Click on WORD or PDF for full content
WaPo writers think we should be wary of this administration’s finances. First Robert Samuelson.
… At worst, the burgeoning debt could trigger a future financial crisis. The danger is that “we won’t be able to sell [Treasury debt] at reasonable interest rates,” says economist Rudy Penner, head of the CBO from 1983 to 1987. In today’s anxious climate, this hasn’t happened. American and foreign investors have favored “safe” U.S. Treasuries. But a glut of bonds, fears of inflation — or something else — might one day shatter confidence. Bond prices might fall sharply; interest rates would rise. The consequences could be worldwide because foreigners own half of U.S. Treasury debt.
The Obama budgets flirt with deferred distress, though we can’t know what form it might take or when it might occur. Present gain comes with the risk of future pain. As the present economic crisis shows, imprudent policies ultimately backfire, even if the reversal’s timing and nature are unpredictable.
The wonder is that these issues have been so ignored. Imagine hypothetically that a President McCain had submitted a budget plan identical to Obama’s. There would almost certainly have been a loud outcry: “McCain’s Mortgaging Our Future.” Obama should be held to no less exacting a standard.
David Ignatius is next.
… The Obama administration has struggled to revive the market for asset-backed securities. The problem isn’t with securitization, they argue, but with restoring investor confidence. So they have launched a variety of schemes aimed at detoxifying the credit system that developed during the 1990s. Not coincidentally, the U.S. Treasury team during that financial boom included Lawrence Summers and Timothy Geithner, who are now Obama’s top financial advisers.
To restart the securitization machine, Treasury and the Federal Reserve have proposed a series of programs with tongue-twister names. They include the Term Asset-Backed Securities Loan Facility (known as “TALF”) and the Public-Private Investment Program (known as “P-PIP”). But these programs have had limited success, so far.
The Treasury argues that securitized lending is slowly coming back, thanks to TALF. That program made available up to $200 billion in public loans to support new issuance of asset-backed securities. A Treasury fact sheet boasts that $13.6 billion of these new securities have been issued this month, more than double the combined total for March and April, with $9.6 billion financed though TALF.
That’s all fine, but the new issues are a small fraction of the securitized lending that was taking place two years ago — for the simple reason that investors remain wary of buying and selling the bundles of debt. In the fourth quarter of 2006, the total issuance of asset-backed securities (excluding mortgage-backed securities) was $250 billion; in the fourth quarter of last year, that total was just $5 billion. The market has come back a little from that low point, but not much.
Private lenders are extremely wary of having the federal government as a partner. …
David Harsanyi prefers hookers over censors.
The first case of prostitution probably dates back to the Paleolithic era, and the last instance of quid pro sexus will most likely take place whenever it is that human civilization finally expires.
The mere existence of crime is not ample justification to ignore it, of course, but most of us would concede that banning ads from the “erotic services” section of Craigslist will bring only a negligible change in the bottom line of harlotry.
So the crusade by 40 state attorneys general and other opportunistic politicians to control language on Craigslist and social networking sites such as MySpace.com will have only long-term implications for free speech on the Internet. …
Art Laffer and Stephen Moore say the high tax states are going to chase away taxpayers.
… Here’s the problem for states that want to pry more money out of the wallets of rich people. It never works because people, investment capital and businesses are mobile: They can leave tax-unfriendly states and move to tax-friendly states.
And the evidence that we discovered in our new study for the American Legislative Exchange Council, “Rich States, Poor States,” published in March, shows that Americans are more sensitive to high taxes than ever before. The tax differential between low-tax and high-tax states is widening, meaning that a relocation from high-tax California or Ohio, to no-income tax Texas or Tennessee, is all the more financially profitable both in terms of lower tax bills and more job opportunities.
Updating some research from Richard Vedder of Ohio University, we found that from 1998 to 2007, more than 1,100 people every day including Sundays and holidays moved from the nine highest income-tax states such as California, New Jersey, New York and Ohio and relocated mostly to the nine tax-haven states with no income tax, including Florida, Nevada, New Hampshire and Texas. We also found that over these same years the no-income tax states created 89% more jobs and had 32% faster personal income growth than their high-tax counterparts. …
Talking about runaway state budgets leads to Tom Elia’s New Editor post on the poster boy for public-sector pensions.
I haven’t followed the saga of retired Chicago-area detective Drew Peterson too closely, but I know he was recently arrested for murdering his third wife, and is under suspicion for the disappearance for his fourth wife.
Aside from the obvious points that he seems to be a real schmuck and perhaps even a cold-blooded murderer, there is another fact to consider about Drew Peterson: he retired in 2007 from his job as a Bolingbrook, IL police detective at the age of 53 with a pension of just over $6,000 per month. …
We have a couple of blog posts on the lack of value in college degrees. The Corner is first. MSNBC’s Red Tape Chronicles is next.
Hernan Castillo is treading water, trying to survive under the weight of $5,200 in credit card debt and $30,000 in student loans. He’s making payments on time, but the Orange County, Calif., resident sees little hope for getting out of the warehouse job he holds and landing a job as an accountant, the field in which he earned his degree. And forget about saving money for a home or retirement. He now firmly believes the money he spent earning a college degree was a waste.
“Every day I wish I had never gone to college,” Castillo said. “It has been the biggest mistake of my life. Sometimes I wish I had gone to prison instead of college. At least I would have learned a trade or two and started being independent once I got out.”
Castillo is one of thousands of student debtors who’ve found their way to the StudentLoanJustice.org Web site, propelled by last year’s credit squeeze and the abrupt economic downturn, according to Alan Collinge, who runs the site.
A recent study by Sallie Mae shows college student credit card debt is skyrocketing. Graduates leave school with 41 percent more credit card debt than four years ago, with one in five owing at least $7,000 on plastic by the time they get their diploma. Worse yet, the study showed that more students – 22 percent — make the minimum payment each month than the 17 percent who pay their bills in full. A full 82 percent said they carried balances each month, and were forced to pay finance charges, far more than the national average of about 50 percent. …
Scott Ott in the Washington Examiner says General Mills will offer prescription strength Cheerios.
Click on WORD or PDF for full content