Posts Tagged: recession

Is There Still Time For a Homeowner’s Bailout?

Here’s an interesting bit from a New York Timeseditorial today critical of Barack Obama’s home foreclosure prevention policies:

The administration’s $75 billion antiforeclosure program, which subsidizes lenders to rework bad loans, has been a big disappointment. One reason is that its usual method of modifying loans — lowering the monthly payment by reducing the interest rate — does not work well for jobless and underwater borrowers. Unemployed homeowners often cannot make even reduced payments and underwater borrowers need principal reductions to succeed over the long run, not lower rates.

And yet, the administration has resisted calls to revamp its program, citing cost and complexity.

But the home foreclosure prevention plan would seem to be the rare instance of a recession-relief program unencumbered by limited funding. Money for the program comes from the Troubled Asset Relief Program — which has hundreds of billions of dollars in either unspent money or money that bailed out banks returned with interest. The Obama administration has announced a $1.5 billion extension to the original $75 billion foreclosure prevention program. Given the criticism of the program and the suspicion that TARP has only helped Wall Street, the administration should announce a more dramatic — and expensive — plan to keep people from losing their homes.

Stimulate The Schools

The New York Times’ Sam Dillon relays a study that state governments have spent almost all of the $100 billion in emergency education funding from last year’s federal stimulus bill. So since there’s still a recession and multiple state budget crises across the nation, states will cut programs and lay off teachers and other school workers.

Education funding to states was a great use of low-hanging fruit in the stimulus: you give the states X amount of money and then X amount of teachers won’t be laid off. Unless Congress passes a second round of stimulus for states, thousands of teachers will soon lose their jobs.

Why Was Violent Crime Down In 2009?

The Wall Street Journal’s Tamara Audi and Gary Fields report that Los Angeles is the latest big city to announce that violent crime, including homicides, was significantly down in 2009, joining New York, Chicago, and Washington, D.C. among other cities. The article provides a surprising reason why this was the case:

Experts believe the fall in violent crime is tied to the aging U.S. population.

“The graying of America is a significant factor,” said James Alan Fox, Lipman Professor of Criminal Justice at Northeastern University in Boston. “The largest and fastest growing segment of the population is people over 50. People over 50 also happen to be the age group that is the least likely to commit crimes. As the group grows, crime rates do decline.”

Prof. Fox said a common assumption that crime goes up during a recession is wrong. Historic data show there is little connection between economic conditions and crime, particularly violent crime.

This graying of America, though, can’t really explain why the decrease in crime between 2008 and 2009 marked a greater annual decline than years past — unless in 2009, a whole swath of the population improbably grew out of their biological window to commit crime.

What the crime stats show is a correlation that does not exist — recession and violent crime. Despite fears, Broad outage over wealth divisions in America — and alienation with how the law has worked for Wall Street and the rich — has not lead to any generalized lawlessness or induced people to become more violent.

Illinois Blogging: Services Providers Hold Their Breath Until November 2010

The Associated Press reports that the Illinois state government, $11 billion in debt,  is not paying local social service agencies:

Illinois is millions of dollars behind in making payments, and many groups haven’t been paid by the state since the fiscal year began in July, a situation that longtime providers said is unprecedented. They’ve gotten used to building their annual budgets around state funding and have been blindsided by the delays.

The Education Service Network in north-central Illinois has shuttered all but one of its half-dozen programs, said Paul Nordstrom, regional superintendent of schools for Grundy and Kendall counties.

That program, an alternative high school, was saved by an emergency $200,000 grant secured by an area legislator. Gone are the network’s programs for early childhood education, after-school care, truancy, and drug and alcohol prevention that served hundreds of students across three counties.

Many Education and health agencies here in Chicago are sitting on their hands hoping that the state takes out an emergency loan, or even better, receives federal assistance. Part of the reason Illinois has not drawn up a better way to provide money to social service agencies is that the governor and state comptroller are in charge of funding these agencies. And Illinois Gov. Pat Quinn is being challenged in his 2010 election bid by — wait for it — Illinois State Comptroller Dan Hynes. Since Hynes declared his candidacy, the two have not collaborated on any substantive plan to deal with the state budget crisis.

Scolding the States On Unemployment Aid

The Washington Post’s Peter Whoriskey looks at the crisis of state unemployment benefit funds: the majority of states have run out of money and need emergency federal assistance. Whoriskey explains that while the crisis is due to the recession, the source of the problem is not just the economy but myopic state governments:

Unemployment benefits are funded by the payroll tax on employers that is collected at a rate that is supposed to keep the funds solvent. Firms that fire lots of people are supposed to pay higher rates. The federal government pays for administrative costs, and in a recession, it pays for the extension of unemployment benefits beyond 26 weeks. But over the years, the drive to minimize state taxes on employers has reduced the funds to unsustainable levels.

“The benefits haven’t grown — that’s not the problem,” said Richard Hobbie, director of the National Association of State Workforce Agencies.

The consequences of fiscal irresponsibility at the state level are immediate: 46 states must balance their budgets, meaning that the best hope for the unemployed to collect benefits is a continued stream of “emergency” federal assistance.

So Is Citigroup Supposed To Be Successful Now?

The New York Times’ Jeff Zeleny and Eric Dash reported this morning that Citigroup reached a deal with the Treasury Dept. to become “the last big Wall Street bank to exit the government bailout program.” Citigroup’s exit from the Troubled Asset Relief Program bolsters the notion that the George W. Bush and Barack Obama administration have successfully executed a recovery of the banks — while the overall economy continues to be awful.

But the Times does a nice job conveying that the health of Wall Street-involved banks like Citigroup and Bank of America is still shaky: (more…)

Let’s Make October ‘Apples’ and November ‘Oranges’

The Wall Street Journal’s Kelly Evans looks at a grab-bag of economic indicators (small business hiring, small business confidence, number of overall job openings nationally) to show that the labor market is as slack as ever. The problem is that it’s all indicators from October. And the implication that at least I got from the article was that WSJ was contrasting these things-are-getting-worse numbers with the things-are-getting better unemployment rate. But the new unemployment rate of 10 percent is from the end of November. The worst monthly unemployment rate in the current recession was 10.2 percent from — you guessed it — October.

The larger issue here is that for most businesses and labor force participants things still suck. Even Barack Obama argued after the relatively not terrible November employment numbers that we’re not yet at a point in the economic recovery where month-to-month numbers mean much.

From Cuba To Illinois: Resettling Gitmo Inmates In An Illinois Prison Could Be An Economic Boon — But Does It Solve The Terrorist Detention Dilemma?

Thomson, Illinois

A day after Attorney General Eric Holder revealed his plan to try alleged 9/11 mastermind Khalid Sheik Mohammed in federal court, the Chicago Tribune reported another change in the “war on terror” – the White House’s initiative to move some Guantanamo Bay terrorist detainees to a rural Illinois prison. The Justice Dept. and the Dept. of Defense would ship an unknown number of the more than 200 detainees still at the Cuban naval base to Thomson, Illinois, a village of 600 people, 90 miles west of Chicago. And Justice would convert the Thomson Correctional Center, which currently holds 200 minimum-security inmates, to a federal maximum-security prison.

Illinois Democrats were quick to champion the proposal as an economic stimulus for their state. Dick Durbin, the no. 2 Democrat in the U.S. Senate, and Illinois Democratic Gov. Pat Quinn have declared that the prison could create more than 3,000 local jobs. A White House economic report largely echoed Durbin’s assertions. Illinois Republicans, meanwhile, went ballistic. Rep. Mark Kirk, who is running for the U.S. Senate, declared that Illinois would become “ground zero for Jihadist terrorist plots, recruitment and radicalization.”

That al Qaeda could wreak havoc on rural Illinois is likely absurd. But that is not to say moving detainees to Thomson is a silver bullet for the local economy – or for national counterterrorism policy. “The relevant question is not where prisoners are held, but how,” says Joseph Margulies, a Northwestern University law professor who has represented Guantanamo detainees. “Will we reform our detention policies to comport with universal rights and the rule of law?” (more…)

Drowning Government In a Leaky Bathtub

The American Prospect’s Harold Meyerson eloquently sums up a problem — maybe the problem — with American government’s response to the recession:

Here is a classic algebra problem in which water pours into a bathtub from the tap at a specified rate but also exits the tub at a different rate because someone has neglected to stop the drain. If you know the rates, you should be able to figure when the water will rise to a certain level. During a recession, the United States becomes a version of that bathtub. The federal government is the tap. The state and local governments are the drain.

That’s no way to fight a recession. When investment, production, and consumption are all in decline, the only way to keep the economy from shrinking is for the federal government to deficit spend and create a stimulus. But while the federal government pours money in, the state and local governments, which cannot deficit spend, see their tax revenue shrinking, so they cut spending, raise taxes, or both — taking money out of the economy. America’s distinct brand of federalism inherently impedes an economic recovery. (more…)