by | ARTICLES, ECONOMY, GOVERNMENT, NEW YORK
Crains New York had a good piece on the living wage legislation currently being debated in NY. “The Bronx lawmaker said the bill, which would compel employers at projects that receive city subsidies to pay $10 an hour plus benefits, or $11.50 without benefits, is designed to “build a stronger economy,”.
I’ve spoken in earlier posts about the need for economic impact studies in NY with regard to financial legislation — just as construction projects necessitate an environmental impact study in order to assess the pros and cons and to find out the true cost, the same process should be applied to economic legislation. A bill such as this perfect fodder for this type of assessment.
LIVING WAGE BILL GETS WATERED DOWN
Councilman Oliver Koppell, the primary sponsor of the City Council’s controversial living wage bill, has been writing to its opponents in recent weeks to explain its “core rationale” and to propose ways to narrow its scope.
The Bronx lawmaker said the bill, which would compel employers at projects that receive city subsidies to pay $10 an hour plus benefits, or $11.50 without benefits, is designed to “build a stronger economy,” and that it was never intended to apply to nonprofits, small businesses and residential projects.
He said he’s considering broadening an exemption to carve out small businesses with annual revenues of $1 million or less; raising the subsidy threshold that triggers the bill to above $100,000; clarifying that certain subsidies like the Industrial and Commercial Abatement and J-51 incentives are exempt; and reducing the record-keeping requirement to six years from 30.
A source close to the Council said the subsidy threshold could be bumped up to as high as $1 million and the small business exemption could be raised to as much as $5 million.
In an interview, Mr. Koppell said the proposed amendments stem from testimony provided by opponents at a City Council hearing on the bill last month. “We don’t want to do anything that will discourage economic activity,” he said. “There are some clear issues raised at the hearing that should be taken care of.”
Proponents of the bill say the city should not subsidize projects that create “poverty-wage” jobs. They argue that stores benefit indirectly from subsidies granted to their landlords, and thus it is fair to ask them to pay more than the state minimum wage.
Opponents, however, contend the bill is flawed beyond repair and say amending it will not satisfy them.
“Koppell is trying to change the bill primarily because there has been broad opposition voiced to the legislation from across all five boroughs,” said Nancy Ploeger, president of the Manhattan Chamber of Commerce, a member of the Five Boro Chamber Alliance, which is leading opposition to the bill. “Wage mandates, regardless of amendments from the City Council, are a nonstarter from the perspective of the business community.”
Ms. Ploeger said she has written to Mr. Koppell on behalf of the coalition offering to meet with him to “discuss ways to promote job creation” in the city. “This bill is not one of them,” she said.
Proponents of the bill said they consent to Mr. Koppell’s proposed changes. “We’re trying to get a bill passed,” said a spokesman for the Living Wage NYC coalition, which is led by the Retail, Wholesale and Department Store Union. “These changes actually strengthen the bill while keeping its core focus the same.”
The bill has 30 sponsors in the City Council, four shy of the number needed to overcome a veto by Mayor Michael Bloomberg, who has expressed disdain for wage mandates.
But City Council Speaker Christine Quinn, who decides whether the bill comes to a vote, has yet to take a stance on the measure. She did meet with Mr. Koppell to discuss the revisions and expressed appreciation for his willingness to compromise. But she is focused on crafting a city budget for the fiscal year that begins next month, not on living-wage legislation.
“Basically, I think the speaker’s view on the bill is ‘let’s get the budget done,’ Mr. Koppell said.
by | ARTICLES, ECONOMY, NEW YORK
Having solved all other fiscal problems in NY, our legislators are working to kill more businesses with this bill. Below is an article from Cranes New York
Advocates for a law requiring city businesses to offer their employees paid sick days step up their efforts as similar measures advance in Connecticut and Philadelphia.
Connecticut legislators are about to pass a bill to make their state the first in the nation to require employers to provide workers with paid sick time. And City Council members in Philadelphia are expected to vote Thursday on a bill mandating up to seven paid sick days per year for workers.
With that momentum, advocates in New York City are stepping up efforts to revive a sick-pay bill shelved last year by City Council Speaker Christine Quinn over concerns that it would harm small businesses.
“Making sure New Yorkers can take a day off when they are sick or need to care for their children—without having to miss a paycheck or worry about losing their job—is the right thing for workers,” said Councilwoman Gale Brewer, the bill’s lead sponsor. “Our neighbors [Connecticut and Philadelphia] recognize the same logic and know it’s the right thing for businesses, too. The time has come for paid sick days in New York City.”
The Council bill is being pushed by the New York State Paid Family Leave Coalition, an alliance of more than 400 labor, community, business and women’s groups. As in Connecticut, where lawmakers could vote Friday or Saturday on sick pay, the local chapter of the Working Families Party is an active member of the group. Members are meeting regularly and expect to soon re-launch a public campaign geared towards bringing the bill to a vote this fall.
Ms. Brewer said she will be meeting with fellow Council members to let them know about the developments on sick pay around the country.
Her bill would require businesses with 20 or more employees to offer nine sick days a year and smaller businesses to give five. It has 35 sponsors in the Council, one more than needed to overcome a potential veto by Mayor Michael Bloomberg.
Despite her members’ sponsorship, Ms. Quinn did not let the bill get to a vote last year, contending it would have a crushing impact on small businesses in a down economy. She promised to revisit the issue every two months, assessing whether economic conditions had improved.
The city’s economic recovery has outpaced that of the nation, with the five boroughs adding nearly 40,000 jobs in the first four months of the year, according to real estate services firm Eastern Consolidated. In the past 19 months, the city has recovered more than half of the jobs lost in the downturn, while the nation has recovered only about 20% of its losses.
“Even though the city’s fared better, we’re far from seeing the light at the end of the tunnel, especially when you’re looking at small businesses,” said Linda Baran, president of the Staten Island Chamber of Commerce, part of a coalition of chambers that led opposition to the bill last year. “Locally, I don’t know any small businesses that are hiring. They’re concerned about making their payroll.”
Carl Hum, president of the Brooklyn Chamber of Commerce, said that one only need to look at Friday’s weak national jobs report to know that the economy is “still pretty fragile.” He said that the Connecticut bill appears to be moving forward “over the objection of business groups” and that “the difference here in New York is that we have a speaker that brought the business community in to talk about the bill.”
A spokesman for Ms. Quinn said that conversations with Ms. Brewer about paid sick days are ongoing. Ms. Brewer said that the speaker has asked about the upcoming vote in Philadelphia. It’s unclear if she will be swayed by efforts in other states, which are being led primarily by the 15-state consortium Family Values @ Work.
In addition to the votes in Connecticut and Philadelphia, the Seattle City Council is set to introduce a sick-pay bill on Wednesday; a bi-partisan group of state legislators in Georgia led by five Republicans is supporting a measure to allow workers to use sick time to care for children and other family members; and a coalition in Denver is pressing for a ballot initiative on sick days in November. San Francisco and Washington already require paid sick days.
The White House has also entered the fray, hosting a series of workplace flexibility forums—including one in New York City this week—designed to help American workers meet the demands of their jobs without sacrificing the needs of their families.
“We know New York is different, and we’re willing to work towards what would make sense for everybody,” Ms. Brewer said. “But I’m hoping that the national momentum pushes us here.”
by | ARTICLES, ECONOMY, TAXES
Nothing riles Americans quite like taxes: who pays what, whether the government needs to raise them or might slash them, and how much they’re eating away at our paychecks.
And when it comes to tax avoidance — the legal means of minimizing one’s tax burden — a growing chorus of critics say high tax rates are to blame, and an overly complex tax code isn’t helping. The emerging point of view: The higher tax rates get, the more people will try to figure out ways to stop paying them.
As evidence of that, analysts point to the relatively steady chunk of gross domestic product that can be attributed to tax revenues, even as nominal rates rise and fall. From 1950 until 2010, all federal taxes hovered between 15 percent and 20 percent of GDP, though top income tax rates varied wildly (from 28 percent to 91 percent) during that period. And that suggests a greater reliance on loopholes when rates are higher, experts say.
“When tax rates are that high, nobody is going to pay,” says Alan Dlugash, an accountant at Marks Paneth & Shron LLP in New York. “You’re going to find a way to get out of it,” he says. In fact, he says his high-end clients in New York are holding onto stocks and avoiding selling their business for fear of being bulldozed by a giant capital gains tax bill.
Big business appears to be following suit. The New York Times reported in May that loopholes in the tax code have meant U.S. multinationals are paying far less than the corporate tax rate (one of the highest in the world), leading one expert to conclude that U.S. businesses were “world leaders in tax avoidance.”
The Internal Revenue Service doesn’t have specific figures on the revenue lost each year to tax avoidance, but nearly a decade ago it reported a tax-gap of $345 billion, the vast majority of which was lost to under-reporting. That figure hasn’t been updated since 2001, though the IRS says plans are underway to release more current stats.
Tax critics, meanwhile, are busily trying to prove the harmful effects of high tax rates. For example, raising $1 trillion in tax revenue costs the economy and taxpayers an additional $110 to $150 billion, according to a 2009 report by Robert Carroll, a fellow at the conservative-leaning Tax Foundation. And a 2008 IMF paper argues that lowering the tax rate would effectively increase tax compliance and raise revenues.
Nina Olson, national taxpayer advocate at the IRS, says she hasn’t seen any definitive evidence that high rates contribute to tax avoidance; the problem, she says, is ambiguity: the tax code has undergone a staggering 4,428 revisions in the last decade. The code itself is some 3.8 million words, creating endless opportunities to exploit the system and confusing even those who want to comply into unintentional non-compliance.
“People find it confusing. And if you don’t understand it, then you’re going to feel ripped off,” Olson says, adding that a person whose marginal tax rate is 28 percent could actually pay only five percent once all the various tax benefits are factored into the equation.
Olson’s office is examining the root causes for non-compliance, looking specifically at attitudes towards tax, education, the influence of tax professionals, enforcement and even civic duty.
Not everyone is convinced that lowering tax rates would stem the wave of tax avoidance. Ted Gayer, a senior fellow at the Brookings Institute, acknowledges that high taxes impact the economy through consequences such as lower labor supply and disincentive to invest. But slashing taxes won’t bring a tide of new revenue, he says.
“When you change taxes, you’re going to get a behavioral response,” Gayer says. “But we shouldn’t fool ourselves into thinking we can get a free lunch by lowering tax rates and collecting more revenue. I don’t buy it.”
by | ARTICLES, ECONOMY, GOVERNMENT, TAXES
(Reuters) – Alan Dlugash is a New York accountant who specializes in high net worth Manhattanites, but lately he’s been fielding a lot of calls from clients in neighboring states — Connecticut and New Jersey.
“The big deal right now is ‘how do I change my residency?'” he said. And the reason is almost always the same: High local taxes.
Given the extension of the Bush era federal tax cuts for two years, a cut in Social Security tax this year, and the rise of anti-tax sentiment evidenced in last November’s election results, tales of tax migrants may seem out of sync. Just last week, a number of ‘we’re undertaxed’ reports surfaced suggesting that Americans were facing their lowest tax burdens since 1958.
That ignores the idea that just as all politics is local and personal a lot of taxes are too – and in recent years the states and cities have been busy offsetting federal tax cuts with local tax hikes, largely aimed at higher income earners.
Since the beginning of 2009, some 31 states have hiked taxes on everything from income, estates, and investment gains to cigarettes and plastic bags, with annual net increases pushing $50 billion, according to data from the National Conference of State Legislatures. City and county governments have been piling on too, raising sales and property taxes in many areas even as home values drop.
For example, with last week’s passage of a two-year, $2.6 billion tax hike, Connecticut – home to much of the hedge fund industry – raised rates on income and investment taxes for the second time in three years.
It had already pushed up the rate for those earning more than $500,000 to 6.5 percent from 5 percent in 2009. Now, it has boosted the top rate to 6.7 percent, raised sales taxes and added an extra luxury tax on items like pricey boats and bracelets.
Earlier this year, Illinois approved a $6.8 billion income tax hike — pushing its flat tax rate to 5 percent from 3 percent. In California, which still doesn’t have a budget for the fiscal year which starts on July 1, Governor Jerry Brown is trying to extend a 0.25 percentage point increase, which took the top rate to 10.55 percent in 2009 but that expired on January 1.
And there could be more local levies to come, as some experts believe states will have to turn to taxes as they face enduring shortfalls and the loss of federal stimulus funds.
All of which means that Dlugash and other accountants are fielding a lot of calls from people who are wondering if there’s anything they can do, from decamping temporarily to low-tax Florida, to buying into money-losing tax shelters, just to cut their local and state tax burdens.
“People are not happy about the direction in which all the state and local taxes are going,” said Charles Barragato, an accountant and financial adviser with offices in Connecticut and New York. “We’re seeing more of a focus on the state tax implications of any plans. More sophisticated clients are looking at trusts.”
In 2000, the average U.S. household was paying 9.4 percent of its income in state and local taxes, according to data from The Tax Foundation, a conservative leaning think tank.
By 2009, the last year for which figures are available, and the year in which the biggest round of recent tax increases were enacted, that had risen to 9.8 percent.
This increase, though significant, isn’t enough to outweigh the Bush tax cuts in 2001. After all, they reduced the top federal income tax rate to 39.6 percent from 35 percent.
But the results of the state and local taxing jag are felt disproportionately in affluent areas that already had comparatively high tax rates, such as Dlugash’s stomping grounds in and around New York.
In New York City, a particular issue for the financial community and other high net worth taxpayers is the treatment of capital gains as ordinary income, resulting in a 12.85 percent rate on investment profits on top of the existing 15 percent federal rate.
That rate on salaries and investment income rose from 10.5 percent in 2002. Along the way, the state also did away with almost all tax deductions for higher income earners, and also increased state estate taxes.
“RUN OUT OF TOWN”
It means that a Manhattan family earning $400,000 with $50,000 in income from dividends and $150,000 in capital gains would pay $73,669 in state and local taxes in 2010, up 31 percent from the $61,986 bill they would have faced in 2000, according to calculations done for Reuters by TurboTax.
Furthermore, the 2010 state burden would have triggered an additional $4,264 in federal taxes because of the way state and federal taxes interplay at high brackets. On top of that, they now face property tax increases that have added thousands of dollars – or in some cases even tens of thousands – to their total tax burden.
“If Kansas legislators ever did to their farmers, or Texas did to their oilmen, what New York does to its financial community, they would have been run out of town on a rail,” Dlugash said.
It is no wonder that some wealthy New Yorkers find themselves holding on to stocks, bonds and businesses beyond their preferred sell date because they don’t want to pay the associated taxes.
That isn’t confined to New York. Richard Mandy, a lifetime Maryland resident who built a successful office furniture business, moved to Miami in Florida, where there is no state income tax, specifically for the purpose of selling his business when he was ready to retire.
He guesstimates that the move saved him more than $350,000 in capital gains taxes, enough to pay for his cushy new home. “As long as the (Maryland) Comptroller of the Currency doesn’t come after me, I’ll be absolutely delighted,” he says.
PROPERTY TAX SCOURGE
Real estate taxes have added another big burden for many homeowners, even as they saw the market values of their houses fall. Between 2005 and 2009, property taxes across the U.S. rose to an average 3.0 percent of income from 2.8 percent, the Tax Foundation reported. But those wealthier areas showed a disproportionate increase.
During that same period, property taxes went to 8.7 percent of income from 7.9 percent in Essex County, New Jersey, where many bankers and professionals who work in Manhattan live.
That means, a resident owning a $1 million house in Montclair, a popular New Jersey town, would pay $36,400 in property taxes now against $25,800 in 2005. There have been similar steep increases in parts of New York state.
Contrast that with the low taxes in some southern states.
In many counties in Louisiana or Alabama, owners of a $1-million home would owe only about $5,000. And, to rub it in, the house would be enormous by comparison with homes in expensive parts of the northeast.
It all means that middle and upper income earners in the northeast can easily pay tens of thousands more in tax than their equivalents in many other states.
We also shouldn’t forget that higher earners in high-tax states often get hit with a double whammy when their state tax burden grows.
That is because of an almost unique American invention called the Alternative Minimum Tax. Originally conceived as a way to insure that even the wealthiest share in the national tax burden, it now catches many in the middle class because the government hasn’t adjusted the system for inflation.
But it adds insult to injury, hitting those who already pay high state and local taxes hardest by adding those back into the calculation before additional federal tax is imposed.
“It’s a big hurt on the middle level of our clients,” says Wayne Berkowitz, an accountant with Berdon LLP. “The middle tier is getting whacked by the AMT as state and local taxes go up.”
But a lot of this is backward looking you may say. Surely, the anti-tax atmosphere means that there won’t be many more hikes, and that spending cuts will be the key to dealing with budget deficits? Meanwhile, some of the state hikes are already scheduled to expire.
“The trend is going to go down a bit, because states are beginning to realize that people will leave,” says Berkowitz. In fact, the 2010 Census did show a decade-long migration to low-tax havens like Florida and Texas, while high tax states like California and New York barely held their population levels.
But still unresolved budget gaps could lead to more tax hikes in the next few years if budget cuts become so deep as to be unpalatable, suggests Elizabeth McNichol of the Center on Budget and Policy Priorities. Her organization has noted that states will face the added burden of losing some $60 billion in federal stimulus funds beginning on July 1.
The NCLS has pegged fiscal year 2012 shortfalls at $86.1 billion, and says states already expect more than $30 billion in gaps for the following year.
“Certainly we still see states struggling with their budgets and looking for ways they can raise revenues and make their budgets balance,” said Greg Rosica, a tax partner at Ernst & Young.
And many believe that with a federal government currently spending about $1 for every 60 cents it takes in from taxes and other revenue, Washington won’t be able to get the deficit under control through spending cuts alone and will soon by rejoining the tax hike party.
(With additional reporting from Lisa Lambert; Editing by Martin Howell)
Corrects change in top federal tax rate in paragraph 14.
by | ARTICLES, TAX TIPS, TAXES
Itemizing on one’s taxes might take longer than taking the standard deduction, but the extra effort often pays off. NY1’s Money Matters reporter Tara Lynn Wagner filed the following report.
To itemize or not to itemize? That is the question… on line 40 of the 1040 form. Taxpayers get to choose between filing a Schedule A or taking the standard deduction, which is $5,700 for a single person and $11,400 for a married couple filing jointly. The standard deductions sound substantial, but itemizing may come up with more money.
“If your sum total of all your itemized deductions are going to exceed that number, you should itemize your deductions,” says Alan Dlugash, a partner of Marks Paneth & Shron LLP.
While $11,400 might sound high, it is actually a pretty easy threshold to reach. Experts recommend starting with big-ticket deductions like mortgage interest and then keep digging.
“You should have a simple list of the major items, and just do a quick ‘looksie’ to make sure,” says Dlugash.
“Personal taxes, taxes on your automobile, sales taxes are deductible as an option, if they’re bigger than your income taxes, which is also deductible; medical deductions,” says Mark Steber of Jackson Hewitt Tax Service.
One can also itemize charitable contributions, which range from clothes donations to support for a relief effort or contributions to the church collection bin. However, experts warn that those itemizations need proof.
“Anything — $10, $20, $30 — needs to be documented, so either a canceled check or you need to get a letter from the charitable organization showing you made this contribution,” says Vincent Cervone, the principal of VRC & Associates. “If you don’t have this letter, you cannot take this deduction.”
The important thing in general is to keep track of receipts, and there are many strategies for doing so. Those who want to use the least amount of effort can just toss their papers in a shoebox or manila envelope.
Cervone takes it one step further and recommends his clients get fancy supplies, like a notebook and a stapler.
“And each day you have a receipt for some sort of business expense, you staple it onto that page,” says Cervone. “At the end of the year when you come see me, I add all the pages up. I total it at the end of the year, and it’s done. It’s easy.”
It may not be as easy as taking the standard deduction, but experts say the bigger effort will likely mean a bigger refund.
“Standard’s easy. Itemized is hard, but itemized in many cases is much larger,” says Steber.
Click here to watch the video: http://brooklyn.ny1.com/content/ny1_living/money_matters/136150/don-t-agonize-when-it-comes-time-to-itemize
by | ARTICLES, ECONOMY
The WSJ had a nice little piece last month on the failures of HAMP. I concur — we need to cut this program out immediately
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Proposing cuts to housing programs has never been politically popular, so maybe it’s a sign of the times that Ohio’s Jim Jordan and other Republicans are floating a bill to terminate the Obama Administration’s Home Affordable Modification Program, or Hamp. Or maybe, just maybe, this latest waste of taxpayer money is so egregious that the bill’s sponsors figure even Democrats can get on board. Let us hope.
Hamp was launched in 2009 to reward mortgage servicers for modifying contracts and borrowers for staying current on their payments. The goal was to help three to four million homeowners avoid foreclosure. Yet two years later, the number of applications cancelled has exceeded those approved, and some homeowners have been forced into foreclosure while awaiting a decision.
Hamp was flawed from its inception. If the last few decades of public housing policy have taught anything, it’s that programs to keep people in homes they can’t afford is a bad idea—and, in any case, bureaucrats are terrible managers. Treasury administered Hamp but contracted day-to-day oversight to Fannie Mae and Freddie Mac. The launch was rushed and the rules for loan modifications were repeatedly changed.
One year into the program, more than one million borrowers had entered trial modifications, swamping mortgage servicers. Seventy-eight percent of borrowers were already in default before starting the trial, according to Treasury data released last week. Many loans weren’t viable from the beginning and wouldn’t benefit even from the low interest rates facilitated by the Federal Reserve.
The numbers bear that out. According to Treasury data, 792,529 trial and permanent Hamphome loan modifications have been cancelled, compared to 521,630 homeowners who have had their mortgages “permanently modified.” Applications for Hamp modifications are now slowing markedly. The Congressional Oversight Panel estimated last month that on current trendsHamp will prevent at most 700,000 to 800,000 foreclosures.
Meantime, private mortgage servicers—who can price risk more accurately—have outstrippedHamp. The Hope Now coalition estimates that last year non-Hamp modifications totaled about 1.2 million loans. That’s about double what Hamp has done over the same period. Treasury claims that Hamp redefault rates are less than those of the private sector, but that is hard to verify because borrowers who drop out of Hamp in the trial period aren’t counted in the redefault statistics.
The Obama Administration nonetheless keeps hawking Hamp, and last month Treasury’s Timothy Massad told Congress that “helping over 500,000 people enter into permanent modification, people who would otherwise be thrown out of their homes” are “dollars well spent.”Hamp is funded through the Troubled Asset Relief Program and has spent $840 million of the $29.9 billion allocated to the Making Home Affordable Program, most of which is for Hamp.
That’s not persuasive to Neil Barofsky, the special inspector general for Tarp, who last month noted Treasury’s “astonishing silence” and refusal to “provide an estimate, goal, or projection of the total number of permanent modifications it expects to complete and maintain.” It’s hard to know if money is “well spent” if you don’t know what defines success.
If you measure success by the housing market, Hamp has failed miserably. According to RealtyTrac, 2.9 million homes received foreclosure filings in 2010, up from 2.8 million in 2009 and 2.3 million in 2008. The bellwether Case-Shiller home price index is falling again. Hamp is one more artificial prop to a housing market that will recover faster if foreclosures are allowed to proceed more rapidly and the homes are resold. By all means give Hamp the hook.
http://online.wsj.com/article/SB10001424052748703956604576110412700522054.html
by | ARTICLES, NEW YORK
An interesting piece coming out of the NYTimes today regarding public sentiment on the activity in Wisconsin.
Majority in Poll Back Employees In Public Unions
As labor battles erupt in state capitals around the nation, a majority of Americans say they oppose efforts to weaken the collective bargaining rights of public employee unions and are also against cutting the pay or benefits of public workers to reduce state budget deficits, according to the latest New York Times/CBS News poll.
Labor unions are not exactly popular, though: A third of those surveyed viewed them favorably, a quarter viewed them unfavorably, and the rest said they were either undecided or had not heard enough about them. But the nationwide poll found that embattled public employee unions have the support of most Americans — and most independents — as they fight the efforts of newly elected Republican governors in Wisconsin and Ohio to weaken their bargaining powers, and the attempts of governors from both parties to cut their pay or benefits.
Americans oppose weakening the bargaining rights of public employee unions by a margin of nearly two to one: 60 percent to 33 percent. While a slim majority of Republicans favored taking away some bargaining rights, they were outnumbered by large majorities of Democrats and independents who said they opposed weakening them.
Those surveyed said they opposed, 56 percent to 37 percent, cutting the pay or benefits of public employees to reduce deficits, breaking down along similar party lines. A majority of respondents who have no union members living in their households opposed both cuts in pay or benefits and taking away the collective bargaining rights of public employees.
Governors in both parties have been making the case that public workers are either overpaid or have overly generous health and pension benefits. But 61 percent of those polled — including just over half of Republicans — said they thought the salaries and benefits of most public employees were either “about right” or “too low” for the work they do.
When it came to one of the most debated, and expensive, benefits that many government workers enjoy but private sector workers do not — the ability to retire early, and begin collecting pension checks — Americans were closely divided. Forty-nine percent said police officers and firefighters should be able to retire and begin receiving pension checks even if they are in their 40s or 50s; 44 percent said they should have to be older. There was a similar divide on whether teachers should be able to retire and draw pensions before they are 65.
The nationwide telephone poll was conducted Feb. 24-27 with 984 adults and has a margin of sampling error of plus or minus three percentage points for all adults. Of those surveyed, 20 percent said there was a union member in their household, and 25 percent said there was a public employee in their household.
Tax increases were not as unpopular among those surveyed as they are among many governors, who have vowed to avoid them. Asked how they would choose to reduce their state’s deficits, those polled preferred tax increases over benefit cuts for state workers by nearly two to one. Given a list of options to reduce the deficit, 40 percent said they would increase taxes, 22 percent chose decreasing the benefits of public employees, 20 percent said they would cut financing for roads and 3 percent said they would cut financing for education.
The most contentious issue to emerge in the recent labor battles has been the question of collective bargaining rights. A proposal by Gov. Scott Walker of Wisconsin to weaken them sent Democratic state lawmakers out of state to prevent a vote, flooded the Capitol in Madison with thousands of protesters and sparked a national discussion about unions.
The poll found that an overwhelming 71 percent of Democrats opposed weakening collective bargaining rights. But there was also strong opposition from independents: 62 percent of them said they opposed taking bargaining rights away from public employee unions.
Phil Merritt, 67, a retired property manager from Crossville, Tenn., who identifies himself as an independent, explained in a follow-up interview why he opposed weakening bargaining rights for public workers. “I just feel they do a job that needs to be done, and in our country today if you work hard, then you should be able to have a home, be able to save for retirement and you should be able to send your kids to college,” he said. “Most public employees have to struggle to do those things, and generally both spouses must work.”
The one group that favors weakening those rights, by a slim majority, was Republicans. Warren Lemma, 56, an electrical contractor from Longview, Tex., said states did not have the money to pay for many benefits that state workers enjoy.
“Retirement benefits should not be taken away from those about to retire, but the system should be changed for the people starting to teach just now,” said Mr. Lemma, a Republican. “And the only way the system will change is to do something about unions and their control, and the only way to do that is to take away collective bargaining.”
The poll found that 45 percent of those surveyed said they believed that governors and state lawmakers who are trying to reduce the pay or benefits of public workers were doing so to reduce budget deficits, while 41 percent said they thought they were doing so to weaken unions’ power.
Although cutting the pay or benefits of public workers was opposed by people in all income groups, it had the most support from people earning over $100,000 a year. In that income group, 45 percent said they favored cutting pay or benefits, while 49 percent opposed it. In every other income group, a majority opposed cutting pay or benefits: Among those making between $15,000 and $30,000, for instance, 35 percent said they favored cutting pay or benefits, while 60 percent opposed it.
Labor unions, including private sector labor unions, are seen as less influential now than they were three decades ago. The poll found that 37 percent of those surveyed believe that labor unions have “too much influence” on American life and politics, while 48 percent said they had the “right amount” or “too little” influence. In a 1981 poll, by contrast — soon after President Ronald Reagan fired striking air traffic controllers — 60 percent of those surveyed said unions had “too much influence.” Of course, union membership has declined since then.
by | ARTICLES, ECONOMY, POLITICS
One of my favorite elected officials, House Majority Leader Eric Cantor, wrote an Op-Ed for his local newspaper in Virginia. Cantor addresses the fundamental and necessary economic premise that cutting spending will grow the economy.
Cutting spending will grow the economy
By TIMES DISPATCH STAFF | ERIC CANTOR
Published: February 26, 2011
America is at a tipping point, and Republicans have begun to take action.
Last week, the House passed unprecedented legislation reducing discretionary spending this fiscal year by more than $100 billion. In addition, we made clear that our long-term budget, to be unveiled in the spring, will address the entitlement crisis that threatens to bankrupt our country — a long overdue move that politicians for too long have kicked down the road. This show of fiscal restraint represents not merely a clean break with Congress’ free-spending past, but a rededication to economic growth and a laser-like focus on job creation.
It’s important to recognize the link between cutting spending and growing the economy. Like the gardenerpruning the tree, we do not cut for the sake of cutting, but out of necessity. It’s the only way to restore economic health and free up the private capital necessary for new growth. Put simply, less government spending equals more private sector jobs.
Economic growth is generated when businesses weigh their risks against their potential reward (returns after taxes) and make a decision that an investment is worthwhile. That investment can take the form of a capital investment or an investment in additional labor (jobs). Especially in this increasingly interconnected world, businesses will logically move their investments to wherever they can achieve the greatest returns without assuming too much additional risk.
For many years, America offered unparalleled opportunity for businesses to grow and succeed. Investors could find in the United States comparatively low taxes, a consistent regulatory environment and a stable currency. Tens of millions of jobs were created as America served as the global driver of growth and prosperity.
Yet today many doubt whether America can still power the world economy forward. Uncertainty over our deteriorating fiscal situation and increasingly burdensome regulatory structure has made job creators and investors think twice about deploying their capital in the United States.
As the federal government continues to borrow nearly 40 cents for every dollar it spends, America’s $14 trillion debt hangs over the economy like a dark cloud waiting to unleash a violent storm of higher taxes, inflation and higher borrowing costs. The very businesses and investors we need to grow our economy are waiting to see if this cloud will pass.
The more local and national business owners I meet with, the more obvious it becomes that our businesses are innovative and poised to grow; government just has to stop making it harder for them to compete.
As part of our larger effort, Republicans are reviewing and cutting job-impeding regulations that stifle job growth. Next week, we will repeal the onerous 1099 reporting requirement to provide small businesses with much-needed relief. Additionally, we are focused on other ways to grow the economy, including tax reform and implementing job-creating trade agreements.
Will the administration and the Senate join us in getting our fiscal house in order? Or will they continue to add entitlements and borrow and spend at unsustainable levels? If only they would unite with us, confidence can be restored in America and capital investment can return.
But if they don’t walk us back from the precipice, businesses will see only weaker prospects for profit and growth on our shores — and turn instead to other countries they deem safer. What does this mean for America? It means we would be a lot more like Europe. Our graduates and work force would have less opportunity to find work. Our prospective entrepreneurs would have less incentive to pursue their ideas. Unemployment would be permanently higher and growth would be permanently weaker.
During his recent speech to the Chamber of Commerce, President Barack Obama insisted that in response to his policies, businesses have a “responsibility” to hire more workers and support the U.S. economy. But that’s not how it works in market-based economies. There is no magic hiring wand.
If the president genuinely wants to create jobs, he should take a cue from Virginia. Gov. Bob McDonnell has turned a $1.8 billion deficit into a $403 million surplus, cut $4.2 billion out of the 2011 and 2012 budgets — and he has done so without raising taxes.
America needs to show the world that we are serious about slashing our debt. By cutting $100 billion off the president’s proposed budget and taking the lead in reforming entitlements, House Republicans have demonstrated that we are more than ready to help make the tough choices necessary to move us in the right direction. Moving forward, we will use every tool at our disposal to remove barriers to economic growth so that people can get back to work and we can start to get our fiscal house in order.
http://www2.timesdispatch.com/news/2011/feb/26/tdopin02-cutting-spending-will-grow-the-economy-ar-868581/?referer=http://www.facebook.com/l.php?u=http://timesdispatch.com/ar/868581/&h=82b92&shorturl=http://timesdispatch.com/ar/868581/
by | ARTICLES, ECONOMY, POLITICS
Continuing on the housing theme, I wanted to share with you an article written on February 7 by Robbie Whelan of the WSJ. Mr. Whelan has a good run-down on the current housing and lending situation as well as the accurate status of HAMP (Home Affordable Modification Program).
By ROBBIE WHELAN and ANTHONY KLAN
As the federal government’s flagship mortgage-modification program comes under scrutiny for failing to meet its goal of helping three to four million troubled homeowners, state-level efforts to boost modifications appear to be picking up momentum.
The Treasury reported Monday that the government’s Home Affordable Modification Program, or HAMP, had provided permanent help to 521,630 homeowners since the program began in spring 2009.
By comparison, over the same period, banks negotiating directly with borrowers have made about two million permanent loan modifications outside the government’s program. These modifications continued to rise in recent months even as the number of HAMP modifications trailed off.
Critics of HAMP say the program has made little impact on the housing market and should be ended. Last week, House Republicans introduced a bill to end the effort, calling it a “colossal failure.” The administration defends the program.
“I think we’ve got to remember that HAMP has achieved over a half-million modifications. These are people that make $50,000 a year, so to sort of write it off and say, ‘Well, it’s a failure,’ I think is not really appropriate,” said Tim Massad, an acting assistant Treasury secretary, in a hearing on Capitol Hill last week.
Banks say they are doing more of their own modifications—and fewer HAMP mods—because eligibility requirements for HAMP are more stringent. Once a borrower is deemed ineligible for the government program, a modification worked out directly with the bank sometimes is the best option.
But also having a big impact are state mandates requiring banks and loan-servicing companies to hold mediation sessions with borrowers prior to foreclosing, said lawyers for delinquent borrowers and judges handling foreclosure cases.
About 20 states encourage some type of foreclosure mediation program to allow borrowers and lenders to hammer out a settlement, according to the Center for American Progress, a liberal Washington think tank. Three of those states—New York, Florida and Connecticut—and a handful of cities make mediation mandatory.
In Florida, Fannie Mae has begun testing a foreclosure-prevention program to get banks to meet with troubled borrowers to negotiate mortgage modifications and other alternatives before filing foreclosure documents in court.
“If they’re looking at mounting legal costs and risks to foreclose, then the workout process might seem like the best option,” said Alan M. White, a professor of law at Valparaiso University in Indiana, who has written extensively on the mortgage crisis. “Banks have got states preventing you from foreclosing…dismissing cases and ordering mediation, those are just two tools that state judges have.”
Others say banks are more willing to modify loan terms—which generally means reducing interest rates, forgoing late fees and extending the terms of loans—because it’s starting to be cheaper than completing a foreclosure. In some cases, in some states, that process can take years and thousands of dollars in legal fees to complete.
Among the banks to ramp up modifications isWells Fargo & Co., which plans to hold 20 large-scale mediation sessions across the country this year. More than 150,000 borrowers who have missed payments, or have been in modification negotiations, have or will be invited to come to hotels and convention centers for rapid-fire meetings the bank hopes will result in loan modifications.
That’s what happened to Patricia Yador, 53, of West Orange, N.J. at a “home preservation workshop” held at the Marriott hotel in downtown Brooklyn last Tuesday. Wells Fargo, her mortgage servicer, agreed after a mediation conference to knock more than 2 percentage points off the interest rate on her $300,000 mortgage.
That cut her monthly payments from $3,257 to $2,833.
“These are tears of joy because [before] they always turned me down,” said Ms. Yador, who has owned her home for 17 years and lives on $2,100 in disability and pension payments since she stopped working as a hospital accounts manager about three years ago.
Ms. Yador was one of 30,000 borrowers that Wells Fargo invited to participate in the modification fair in the New York-New Jersey area. Borrowers like Ms. Yador, who end up in a non-HAMP modification, are far more common than those who go through the government program. Of the roughly 600,000 loan modifications made by Wells Fargo since January, 2009, 86% have been done outside of HAMP, and 14% through HAMP.
HAMP offers servicers financial incentives to reduce loans to 31% or less of a borrower’s income, but it also has stringent requirements for eligibility. Borrowers who have lost their jobs or who have expensive medical conditions or other debts often are rejected by HAMP.
A Wells Fargo spokesman said the modification fairs are driven by the bank’s desire to do right by its customers. But others say the stepped up efforts are in response to ratcheted-up pressure from the states.
For the last two years in Philadelphia, where foreclosures are handled by judge, courts have moved to a system where they automatically schedule a “conciliation conference” within 30 to 45 days of each foreclosure filing.
Servicers are required to send a representative in person or by telephone to these conferences. If they fail to do so, the case can be postponed. The courts also keep mediators and pro bono housing lawyers on hand to serve borrowers.
“Yes, we are asserting pressure, but it’s almost as if they want the pressure,” said Annette Rizzo, a judge with the Court of Common Pleas in Philadelphia. “The banks always say that reaching out to homeowners, it’s a black hole. It’s so hard to connect with them. That’s what we offer, to connect with them.”
About 75% of eligible, struggling homeowners show up for and participate in mediation sessions in Philadelphia court rooms, and they have produced about a 35% success rate for about 14,000 loans according to an evaluation of the program to be released next month. Programs in Staten Island, NY and Bloomington, Indiana, have produced similarly high participation rates.
To be sure, not every mediation or modification results in significant savings for homeowners and it’s not clear how these modification will perform over time.
In the third quarter, modifications done in the HAMP program reduced monthly payments by an average of $585, almost double the $332 reduction in payments for modifications done outside the HAMP program. Those loans with modifications that reduced payments by 10% or more were almost twice as likely to be current than those loans with modifications that reduced payments by less than 10%.
by | ARTICLES, POLITICS
USA Today
Friday, January 28, 2011
The Financial Crisis Inquiry Commission was impaneled to describe to Congress, the president and the American people what caused the financial crisis. What it produced was a story about the financial crisis, but not what caused the financial crisis.
Both the majority report by six Democratic appointees, and the dissent by three of the Republican members, acknowledged that the U.S. and world financial system were badly hurt by the collapse of a huge U.S housing bubble. The bubble’s collapse was destructive, everyone agrees, because banks and other financial institutions in the U.S. and elsewhere held large numbers of U.S mortgages — or securities backed by these mortgages — which lost most of their value when the bubble’s collapse drove down housing prices.
Left out of both the Democratic and Republican accounts was the vital fact that although many other countries also had housing bubbles, the number of mortgage defaults in the U.S. was many times higher than in any other country. This would suggest that the underlying cause of the financial crisis was the particular weakness of the mortgages in the U.S. financial system — the likelihood that they would default when the U.S. bubble deflated.
In my dissent, I point out that before the financial crisis began in 2008, half of all mortgages in the U.S. financial system — 27 million loans — were subprime or otherwise high risk. This was an unprecedented number and a far larger percentage than in any bubble in the past.
Why were so many U.S. mortgages so weak? Both the Democratic and Republican reports ignored this central question. The answer is that it was Housing and Urban Development’s policy, from 1992 to 2007, to reduce mortgage underwriting standards so that more people could buy homes. Home ownership rates rose. But in 2007 it all came apart.
Then the finger-pointing began — and continued in the two commission reports. But the government cannot escape the numbers. Just before the financial crisis, government agencies, or institutions under its control, held or had guaranteed more than two-thirds of the risky loans that brought the financial system down. If we don’t change these government policies, we won’t escape the next crisis.
Peter J. Wallison is a senior fellow at AEI and a member of the Financial Crisis Inquiry Commission.
