Joint Economic Committee on Thursday.

Think of America’s financial future this way: A large family goes to a restaurant and stuffs itself on a full-course meal with drinks and dessert. The waitress then hands the bill to the babbling infant in a high chair. Budget deficits make today more enjoyable, but future generations of Americans will have to pay the bills.

Most economists, including Greenspan, believe American taxpayers won’t be able to pay for the retirement and health-care promises that the government has made to the baby-boom generation — those born between 1946 and 1964 — which begins retiring in 2008.

“We owe it to those who will retire over the next couple of decades to promise only what the government can deliver,” Greenspan said Thursday.

Undisciplined government spending has done the unthinkable: It’s united experts from two rival think tanks with great influence in Washington — the left-leaning Brookings Institution and the conservative Heritage Foundation. Both accuse Congress and the White House of a “leadership deficit,” punting when it should be tackling issues affecting the nation’s financial future.

“It’s very obvious that something has to give. It’s as simple as that,” said Stuart Butler, vice president of economic policy for the Heritage Foundation.

Congress is struggling over modest proposals — such as whether to nick all spending by 2 percent across the board, trim Medicaid, pinch food stamps and farm subsidies — but ignoring big-ticket spending on tax cuts, defense, homeland security, Medicare and Social Security.

Douglas Holtz-Eakin, director of the nonpartisan Congressional Budget Office (CBO), said current congressional efforts to trim spending won’t make much difference.

“It doesn’t change our outlook substantially at all over the long haul,” said Holtz-Eakin, who formerly worked for Bush.

“The most important thing about the number this year is not the number, but doing it.”

Congress shows no interest in halting a Medicare drug benefit scheduled to take effect next year. It will cost $700 billion over 10 years, and more after. It’s one reason why spending on Medicare, the health-care program for the elderly and disabled, is projected to explode.

Medicare benefits promised to 40 million seniors will cost $2.7 trillion more over the next 10 years than what it costs now, according to Heritage Foundation economists.

Left unchanged, Medicare promises will cost $30 trillion over 75 years. That would consume all federal revenues, leaving nothing for national defense — or anything else.

“It’s like falling off a 30-story building. For the first 20, it doesn’t seem so bad,” Heritage’s Butler said.

Congress displays no appetite for curbing the biggest expenses in the federal budget — automatic “entitlement” spending, especially Social Security and Medicare.

In 1985, spending on such entitlements took 45 percent of the federal budget. It now takes 56 percent. A decade from now, it will take 62 percent, according to the CBO.

It gets worse from there, as the first wave of boomers reaches full retirement age in 2011.

“If there’s one thing that could bankrupt the country, it’s health care,” Comptroller General Walker said.

But it’s not just health care and retirement, not just war and homeland security. Congress is spending lavishly on everything, said Brian Riedl, Heritage’s top budget analyst.

Spending has grown twice as rapidly under Bush than it had under Clinton. Remove defense and homeland security costs and spending still jumped 22 percent.

“Everything is going up well past inflation” rates, Riedl said.

Since 2001, spending on education is up more than 100 percent, international programs 94 percent and housing and commerce up 86 percent.

“We need a spending cap that helps lawmakers say no,” Riedl said. He pointed to the 1990 agreement between Congress and the first President Bush called Pay-Go, which capped discretionary spending and required new spending to be offset with cuts elsewhere.

Sen. Kent Conrad, D-N.D., the ranking Democrat on the Senate Budget Committee, recently introduced an amendment to return to Pay-Go. “There is an old-fashioned idea,” he said on the Senate floor.

“Pay for it.”

Read Full Post »

By WILL LESTER

The dramatic differences between rich and poor that were on view during Hurricane Katrina also can be seen by how those two groups view the causes of poverty. The poor largely believe they were dealt a bad hand while the rich are more apt to say poverty is from lack of effort.

Polling by the Marguerite Casey Foundation also found that both rich and poor are optimistic about future prospects for their children.

Those at the poverty level or the near poor were almost twice as likely to say factors beyond their control are responsible for their impoverished state. Those who make higher incomes were evenly split on whether poverty is caused by external factors or by people not making enough effort.

Most in the public — at least three quarters — were aware of the big gap between rich and poor in this country well before Katrina put those differences in the spotlight.

“We’re looking more and more like a developing country,” said Luz Vega-Marquis, president of the foundation. “We have a concentration of wealth in the top 5 percent, but what is happening to the middle-class and poor people?”

People of all income groups said they felt optimistic that their own children will be better off in the future. The poorest were most likely to express optimism their children will be better off.

The polling found widespread recognition long before Katrina that poverty is a severe problem in this country, said pollster Celinda Lake, who conducted the second wave of polling.

“The conventional wisdom was that Katrina was catalytic to these attitudes about poverty,” Lake said. “But these attitudes were evident before Katrina.”

The polling found that “despite large income differences, there are very similar dreams and worries for both these sets of families,” said Mary McIntosh of Princeton Survey Research Associates. “They’re worried about money, affording health care and retirement, but they’re hopeful about their children.”

The poll findings are based on a survey of 1,546 parents of children under 18 taken from Dec. 9, 2004 to Feb. 12 and a survey of 1,000 adults from Sept. 30-Oct 3 of this year. The margin of error for each survey was plus or minus 3 percentage points, larger for subgroups.

Read Full Post »

Older Posts »