KeNo's Housing and Economic Portal: Sunday April 18 Housing and Economic stories

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TOP STORIES:

State Debt Woes Grow Too Big to Camouflage - (www.nytimes.com) California, New York and other states are showing many of the same signs of debt overload that recently took Greece to the brink — budgets that will not balance, accounting that masks debt, the use of derivatives to plug holes, and armies of retired public workers who are counting on benefits that are proving harder and harder to pay. And states are responding in sometimes desperate ways, raising concerns that they, too, could face a debt crisis. New Hampshire was recently ordered by its State Supreme Court to put back $110 million that it took from a medical malpractice insurance pool to balance its budget. Colorado tried, so far unsuccessfully, to grab a $500 million surplus from Pinnacol Assurance, a state workers’ compensation insurer that was privatized in 2002. It wanted the money for its university system and seems likely to get a lesser amount, perhaps $200 million. Connecticut has tried to issue its own accounting rules. Hawaii has inaugurated a four-day school week. California accelerated its corporate income tax this year, making companies pay 70 percent of their 2010 taxes by June 15. And many states have balanced their budgets with federal health care dollars that Congress has not yet appropriated.

Vallejo's Inept City Council Blows It - (Mish at http://globaleconomicanalysis.blogspot.com) To permanently bring its spending in line with its tax base, however, at some point Vallejo will have to do something about its pensions. U.S. bankruptcy judge Michael McManus, as the National law Journal reported last March, "held the city of Vallejo, Calif., has the authority to void its existing union contracts in its effort to reorganize." But when it came to voiding those contracts on pensions—a major driver of public expenses—the city blinked. The "workout plan" the city approved in December calls for cuts in services, staff and even some benefits, such as health benefits for retirees. However, it does not touch public-employee pensions. Indeed, it increases the pension contributions the city pays. This week, the city did approve a new firefighter contract that trims pension benefits for new hires and requires existing firefighters to pay more into their pensions. But that contract doesn't touch existing pensions. Nor does it affect police officers or other city workers. It also leaves the city with a $1.2 million shortfall. "The majority [of council members] did not have the political will to touch the pink elephant in the room—public safety influence, benefits and pay," Vice Mayor Stephanie Gomes told me.

IRS to Track Online Sellers' Payment Transactions Beginning Next Year - (www.auctionbytes.com) Internet sellers who don't report their sales will no longer be under the radar. Starting next year, any bank or other payment settlement company that processes credit cards, debit cards, and electronic payments such as PayPal will have to issue information returns telling the IRS what merchants receive. The new returns are Form 1099-K, Merchant Card and Third-Party Payments. The IRS believes that many online sellers fail to report their transactions. Some don't report because they mistakenly believe that Internet sales are invisible. Others do so because they are trying to evade taxes. The IRS has found that using information returns, such as W-2 forms for employees, Form 1099-MISC for independent contractors, and Form 1099-INT for bank interest, goes a long way toward improving the reporting of income. IRS computers can match income reported on these information returns with the income reported on tax returns.

U.S.-Bound Boxes Pile Up in Asia as Lines Avoid Adding Ships - (www.bloomberg.com) Surging shipments of furniture, electronics and clothes to the U.S. and Europe, coupled with capacity cuts by shipping lines, has caused as much as 15 percent of containers to be delayed in Busan this year, often by more than a week, according to Park Jong Ho, assistant general manager at Busan International Container Terminal Co. “With the economy recovering, we have been seeing a lot of containers that didn’t make it out on time because there wasn’t enough space on ships,” he said. A capacity crunch on transpacific routes has disrupted deliveries of Asian and U.S. exports, prompting a probe by U.S. regulators. Container lines have cut trips and imposed higher rates on customers, or shippers, after slumping trade and an excess supply of vessels caused industrywide losses of about $20 billion last year, according to Drewry Shipping Consultants Ltd. “There is seething anger in the shipper community over the way rates have been raised,” said Bjorn Van Jensen, who manages more than 100,000 container shipments a year as logistics head at appliance-maker Electrolux AB. “Carriers see a tight supply situation and they are looking to get rates back up.”

Obama's $3,000,000,000,000 Tax Hike - (online.wsj.com) When he released his new budget proposal on February 1, President Barack Obama asserted that the government "simply cannot continue to spend as if deficits don't have consequences; as if waste doesn't matter; as if the hard-earned tax dollars of the American people can be treated like Monopoly money; as if we can ignore this challenge for another generation."[1] Yet the President's new budget does exactly that-- raising taxes by $3 trillion and federal spending by $1.6 trillion over the next ten years. If enacted, this budget would increase the 2010 deficit to more than $1.5 trillion, and leave a deficit of more than $1 trillion even after an assumed return to peace and prosperity. Overall, the President's budget would double the national debt over the next decade.[2]. President Obama's Budget:

· Would permanently expand the federal government by 3 percent of gross domestic product (GDP) over 2007 pre-recession levels;

· Would raise taxes on all Americans by nearly $3 trillion over the next decade;

· Would raise taxes for 3.2 million small businesses and upper-income taxpayers by an average of $300,000 over the next decade;

· Would borrow 42 cents for each dollar spent in 2010;

· Would run a $1.6 trillion deficit in 2010--$143 billion higher than the recession-driven 2009 deficit;

· Would leave permanent deficits that top $1 trillion as late as 2020;

· Would dump an additional $74,000 per household of debt into the laps of our children and grandchildren; …..

Top Bell aide says Toledo likely to face 'fiscal emergency' - (www.toledoblade.com) Unless there is a fundamental change in the way Toledo's government operates, the city will likely be unable to pay its employees before the year is through, a top official in the Bell administration warned. That looming financial disaster leads people such as Mayor Mike Bell and Councilman D. Michael Collins to throw out words like "bankruptcy" or "receivership," two feared terms but ones that are not likely to become reality. The truth is that receivership or bankruptcy is probably not an option for the city anytime soon. But being slapped by the state as a "fiscal emergency" municipality is a real threat - a label some dislike but others advise Toledo to embrace given its $48 million deficit. "If you cannot make payroll for 30 days, you are there. You are in fiscal emergency," said Deputy Mayor of Operations Steve Herwat, Mr. Bell's right-hand man. "If we don't get this budget balanced, and the imbalance is enough, and yes it is, we are at risk," he said.

Director On Leave After Audit Shows $157,000 Raise - (www.kcci.com) New allegations have emerged that the executive director of the Iowa Association of School Boards gave herself a $157,000 raise. Maxine Kilcrease was suspended from the private, nonprofit group, which is funded with taxpayer money. Recent reports said the group was running low on funds. The IASB accepts dues from all 361 public school districts in Iowa and uses those funds for a variety of tasks, including teaching local school boards how to work together and lobbying at the statehouse on education issues. The Des Moines Sunday Register reported that Kilcrease had her employment contract changed without board approval and that she returned $59,000 in pay last week one day after a Register reporter asked questions about it.

OTHER STORIES:

Greek Bonds Decline on Funding Concern After New Debt Sales - (www.bloomberg.com)

Gold Rises to One-Week High on Demand for Alternative to Dollar - (www.bloomberg.com)

Greek 7-Year Bond Trading to Measure EU Support Need

S.E.C. Looks at Wall St. Accounting - (www.nytimes.com)

SEC launches ‘Repo 105’ probe - (www.ft.com)

China Gold Demand May Double Within Decade, WGC Says - (www.bloomberg.com)

SEC Queries Firms on Repos - (online.wsj.com)

IMF Concerned About East European Currency Gains, Belka Says - (www.bloomberg.com)

Subprime Debt Rallies as U.S. Enhances Loan Aid: Credit Markets - (www.bloomberg.com)

Vale, BHP End Annual Ore Talks; Vale Wins 90% Jump - (www.bloomberg.com)

Uranium May Have ‘Hyper’ Price Run, Uranium Energy Corp Says - (www.bloomberg.com)