KeNo's Housing and Economic Portal: Tuesday April 6 Housing and Economic stories

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TOP STORIES:

Gov. Chris Christie plans to cut N.J. school aid by $800M - (www.nj.com) Gov. Chris Christie's budget includes an across-the-board cut in state aid to school districts that will equal up to 5 percent of their budgets for the current fiscal year, a move the administration expects to be challenged in court, according to three state officials familiar with the plan. By basing the aid calculation on districts' budgets, the overall reduction of about $820 million is at odds with New Jersey's school funding formula, which dictates that more money go to districts with the neediest children, officials said. That formula, which survived a Supreme Court challenge last spring, replaced the longstanding "Abbott" system that sent the bulk of the aid to 31 poor urban districts. The cuts to schools come on top of $475 million that Christie sliced from school aid in the current fiscal year. Those cuts were based on districts' excess surplus. In addition to schools, Christie's first budget will make major cuts in aid to towns and colleges while skipping a $3 billion payment to the struggling state pension system, said four officials who spoke on the condition of anonymity ahead of Christie's speech.

Struggling Governments Get Creative to Raise Income - (www.bloomberg.com) France, promising to improve the environment, is planning to introduce a carbon tax. In Finland, where the government says it wants to improve diets, taxes are back on candy and soft drinks. Similarly, Denmark has added tobacco and some fatty foods to the list of taxed products. Britain is taking a different tack, considering a so-called horse tax. All these taxes may be presented as serving virtuous ends, but they also have something else in common: they help plug budget holes deepened by the recession, bailouts and billions in stimulus spending. At a time when political leaders in Europe and the United States are committed to no additional income-tax burden on the middle class, they also share the advantage of raising revenue without drawing too much attention to the tightening fiscal noose. As a result, analysts say, taxpayers from California to Copenhagen should brace themselves for more “stealth taxes” — indirect levies like sales taxes, or microcharges on services once provided free, like registering a pet. Such charges can have many benefits for tax collectors. For one thing, they are less volatile and less dependent on the economic cycle than corporate or income taxes. For another, they are less prone to avoidance and cheaper to collect. Finally, analysts say, they are generally easier to enact.

Fed Affirms Plan to End Mortgage Intervention - (www.nytimes.com) he Federal Reserve on Tuesday affirmed its plan to stop buying mortgage-backed securities, expressing a degree of confidence that it could eliminate that pillar of support without undermining the nation’s economic recovery. The move came as the Fed voted to keep its benchmark interest rate unchanged, at nearly zero percent, citing evidence of economic weakness and little sign of inflation. The Fed’s purchases of mortgage-backed securities, which will total $1.25 trillion and end March 31, have helped hold mortgage rates to near-record lows, and the Fed left open the possibility that the purchases might have to be resumed, particularly if the housing recovery stalls. The Fed said it would “continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.”

Fed to leave interest rates near zero a little longer - (www.washingtonpost.com) The Federal Reserve stood by its policy of keeping interest rates at rock-bottom levels for the foreseeable future at its policymaking meeting Tuesday even as central bank officials took a more positive tone about the economy. The Federal Open Market Committee left its target for short-term interest rates near zero, where it has been for the past 15 months. Fed officials also repeated language from previous statements that rates are likely to remain "exceptionally low" for an "extended period," which they have said means at least six more months. The Fed will also go forward with a plan to end its support for the mortgage market at the end of March. By then, the central bank will have completed the purchase of $1.25 trillion in mortgage-backed securities, a key factor in keeping interest rates low for those buying a house. On balance, the Fed's assessment of the economy seemed slightly better than it had been at the last policy meeting, in late January. Recent data suggest that "the labor market is stabilizing," the statement accompanying the rate decision said. At the January meeting, the Fed had said that "deterioration in the labor market is abating."

Jobs Bill Passes in Senate With 11 Votes From Republicans - (www.bloomberg.com) In a rare bipartisan vote, the Senate approved and sent to President Obama on Wednesday a bill intended to spur employment by providing businesses with incentives to hire new workers — an approach that Congressional Democrats hope to repeat. The legislation, approved 68 to 29, would give employers an exemption from payroll taxes through the end of 2010 on workers they hire who have been unemployed for at least 60 days. It also extends the federal highway construction program, shifts $20 billion to road and bridge building and takes other steps to bolster public improvement projects. Democrats hope to follow up with legislation by extending more than $30 billion in corporate tax breaks and aid to small business. At a St. Patrick’s Day luncheon on Capitol Hill after the vote, Mr. Obama thanked the 11 Republicans who backed the measure and said he would like to see that trend continue on emerging economic initiatives.

Greece Keeps IMF Option Alive as Merkel Urges Caution on EU Aid - (www.bloomberg.com) Greek Prime Minister George Papandreou kept alive the possibility of requesting International Monetary Fund aid as German Chancellor Angela Merkel cautioned against “hasty” decisions on European Union assistance for the country. As long as “Greece is still borrowing at an unreasonably high interest rate, over 6 percent,” the country will keep “all options open” while preferring an EU solution, Papandreou said at a press conference in Brussels today with European Commission President Jose Barroso. European finance ministers this week approved a framework for emergency aid to Greece, while leaving the final go-ahead to government leaders who meet next on March 25-26 in Brussels. Papandreou has called on the EU to spell out how the mechanism would work to help Greece fend off the investors who have been dumping the country’s bonds and driving up its borrowing costs. Germany may also favor an IMF role rather than committing taxpayer money to Greece, an option that has been dismissed by European Central Bank President Jean-Claude Trichet and French President Nicolas Sarkozy.

OTHER STORIES:

A second deflationary tidal wave may hit the US early as April - (www.madhedgefundtrader.biz)

Producer prices post biggest drop in 7 months - (www.reuters.com)

Japan's 20 year fight against DEFLATION continues - (www.nytimes.com)

Embattled Health Care Reform Plan Picking Up Steam - (www.cnbc.com)

Thursday: Stocks May Get Lift from Quadruple Witching - (www.cnbc.com)

BOJ Doubles Lending Program to Combat Deflation - (www.bloomberg.com)

Japan Eases Monetary Policy to Fight Deflation - (www.nytimes.com)

Four Ways to Profit When Market Volume Takes a Plunge - (www.cnbc.com)

Jim Rogers Sizes Up Two Global Bubbles - (www.cnbc.com)

China in Midst of ‘Greatest Bubble in History,’ Rickards Says - (www.bloomberg.com)

China unyielding on yuan as U.S. raises pressure - (www.reuters.com)