KeNo's Housing and Economic Portal: Wednesday August 26 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

U.S. Posts Record Year-to-Date Budget Gap of $1.27 Trillion - (www.bloomberg.com) The U.S. budget deficit reached a record for the first 10 months of the fiscal year and broke a monthly high for July as the recession curbed revenue and the government ramped up spending to rejuvenate the economy. The shortfall so far for the fiscal year that ends Sept. 30 totaled $1.27 trillion compared with a $389 billion year-to-date gap in 2008, the Treasury said today in Washington. The excess of spending over revenue for July climbed to $180.7 billion compared with a $102.8 billion gap in July 2008 as the government spent more than in any month in U.S. history. Tax receipts are sliding and spending is surging even as some economists say the recession may have ended. The government is trying to spark business and consumer spending through a $787 billion stimulus plan spanning tax cuts, infrastructure projects and a goal to create or save 3.5 million jobs. PresidentBarack Obama also is pushing a health-care overhaul that may cost $1 trillion over a decade. “Spending is bound to increase as the year goes along” and money from the stimulus package is distributed, said Stan Collender, managing director of Qorvis Communications in Washington and a former U.S. House and Senate Budget Committee analyst. “That’s good news given the state of the economy. You want to do that, to get the recovery going.” Record Spending: Spending for the month of July rose 26 percent from a year earlier to $332.2 billion, while revenue fell 6 percent to $151.5 billion. Because Aug. 1 was on a weekend, many payments due at the start of the month were disbursed in late July, boosting outlays by about $25 billion, Treasury said. For the fiscal year that ends Sept. 30, the Office of Management and Budget forecasts the deficit will reach a record $1.841 trillion, more than four times the previous fiscal year’s $459 billion shortfall.

Corrupted Government behaving badly (again): $500-million settlement reached in suspension of Social Security benefits - (www.latimes.com) We need to figure out who within our government is ordering this and prosecute them!! These government employees looking to steal from the citizens are the real felons!! Legal advocates for the poor, elderly and disabled secured a $500-million class-action settlement Tuesday for as many as 200,000 people whose Social Security benefits were suspended on unfounded suspicions that they were fleeing prosecution. The suspensions, dating back nearly a decade in some instances, were ordered in cases of mistaken identity or outstanding warrants for offenses such as bounced checks or traffic violations. "Virtually none" of the Social Security recipients who were cut off after their names were matched with those in a computerized warrant database were felons using their government benefits to evade law enforcement or prosecution, said Gerald McIntyre, an attorney for the National Senior Citizens Law Center. More often, those deprived of their sole source of modest income were people like lead plaintiff Rosa Martinez of Redwood City, Calif., whose name matched that of a woman with a 1980 arrest warrant from Miami for drug offenses -- a city she had never visited and a crime she never committed. The drug suspect described in the arrest warrant was eight inches shorter than Martinez. "Thanks to God, I was able to prove I was never in that place at those times," Martinez, 52, a former nurse's aide who became disabled with fibromyalgia and other ailments, said of the Miami drug charges. "I was pregnant with my first child when that happened. My God, I have never done anything of the sort." Martinez, who raised her two daughters alone after her husband abandoned the family, had only the $700 monthly disability benefit on which to live and was forced to borrow from relatives to pay her rent and buy food during the four-month suspension. Most of the $500 million the Social Security Administration has agreed to pay in back benefits will go to 80,000 recipients whose payments have been suspended or denied since Jan. 1, 2007. Those cut off between 2000 and 2006 who haven't previously appealed the suspensions will be allowed to reestablish their eligibility and collect benefits back to April of this year -- a compromise aimed at paying the more recent victims who were appealing their suspensions and presumably had stronger cases, McIntyre said. The settlement negotiated between the federal government and legal advocacy groups such as the seniors law center earned preliminary approval Tuesday by U.S. District Judge Claudia Wilken in Oakland. Under the agreement, the government will be able to suspend recipients' benefits only in cases where there is evidence that they were actively seeking to evade arrest or prosecution.

Loan Program for Small Businesses Is Off to Slow Start - (www.nytimes.com) Small-business owners hoping for some assistance of the sort given to the nation’s biggest banks applauded when the Small Business Administration unveiled a lending program in May. Washington officials and some lenders predicted that the program, providing emergency bridge loans as part of the economic stimulus package, would save jobs and provide a lifeline for vulnerable businesses. Many in the banking industry expected it to be fully subscribed in months. But the program is off to a slow start, and many banks, including some of the largest, appear reluctant to take part. With $255 million, the program is prepared to make about 10,000 loans of up to $35,000 each. As of Monday, the agency reported that only 1,127 loans, totaling $36.8 million, had been extended. While the agency maintains that the program is on track, some in the banking industry say the banks are moving slowly because they have little incentive. “There’s not a lot of profit motive in a $35,000 loan stretched over six years,” said Paul Merski, chief economist for the Independent Community Bankers of America, a trade association. Bob Seiwert, of the Center for Commercial Lending and Business Banking at the American Bankers Association, says “stringent underwriting standards” will require as much work as larger loans, making these even less economical. Alex Cooper, a counselor at the Pima Community College Small Business Development Center in Tucson, says he has helped nearly 30 clients apply for the loans. None has received one. “It’s a disappointment,” said Mr. Cooper. “I thought the banks would be more interested in the community and try to help small businesses.” Under the program, known as America’s Recovery Capital, a business owner applies to a bank for a loan and, if approved, can use the proceeds to retire existing debt. The borrower pays no interest on the new loan. Instead, the Small Business Administration pays the bank two percentage points over the prime rate. After a one-year deferral, the borrower repays the loan over five years. The agency will repay the lender in case of default. At the current rate, the program could have loans available through September 2010, when it is set to expire. “We like the fact, actually, that they will be spread out over time,” said Karen G. Mills, head of the Small Business Administration. “We have no doubt that we will make 10,000 loans.”

Kaiser Permanente to cut more than 1,800 jobs in California - (www.latimes.com) One of the state's largest employers, healthcare giant Kaiser Permanente, said it would eliminate more than 1,800 positions as it struggles with drooping membership, uncertain healthcare reform and shriveling Medicare reimbursement rates. Job reductions will occur within the next few months, the Oakland-based nonprofit said Tuesday. Many of the purged positions -- just under 2% of Kaiser employees -- are temporary, on-call or short-hour. Most Kaiser medical centers in California will be affected. Kaiser said it would attempt over the next year to transfer employees into other positions, but it is also offering up to a year of severance pay and extended health benefits, as well as buyout offers for volunteers to leave the company. "We're doing everything we can to minimize the impact on our employees," spokesman Jim Anderson said. "But the job losses in many businesses mean that people have lost their healthcare coverage, which means we've lost them as members." In Southern California, 650 administrative and service employees out of roughly 56,000 total were notified Tuesday that their positions would be cut, Anderson said. About 1,200 workers in Northern California were told the same. But none of the people who lose their jobs will be members of SEIU-United Healthcare Workers, which reached an agreement with Kaiser that prevents the company from laying off members of the union. "We don't think it's necessary to eliminate any positions, given Kaiser's strong financial performance this year," union trustee Dave Regan said in a statement. "We intend to keep pressing . . . Kaiser to maintain the staffing needed to continue providing the highest level of patient care."
With the shaky economy, fewer patients are coming into centers and the revenue stream is slowing, according to a statement from Gay Westfall, a senior vice president with Kaiser Foundation Health Plan and Hospitals, Northern California. Last week Kaiser said membership had tumbled by nearly 36,000 members to 8.6 million in the first six months of the year.

Nevada ads target California businesses - (www.latimes.com) For entrepreneurs wondering when California might become more business-friendly, Nevada has an answer: When pigs fly. In a series of aphorism- laden ads running this week on TV, on radio and in print, the Nevada Development Authority once again is trying to lure businesses from the Golden State, this time by comparing the California budget to a swine and lawmakers to monkeys. "If the Legislature doesn't stop monkeying around, you can kiss your assets goodbye," says a voice-over in one spot, which features a monkey making spitting sounds at the camera as cartoon bananas fall from the sky. It's just the latest attempt by neighboring states to lure jobs and tax revenue by highlighting California's reputation as a high-cost, highly regulated place to do business. California has battled such negative perceptions for years. But its huge consumer base, great weather and dynamic entrepreneurial culture have kept many businesses anchored here. Still, in a tough economy when companies are looking to slash costs, some industry leaders fear poachers will be more successful this time around. "This has gotten to a point where we are lagging behind other states where it counts," said Lloyd Greif, chairman of the Los Angeles County Economic Development Corp. and president of investment banking firm Greif & Co. The Nevada campaign touts the fact that the Silver State has no corporate or personal income tax, no inventory tax, and lower workers' compensation costs. A light-industrial facility that costs $405,478 a year to operate in Las Vegas would cost $625,774 to operate in Los Angeles County, according to the Nevada Development Authority. One TV ad urges California businesses to "get the monkey off your back" and relocate to Las Vegas. In another, a news anchor -- working for fictitious channel KTAX -- turns into a swine, and a voice tells businesses not to wait "until they put lipstick on that pig" to leave California. A print ad shows a pig with white, fluffy wings underneath the text "California will be more pro-business . . . when?" "If you don't like the business situation [in California], you don't have to go under," said Somer Hollingsworth, president and chief executive of the Nevada Development Authority. "You can always move to Las Vegas." Nevada could use the help. Its unemployment rate, at 12% in June, was nearly double its 6.4% rate in June 2008. It was especially hard hit by the housing bust: The number of construction jobs in June were down 29% from a year earlier. And the number of jobs in Nevada's leisure and hospitality industry, which includes casinos, fell 24% in June from the previous year. Nevada has always recruited businesses from California; Hollingsworth jokes that former California Gov. Gray Davis was an asset to the development authority's campaign. But California's ongoing budget crisis seems to be working in Nevada's favor this year. Hollingsworth said that 35% of companies he had recruited to the state this year were from California, compared with 20% last year. "January was the tipping point," he said. "Companies were saying they couldn't stay there." A report released in June by the Milken Institute estimated that California lost 79,000 manufacturing jobs from 2003 to 2007, while seven other states with a meaningful percentage of U.S. manufacturing gained 62,000, in part because of California's regulatory environment. Los Angeles County has fewer Fortune 500 companies than most other major metropolitan areas, said Greif of the Los Angeles County Economic Development Corp. That's a bad sign for a state famous for its creativity and innovation.