The Huffington Post | By Jeffrey Young
Having to return to the hospital for another round of treatments for the same medical condition isn’t just emotionally draining, potentially dangerous and tough on a patient’s wallet, it also costs hospitals a ton of money, according to a report issued today.
A typical hospital with 200 to 300 beds wastes up to $3.8 million a year, or 9.6 percent of its total budget, on readmissions of patients who shouldn’t have had to come back, says Premier, a health care company that advises hospitals on improving efficiency and safety. The company analyzed the records of 5.8 million incidents in which a patient went back to a hospital to be re-treated and found they added $8.7 billion a year, or 15.7 percent, to the cost of caring for those people.
Cutting back on these readmissions would be good news for patients. Even if the hospital has to eat the costs of additional treatments, patients are still subject to the risks of the procedures they undergo and the normal danger of contracting an infection while in the hospital. Patients being treated for heart attacks, respiratory problems like pneumonia and major joint problems are the most likely to wind up back in the hospital, according to Premier.
Wasteful spending in the U.S. health care system has been estimated to be as high as $850 billion each year, according to a 2009 Thomson Reuters report. Overall health care spending rose by a factor of 10 between 1980 and 2010, when it reached $2.6 trillion.
Hospitals are ground zero for health care cost-containment efforts because they are the biggest recipients of America’s health care spending, having taken in $814 billion in 2010, according to a federal government report. Rising costs and shrinking payments from government programs like Medicare and Medicaid and from private insurance companies have hospitals looking everywhere for ways to streamline their operations.
The health care reform law enacted two years ago expands on efforts begun three years ago to link how much Medicare pays hospitals to how well they reduce medical errors, readmissions, and other inefficiencies. Starting next year, hospitals will see their Medicare payments docked by 1 percent if they don’t cut back on these readmissions. The penalty increases to 3 percent in 2015.
Premier’s message to hospitals feeling squeezed: The money you need to save is already in the system. The company has identified 15 steps hospitals can take to improve the care they provide while also saving money, such as making sure patients are treated right the first time and don’t need to be “readmitted” for more care. By analyzing information culled from its hospital partners, Premier recommends other targets for savings, such as performing fewer blood transfusions and limiting costly tests.
Major physician groups also recently rolled out an initiative to reduce unnecessary medical tests. Combined with efforts such as those promoted by Premier, these ventures underscore how private sector health care entities are accelerating cost-containment programs with a push by the health care reform law.
Written by Alexander Eichler Reported in Huffington Post
What does it mean to be poor?
If it means living at or below the poverty line, then 15 percent of Americans — some 46 million people — qualify. But if it means living with a decent income and hardly any savings — so that one piece of bad luck, one major financial blow, could land you in serious, lasting trouble — then it’s a much larger number. In fact, it’s almost half the country.
“The resources that people have — they are using up those resources,” said Jennifer Brooks, director of state and local policy at the Corporation for Enterprise Development, a Washington, D.C., advocacy group. “They’re living off their savings. They’re at the end of their rope.”
The group issued a report today examining so-called liquid asset poverty households — the people who aren’t living below the poverty line, but don’t have enough money saved to weather a significant emergency.
According to the report, 43 percent of households in America — some 127.5 million people — are liquid-asset poor. If one of these households experiences a sudden loss of income, caused, for example, by a layoff or a medical emergency, it will fall below the poverty line within three months. People in these households simply don’t have enough cash to make it for very long in a crisis.
The findings underscore the struggles of many Americans during what has often seemed like an economic recovery in name only. While the Great Recession officially ended more than two years ago, unemployment remains high and wages have barely budged for most workers. For more people, whether they draw a paycheck or not, a life free of deprivation and financial anxiety seems perpetually out of reach.
That’s not to say that everyone who is liquid-asset poor spends all their time fretting. On the contrary, because many have regular paychecks coming in, they may not grasp the precariousness of their situation.
Rothstein, who also serves on a steering committee at the Corporation for Enterprise Development, told The Huffington Post that payday lenders — who loan money to desperate borrowers at high interest rates, drawing people into hard-to-escape cycles of debt — are “a huge problem” in Ohio, as in many other states. People often turn to payday lenders to cover one-time, unexpected expenses, but can end up in a long and costly relationship.
“People say things like, it’s just one mechanical problem with their car,” said Rothstein. Before they know it, he said, “every other week, they’re back at the payday lending shop.”
The Corporation for Enterprise Development findings echo other recent studies showing that many Americans are ill-prepared for financial emergencies. Analysts said the reasons include flat wages, the high cost of medical treatment and the nationwide drop in housing values leaving homeowners with less wealth than they believed they had.
Andrea Levere, the president of Corporation for Enterprise Development, told HuffPost that greater financial literacy might have helped prevent the current situation.
People can “graduate high school and not know how to write a check,” Levere said, adding that an increased emphasis on personal responsibility for budgeting and spending sould be an important part of any step forward.
At the same time, Corporation for Enterprise Development officials were quick to argue that public policy needs to address the scope of the problem. Levere cited the example of asset limits in public benefit programs, which restrict services like food assistance and public health insurance to households with few or no assets — a policy that critics say denies help to many people in need.
“In some cases,” said Levere, “it means they can’t even own a car that is in good enough shape to get them to work.”
Brooks agreed. “A family that loses its job, that was maybe solidly middle class, in a state where they have restrictive asset tests, is going to have to liquidate all their assets, all their savings for the future” in order to qualify for benefits.
The report maintains that there are a number of measures that could alleviate liquid asset poverty, from strengthening consumer protections against payday lenders to making greater assistance available to first-time homebuyers. Levere said even minor policy adjustments could have “revolutionary implications.”
“There’s a lot of ways forward. It doesn’t mean it’s not tough,” Levere said. “I’m a great believer in one step at a time.”
As reported in Huffington Post
WASHINGTON — Standard & Poor’s says it downgraded the U.S. government’s credit rating because it believes the U.S. will keep having problems getting its finances under control.
S&P officials on Saturday defended their decision to drop the government’s rating to AA+ from the top rating, AAA. The Obama administration called the move a hasty decision based on wrong calculations about the federal budget. It had tried to head off the downgrade before it was announced late Friday.
But S&P said it was the months of haggling in Congress over budget cuts that led it to downgrade the U.S. rating. The ratings agency was dissatisfied with the deal lawmakers reached last weekend. And it isn’t confident that the government will do much better in the future, even as the U.S. budget deficit grows.
David Beers, global head of sovereign ratings at S&P, said the agency was concerned about the “degree of uncertainty around the political policy process. The nature of the debate and the difficulty in framing a political consensus … that was the key consideration.”
S&P was looking for $4 trillion in budget cuts over 10 years. The deal that passed Congress on Tuesday would bring $2.1 trillion to $2.4 trillion in cuts over that time.
Another concern was that lawmakers and the administration might fail to make those cuts because Democrats and Republicans are divided over how to implement them. Republicans are refusing to raise taxes in any deficit-cutting deal while Democrats are fighting to protect giant entitlement programs such as Social Security and Medicare.
S&P so far is the only one of the three largest credit rating agencies to downgrade U.S. debt. Moody’s Investor Service and Fitch Ratings have both issued warnings of possible downgrades but for now have retained their AAA ratings.
The rating agencies were sharply criticized after the 2008 financial crisis. They were accused of contributing to the crisis because they didn’t warn about the dangers of subprime mortgages. When those mortgages went bad, investors lost billions of dollars and banks that held those securities had to be bailed out by the government.
Ratings agencies assign ratings on bonds and other forms of debt so investors can judge how likely an issuer – like governments, corporations and non-profit groups – will be to pay the debt back.
Asked when the United States might regain its AAA credit rating, Beers said S&P would take a look at any budget agreements that achieve bigger deficit savings. But the history of other countries such as Canada and Australia who saw cuts in their credit ratings, shows that it can take years to win back the higher ratings.
Administration sources, who briefed reporters on condition of anonymity because of the sensitivity of the debt issue, said the administration was surprised by the timing of the announcement, coming just a few days after the debt agreement had been signed into law.
Treasury officials were notified by S&P of the imminent downgrade early Friday afternoon and spent the next several hours arguing with S&P. The administration contended that S&P acknowledged at one point making a $2 trillion error in their computations of deficits over the next decade.
But S&P officials said the difference reflected the use of different assumptions about how much spending and taxes will come to over the next decade. The S&P officials said they decided to use the administration’s assumptions since the $2 trillion difference in the deficit numbers was not going to change the company’s downgrade decision.
In a Treasury blog posting Saturday, John Bellows, the Treasury’s acting assistant secretary for economic policy, said he was amazed by that decision.
“S&P did not believe a mistake of this magnitude was significant enough to warrant reconsidering their judgment or even significant enough to warrant another day to carefully re-evaluate their analysis,” Bellows wrote.
S&P officials said their decision hadn’t been rushed. They noted that S&P had been warning about a potential downgrade since April.
Some critics, the debacle of 2008 still in mind, raised questions about S&P’s actions now.
“I find it interesting to see S&P so vigilant now in downgrading the U.S. credit rating,” Sen. Bernie Sanders, I-Vt., said Saturday. “Where were they four years ago?”
Standard & Poor’s roots go back to the 1860s. One of its founders, Henry Varnum Poor, was a publisher of financial information about the nation’s railroads. His company, then called Poor’s Publishing, merged in 1941 with Standard Statistics Inc., another provider of financial information.
S&P’s website said both founding firms warned clients well before the 1929 stock market crash that they should sell their stocks.
The company has been owned by publisher McGraw-Hill Cos. since 1966.
Deficitation
July 27, 2011
I thought I would only write 1 newsletter this week.
You know….
Keep it light…
Talk about the summer fun
As much as I am trying to enjoy this summer
I am finding that I once again have to speak up
I wrote several newsletters in the past
Discussing the deficit and government spending
It just amazes me that Washington
Is going out of their way
Not to bring a serious resolve to the issue
Short term……Long term
What steps must be taken?
Putting party politics aside
That will send a message to the financial world
That we are done drinking the kool aid
The US will take responsible steps
To control our cost
And bring our economy in line
We can no longer continue to borrow $.43 cent of every
dollar
To support our economy
The chart below shows the growth of government
Over the past 40 years
TotReceipt Tot Expense Surplus/Deficit
1970 $192B $195B $2.8B
1980 $517B $590B -$73B
1990 $1.031T $1.253T -$221B
2000 $2.025T $1.788T +$236B
2010 $2.165T $3.833T – $1.555T
They are talking of doing a short term deal
Cutting spending by $1.2T over the next 10 years
That’s about $120B a year
Although they say most of it is on the back end
Smoke and Mirrors….
Every family has to deal with budget issues
We are all held to responsible spending
Even when we borrow money
Banks look at acceptable levels of
Debt to Income
We are a great nation…
Difficult decisions have been made in the past
To bring us to where we are today
Let Washington send a strong message
That we are back…
And ready to do business responsibly.
The Mistake of 2010
June 3, 2011
By PAUL KRUGMAN
Published: June 2, 2011
Earlier this week, the Federal Reserve Bank of New York published a blog post about the “mistake of 1937,” the premature fiscal and monetary pullback that aborted an ongoing economic recovery and prolonged the Great Depression. As Gauti Eggertsson, the post’s author (with whom I have done research) points out, economic conditions today — with output growing, some prices rising, but unemployment still very high — bear a strong resemblance to those in 1936-37. So are modern policy makers going to make the same mistake?
Fred R. Conrad/The New York Times
Paul Krugman
Mr. Eggertsson says no, that economists now know better. But I disagree. In fact, in important ways we have already repeated the mistake of 1937. Call it the mistake of 2010: a “pivot” away from jobs to other concerns, whose wrongheadedness has been highlighted by recent economic data.
To be sure, things could be worse — and there’s a strong chance that they will, indeed, get worse.
Back when the original 2009 Obama stimulus was enacted, some of us warned that it was both too small and too short-lived. In particular, the effects of the stimulus would start fading out in 2010 — and given the fact that financial crises are usually followed by prolonged slumps, it was unlikely that the economy would have a vigorous self-sustaining recovery under way by then.
By the beginning of 2010, it was already obvious that these concerns had been justified. Yet somehow an overwhelming consensus emerged among policy makers and pundits that nothing more should be done to create jobs, that, on the contrary, there should be a turn toward fiscal austerity.
This consensus was fed by scare stories about an imminent loss of market confidence in U.S. debt. Every uptick in interest rates was interpreted as a sign that the “bond vigilantes” were on the attack, and this interpretation was often reported as a fact, not as a dubious hypothesis.
For example, in March 2010, The Wall Street Journal published an article titled “Debt Fears Send Rates Up,” reporting that long-term U.S. interest rates had risen and asserting — without offering any evidence — that this rise, to about 3.9 percent, reflected concerns about the budget deficit. In reality, it probably reflected several months of decent jobs numbers, which temporarily raised optimism about recovery.
But never mind. Somehow it became conventional wisdom that the deficit, not unemployment, was Public Enemy No. 1 — a conventional wisdom both reflected in and reinforced by a dramatic shift in news coverage away from unemployment and toward deficit concerns. Job creation effectively dropped off the agenda.
So, here we are, in the middle of 2011. How are things going?
Well, the bond vigilantes continue to exist only in the deficit hawks’ imagination. Long-term interest rates have fluctuated with optimism or pessimism about the economy; a recent spate of bad news has sent them down to about 3 percent, not far from historic lows.
And the news has, indeed, been bad. As the stimulus has faded out, so have hopes of strong economic recovery. Yes, there has been some job creation — but at a pace barely keeping up with population growth. The percentage of American adults with jobs, which plunged between 2007 and 2009, has barely budged since then. And the latest numbers suggest that even this modest, inadequate job growth is sputtering out.
So, as I said, we have already repeated a version of the mistake of 1937, withdrawing fiscal support much too early and perpetuating high unemployment.
Yet worse things may soon happen.
On the fiscal side, Republicans are demanding immediate spending cuts as the price of raising the debt limit and avoiding a U.S. default. If this blackmail succeeds, it will put a further drag on an already weak economy.
Meanwhile, a loud chorus is demanding that the Fed and its counterparts abroad raise interest rates to head off an alleged inflationary threat. As the New York Fed article points out, the rise in consumer price inflation over the past few months — which is already showing signs of tailing off — reflected temporary factors, and underlying inflation remains low. And smart economists like Mr. Eggerstsson understand this. But the European Central Bank is already raising rates, and the Fed is under pressure to do the same. Further attempts to help the economy expand seem out of the question.
So the mistake of 2010 may yet be followed by an even bigger mistake. Even if that doesn’t happen, however, the fact is that the policy response to the crisis was and remains vastly inadequate.
Those who refuse to learn from history are condemned to repeat it; we did, and we are. What we’re experiencing may not be a full replay of the Great Depression, but that’s little consolation for the millions of American families suffering from a slump that just goes on and on.
Balance the U.S. budget? I did it in under a minute
June 2, 2011
James
Pethokoukis
Politics and policy from inside Washington
So I took a crack at the budget
simulator cooked up over at the NYTimes Web site. It starts out with a
projected 2015 deficit of $418 billion and a projected 2030 deficit of $1.355
trillion. My goal was to do it through 100 percent spending cuts.
Here is what I did:
1. Eliminated earmarks ($14 billion)
2. Cut the pay of civilian workers by 5 percent ($17 billion)
3. Reduced the federal workforce by 10 percent ($15 billion)
4. Reduced nuclear arsenal and space spending ($38 billion)
5. Reduce military to pre-Iraq War size and further reduce troops in Asia and
Europe ($49 billion)
6. Reduce Navy and Air Force fleets ($24 billion)
7. Cancel or delay some weapons programs ($18 billion)
8. Reduce the number of troops in Iraq and Afghanistan to 60,000 by 2015
($149 billion)
9. Enact medical malpractice reform ($13 billion)
10. Increase the Medicare eligibility age to 68 ($56 billion)
11. Reduce the tax break for employer-provided health insurance ($157
billion)
12. Cap Medicare growth starting in 2013 ($562 billion)
13. Raise the Social Security retirement age to 70 ($247 billion)
14. Reduce Social Security benefits for those with high incomes ($54
billion)
15. Tighten eligibility for disability ($17 billion)
16. Use an alternate measure for inflation ($82 billion)
In the end, my budget would have a minuscule 2015 deficit of $80 billion and
a 2030 surplus of $187 billion. Now I would have preferred an option for deeper
domestic spending cuts. The Heritage
Foundation has ideas for over $300 billion worth. And I think eliminating
hundreds of billions of tax breaks and lowering tax rates across the board would
boost growth and revenue. The simulator only lets me use the Bowles-Simpson plan
which would lower rates by cutting tax expenditures — but uses some of the
dough for deficit reduction. Plus, the simulator assumes no impact on growth
from higher taxes or lower taxes. Also, there is no doubt the Medicare cuts
would be rightly labeled as “rationing.” But Americans really have only two
choices, I think: severe government healthcare rationing (since right now
healthcare costs are rising much faster than GDP growth) or voucherization.
The simulator also shows how tough it is to balance the budget through tax
increases alone. If you went for every tax increased offered, you would still
have a slight deficit in 2030. And again, that assumes zero impact on economic
growth from a) letting all the Bush tax cuts expire; b) eliminating tax breaks;
c) adding a national sales tax, carbon tax and bank tax. That is a fantasy.
Letting all the Bush tax cuts expire, for instance, would probably knock 2-3
percentage points from GDP next year.
WASHINGTON (Kevin Drawbaugh) – Twelve big U.S. companies paid far less than the statutory corporate tax rate from 2008 to 2010, despite making substantial profits in that period, said a report released on Wednesday.
With the Obama administration drafting a corporate tax reform plan, the report found General Electric Co, American Electric Power Co Inc, DuPont Co and nine other companies had a negative 1.5 percent tax rate on $171 billion in profits over the three years studied.
“Not a single one of these companies paid anything close to the 35 percent statutory tax rate,” said the report from Citizens for Tax Justice, a left-leaning group based in Washington that promised more details later this year.
The White House and Congress are considering an overhaul of the corporate tax system as a partial solution to the federal deficit, projected to hit $1.4 trillion this year.
Critics say tax loopholes promoted by corporate lobbyists and enacted by Congress are to blame for a system that lets companies avoid taxes, usually in perfectly legal ways.
Some business leaders have said they could live with closing some of these loopholes, but in return, they have said they want the statutory tax rate lowered. It is among the highest rates in the industrialized world.
The Business Roundtable, a lobbying group for corporate CEOs, issued a report in April that said U.S.-based companies faced an average effective tax rate of 27.7 percent in the 2006-2009 period, more than their non-U.S. competitors.
The debate promises to go on for months and possibly years. U.S. Treasury Secretary Timothy Geithner last week predicted movement on tax reform later in 2011.
Citizens for Tax Justice produced a report in the 1980s that helped lead to President Ronald Reagan’s landmark 1986 tax reforms. Since then, the tax code has become riddled with exemptions, deferrals and other special breaks.
Companies singled out in Citizens for Tax Justice’s newest report also included Verizon Communications, Boeing Co, Wells Fargo & Co, FedEx Corp and Exxon Mobil Corp.
‘TIP OF ICEBERG’
“These 12 companies are just the tip of the iceberg of widespread corporate tax avoidance,” said Bob McIntyre, director of Citizens for Tax Justice, which is working on a broader report covering the Fortune 500 companies.
Elected officials should make “reducing or eliminating the vast array of corporate tax subsidies the centerpiece of any deficit-reduction strategy,” he said.
GE spokesman Andrew Williams said the company is “fully compliant with all tax laws. There are no exceptions.”
He said GE’s 2010 tax rate was low because the company lost billions of dollars in GE Capital, its financial arm, as a result of the global financial crisis. “GE’s tax rate will be much higher in 2011 as GE Capital recovers,” he said.
Citizens for Tax Justice said that in the 2008-2010 period, 10 of the dozen companies studied enjoyed at least one year in which they were profitable, but paid no taxes.
Exxon Mobil had a 14.2 percent effective tax rate over the 3-year period, the highest of the 12 companies cited in the report, according to the group.
Exxon Mobil spokesman Alan Jeffers said, “Our effective tax rate in this country over the past six years has averaged about 32 percent. Last year our total taxes and duties to the U.S. government were $9.8 billion, which includes an income tax expense of $1.8 billion.”
American Electric Power and DuPont did not respond to requests for comment. DuPont effectively paid $258 million in taxes in the first quarter of 2011, a 15.2 percent tax rate.
(Additional reporting by Matthew Daily and Ernest Scheyder in New York, Anna Driver in Houston, Scott Malone in Boston; Editing by Richard Chang)
Copyright 2011 Thomson Reuters
States ignored warnings on unemployment insurance
April 28, 2011
As reported by Ebru News Feb 19,2011
WASHINGTON (AP) – State officials had plenty of warning. Over the past three decades, two national commissions and a series of government audits sounded alarms about the dwindling amount of money states were setting aside to pay unemployment insurance to laid-off workers.
“Trust Fund Reserves Inadequate,” federal auditors said in a 1988 report.
It’s clear now the warnings were pretty much ignored. Instead, states kept whittling away at the trust funds, mostly by cutting unemployment insurance taxes at the behest of the business community. The low balances hastened insolvency when the recession hit, leading about 30 states to borrow $41.5 billion from the federal government to pay unemployment benefits to their growing population of jobless.
The ramifications will be felt for years.
In the short term, states must find the money to pay interest on the loans. Generally, that involves a special tax on businesses until the loan is repaid. Some states could tap general revenues, making it harder to pay for schools, roads and other state services.
In the long term, state will have to replenish their unemployment insurance programs. That typically leads to higher payroll taxes, leaving companies with less money to invest.
Past recessions have resulted in insolvencies. Seven states borrowed money in the early 1990s; eight did so as a result of the 2001 recession.
But the numbers are much worse this time because of the recession was more severe and the funds already were low when it hit, said Wayne Vroman, an analyst at the Urban Institute, a liberal-leaning think tank based in Washington.
The Obama administration this month proposed giving states a waiver on the interest payments due this fall. Down the road, the administration would raise the amount of wages on which companies pay federal unemployment taxes. Many states probably would follow suit as a way of boosting depleted trust funds.
Businesses pay a federal and state payroll tax. The federal tax primarily covers administrative costs; the state tax pays for the regular benefits a worker gets when laid off. The Treasury Department manages the trust funds that hold each state’s taxes.
Each state decides whether its unemployment fund has enough money. In 2000, total reserves for states and territories came to about $54 billion. That dropped to $38 billion by the end of 2007, just as the recession began.
Over the next two years, reserves plummeted to $11.1 billion, lower than at any time in the program’s history when adjusted for inflation, the Government Accountability Office said in its most recent report on the issue. Yet benefits have stayed relatively flat, or declined when compared with average weekly wages.
“If you look at it from the employers’ standpoint, they’re not going to want reserves to build up excessively high because then there’s an increasing risk that advocates for benefit expansion would point to the high reserves and say, ‘We can afford to increase benefits,”‘ said Rich Hobbie, executive director of the National Association of State Workforce Agencies.
A review of state unemployment insurance programs shows how states weakened their trust funds over the past two decades.
In Georgia, lawmakers gave employers a four-year tax holiday from 1999-2003. Employers saved more than $1 billion, but trust fund reserves fell about 40 percent, to $700 million. The state gradually has raised its unemployment insurance taxes since then, but not nearly enough to restore the trust fund to previous levels. The state began borrowing in December 2009. Now it owes Washington about $588 million.
Republican Mark Butler, Georgia’s labor commissioner, said his state had one of the lowest unemployment insurance tax rates in the nation when the tax holiday was enacted.
“The decision to do this was not really based upon any practical reasoIt was based on a political decision, which I think, by all accounts now, we can look back on and say it was the wrong decision,” Butler said. “Now we find ourselves in a situation where we’ve had to borrow money and that puts everyone in a tight situation.”
In New Jersey, lawmakers used a combination approach to deplete the trust fund. The Legislature expanded benefits and cut taxes, as well as spending $4.7 billion of trust fund revenue to reimburse hospitals for indigent health care. The money was diverted over a period of about 15 years and helps explain why the state’s trust fund dropped from $3.1 billion in 2000 to $35 million by the end of 2010. The state has had to borrow $1.75 billion from the federal government to keep the program afloat.
“It was a real abdication of responsibility and a complete misunderstanding of how you finance an unemployment insurance fund to make sure you have sufficient money in bad economic times,” said Phillip Kirschner, president of the New Jersey Business and Industry Association. “In good economic times you build up your bank account, but in New Jersey, they said, ‘Well, we have all this money, let’s spend it.”‘
California took its own road to trust fund insolvency. Lawmakers kept payroll tax rates the same, but gradually doubled the maximum weekly benefit paid to laid-off workers to $450. The average benefit now is about $300 and is paid for about 20 weeks.
Loree Levy, spokeswoman for the California Employment Development Department, said lawmakers were warned of the consequences.
“We testified at legislative hearings that the fund would eventually go broke and would become permanently insolvent if legislation wasn’t passed to increase revenue,” Levy said.
California has borrowed $9.8 billion to keep unemployment insurance payments flowing. It owes the federal government an interest payment of $362 million by the end of September.
In Michigan, unemployment insurance tax rates declined from 1994 through 2001. The trust fund prospered during those years because of the healthy economy and low unemployment rate. Then the recession arrived and reserves plunged. In response, Michigan lawmakers passed legislation that lowered the amount of wages subject to unemployment taxes from $9,500 to $9,000. They increased the maximum weekly benefit from $300 to $362. The trust fund dropped from $1.2 billion to $112 million over the next four years. In September 2006, Michigan was the first state to begin borrowing from the federal government.
Other states held their trust funds purposely low as part of an approach called “pay-as-you-go.” Texas is a nationally recognized leader of this effort. Its philosophy is that, in the long run, it’s better for the economy to keep the maximum level of dollars in the hands of businesses rather than government. Texas had to borrow $1.3 billion in 2009. State officials have no regrets about their policy.
“By keeping the minimum in the (trust fund), Texas is able to maximize funds circulating in the Texas economy, allowing for the creation of jobs and stimulation of economic growth,” said Lisa Givens, spokeswoman for the Texas Workforce Commission.
The pay-as-you-go approach goes against the findings of a presidential commission that looked into the issue of dwindling trust funds in the mid-1990s.
“It would be in the interest of the nation to begin to restore the forward-funding nature of the unemployment insurance system, resulting in a building up of reserves during good economic times and a drawing down of reserves during recessions,” said the Advisory Council on Unemployment Compensation, which President Bill Clinton appointed.
Hobbie, from the association representing state labor agencies, said there’s no way to tell which approach is better over the long haul. He acknowledged that keeping reserves at the minimum in good times goes against one of the original aims of the program – to act as an economic stabilizer in bad times. That’s because businesses are asked to pay more in taxes, which leaves them less money to invest in their company.
A survey from Hobbies’ organization found that 35 states raised their state unemployment taxes last year.
Hobbie said he suspects that some states allowed reserves to dwindle out of complacency.
“I think we just got overconfident and thought we wouldn’t experience the bad recessions we had in, say the mid ’70s, and then this big surprise hit,” he said.
Obama Deficit Reduction Plan To Be Detailed By President
April 11, 2011
JIM KUHNHENN 04/11/11 06:13 PM ET 
WASHINGTON — President Barack Obama, plunging into the rancorous struggle over America’s mountainous debt, will draw sharp differences with Republicans Wednesday over how to conquer trillions of dollars in spending while somehow working out a compromise to raise some taxes and trim a cherished program like Medicare.
Obama’s speech will set a new long-term deficit-reduction goal and establish a dramatically different vision from a major Republican proposal that aims to cut more than $5 trillion over the next decade, officials said Monday.
Details of Obama’s plan are being closely held so far, but the deficit-cutting target probably will fall between the $1.1 trillion he proposed in his 2012 budget proposal and the $4 trillion that a fiscal commission he appointed recommended in December.
The speech is intended as a declaration of Obama’s commitment to seriously tame the deficit while outlining his long-term budget principles – key components of his campaign for re-election in 2012. After gingerly avoiding any discussion until now of cuts in the government’s massive benefit programs for the elderly and poor, Obama will acknowledge a need to reduce spending on Medicare and Medicaid while at the same time tackling defense spending and calling for increased taxes on the wealthy, White House officials said.
If that sounds like a reprise of last week’s budget fight that barely avoided a government shutdown, it isn’t. The stakes are far higher, the political risks greater and the goals more ambitious. At issue are long-term budget deficits and a $14.3 trillion national debt that many say could threaten the nation’s economy.
The cuts accomplished last week were for $38.5 billion over the next six months; the cuts envisioned now are for trillions of dollars over the next 10 years.
Obama’s speech, to be delivered at George Washington University, comes as Congress readies for a fierce fight over raising the nation’s debt limit. Republicans have vowed to use that vote as leverage to extract greater budget discipline from the Democrats and the president.
Setting the terms of the debate and the likely brinkmanship to follow, White House spokesman Jay Carney said on Monday: “What I’m saying is that we support a clean piece of legislation to raise the debt ceiling. … We cannot play chicken with the economy in this way.”
The president’s speech also comes amid liberal apprehension over recent Obama spending concessions and a desire among some Democrats to make proposed GOP cuts in Medicare a 2012 election issue.
Obama is expected to concede a need for overhauling Medicare and Medicaid and to even make adjustments to Social Security, always considered politically risky territory. But he will distinguish his plan from the Republican budget, which would shrink Medicare by shifting the program to private insurers and send block grants to states to pay for Medicaid, the health care program for the poor.
Unlike the Republican plan, Obama is also expected to call for cuts in defense spending and for tax increases, repeating his 2012 effort to increase Bush-era tax rates for families making more than $250,000. Obama shelved that plan in a budget compromise with Republicans.
His 2012 budget blueprint didn’t touch the health care entitlements or Social Security. Now that he plans to, some of his own supporters are wary, arguing that the president ceded too much ground when he cut a tax deal with Republicans last December and in yielding spending cuts last week.
“I want to have confidence, but I’ve got to see something,” said Barbara Kennelly, a former Democratic congresswoman and president of the National Committee to Preserve Social Security and Medicare, an advocacy group. “They can’t continue to give in.”
Many liberals say Obama has not been a strong bargainer.
“Their weakness in getting the most out of negotiations is their strategic belief that they don’t want to be seen as fighting, they want to appear above the fray and beyond partisanship,” said Lawrence Mishel, president of the labor-leaning Economic Policy Institute. “They also believe that they shouldn’t get out there on a position where they may not succeed. These are characteristics that make for a weak negotiator.”
Republicans on Monday said Obama’s speech was overdue.
“I’m anxious to hear what the president has to say,” House Speaker John Boehner said on Fox News. “We’ve been waiting for months for the president to enter into this debate with us. I can tell you that privately I’ve encouraged the president: `Mr. President, lock arms with me, let’s jump out of the boat together. We have to deal with this, this is the moment in time that we’ve been given to address the problems.
“Forget the next election, forget the next poll that’s going to come out. It’s time to do the right thing for the country.’”
The speech is expected to affirm Obama’s stand on the spending he is not willing to cut, chiefly in the areas of education, energy, infrastructure, research and innovation. On Medicare, the federal insurance program for senior citizens, the president is expected explain his case for cost savings without putting “all the burden on seniors,” as his senior adviser David Plouffe put it.
In choosing to wait until now, White House officials have looked at past precedents, including President George W. Bush’s plan to partially privatize Social Security, and have seen the pitfalls of staking out major policy initiatives that come undone in Washington’s combative environment.
Democrats have been torn over what Obama should do. Many believe the weight of the debt is a powerful issue with independent voters and that Obama needs to engage Republicans with a legitimate counterproposal and then conduct the “adult conversation” he professes to desire.
The debate over Medicare and Medicaid may not be resolved before the 2012 election, potentially making it the defining element of the presidential campaign.
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Why aren’t Americans being told the truth about the economy? We’re heading in the direction of a double dip — but you’d never know it if you listened to the upbeat messages coming out of Wall Street and Washington.
Consumers are 70 percent of the American economy, and consumer confidence is plummeting. It’s weaker today on average than at the lowest point of the Great Recession.
The Reuters/University of Michigan survey shows a 10 point decline in March — the tenth largest drop on record. Part of that drop is attributable to rising fuel and food prices. A separate Conference Board’s index of consumer confidence, just released, shows consumer confidence at a five-month low — and a large part is due to expectations of fewer jobs and lower wages in the months ahead.
Pessimistic consumers buy less. And fewer sales spells economic trouble ahead.
What about the 192,000 jobs added in February? (We’ll know more Friday about how many jobs were added in March.) It’s peanuts compared to what’s needed. Remember, 125,000 new jobs are necessary just to keep up with a growing number of Americans eligible for employment. And the nation has lost so many jobs over the last three years that even at a rate of 200,000 a month we wouldn’t get back to 6 percent unemployment until 2016.
But isn’t the economy growing again — by an estimated 2.5 to 2.9 percent this year? Yes, but that’s even less than peanuts. The deeper the economic hole, the faster the growth needed to get back on track. By this point in the so-called recovery we’d expect growth of 4 to 6 percent.
Consider that back in 1934, when it was emerging from the deepest hole of the Great Depression, the economy grew 7.7 percent. The next year it grew over 8 percent. In 1936 it grew a whopping 14.1 percent.
Add two other ominous signs: Real hourly wages continue to fall, and housing prices continue to drop. Hourly wages are falling because with unemployment so high, most people have no bargaining power and will take whatever they can get. Housing is dropping because of the ever-larger number of homes people have walked away from because they can’t pay their mortgages. But because homes the biggest asset most Americans own, as home prices drop most Americans feel even poorer.
There’s no possibility government will make up for the coming shortfall in consumer spending. To the contrary, government is worsening the situation. State and local governments are slashing their budgets by roughly $110 billion this year. The federal stimulus is ending, and the federal government will end up cutting some $30 billion from this year’s budget.
In other words: Watch out. We may avoid a double dip but the economy is slowing ominously, and the booster rockets are disappearing.
So why aren’t we getting the truth about the economy? For one thing, Wall Street is buoyant — and most financial news you hear comes from the Street. Wall Street profits soared to $426.5 billion last quarter, according to the Commerce Department. (That gain more than offset a drop in the profits of non-financial domestic companies.) Anyone who believes the Dodd-Frank financial reform bill put a stop to the Street’s creativity hasn’t been watching.
To the extent non-financial companies are doing well, they’re making most of their money abroad. Since 1992, for example, G.E.’s offshore profits have risen $92 billion, from $15 billion (which is one reason it pays no U.S. taxes). In fact, the only group that’s optimistic about the future are CEOs of big American companies. The Business Roundtable’s economic outlook index, which surveys 142 CEOs, is now at its highest point since it began in 2002.
Washington, meanwhile, doesn’t want to sound the economic alarm. The White House and most Democrats want Americans to believe the economy is on an upswing.
Republicans, for their part, worry that if they tell it like it is Americans will want government to do more rather than less. They’d rather not talk about jobs and wages, and put the focus instead on deficit reduction (or spread the lie that by reducing the deficit we’ll get more jobs and higher wages).
I’m sorry to have to deliver the bad news, but it’s better you know.
