By PAUL KRUGMAN
Elections have consequences. President Obama’s new budget represents a huge break, not just with the policies of the past eight years, but with policy trends over the past 30 years. If he can get anything like the plan he announced on Thursday through Congress, he will set America on a fundamentally new course.
The budget will, among other things, come as a huge relief to Democrats who were starting to feel a bit of postpartisan depression. The stimulus bill that Congress passed may have been too weak and too focused on tax cuts. The administration’s refusal to get tough on the banks may be deeply disappointing. But fears that Mr. Obama would sacrifice progressive priorities in his budget plans, and satisfy himself with fiddling around the edges of the tax system, have now been banished.
For this budget allocates $634 billion over the next decade for health reform. That’s not enough to pay for universal coverage, but it’s an impressive start. And Mr. Obama plans to pay for health reform, not just with higher taxes on the affluent, but by putting a halt to the creeping privatization of Medicare, eliminating overpayments to insurance companies.
On another front, it’s also heartening to see that the budget projects $645 billion in revenues from the sale of emission allowances. After years of denial and delay by its predecessor, the Obama administration is signaling that it’s ready to take on climate change.
And these new priorities are laid out in a document whose clarity and plausibility seem almost incredible to those of us who grew accustomed to reading Bush-era budgets, which insulted our intelligence on every page. This is budgeting we can believe in.
Many will ask whether Mr. Obama can actually pull off the deficit reduction he promises. Can he actually reduce the red ink from $1.75 trillion this year to less than a third as much in 2013? Yes, he can.
Right now the deficit is huge thanks to temporary factors (at least we hope they’re temporary): a severe economic slump is depressing revenues and large sums have to be allocated both to fiscal stimulus and to financial rescues.
But if and when the crisis passes, the budget picture should improve dramatically. Bear in mind that from 2005 to 2007, that is, in the three years before the crisis, the federal deficit averaged only $243 billion a year. Now, during those years, revenues were inflated, to some degree, by the housing bubble. But it’s also true that we were spending more than $100 billion a year in Iraq.
So if Mr. Obama gets us out of Iraq (without bogging us down in an equally expensive Afghan quagmire) and manages to engineer a solid economic recovery — two big ifs, to be sure — getting the deficit down to around $500 billion by 2013 shouldn’t be at all difficult.
But won’t the deficit be swollen by interest on the debt run-up over the next few years? Not as much as you might think. Interest rates on long-term government debt are less than 4 percent, so even a trillion dollars of additional debt adds less than $40 billion a year to future deficits. And those interest costs are fully reflected in the budget documents.
So we have good priorities and plausible projections. What’s not to like about this budget? Basically, the long run outlook remains worrying.
According to the Obama administration’s budget projections, the ratio of federal debt to G.D.P., a widely used measure of the government’s financial position, will soar over the next few years, then more or less stabilize. But this stability will be achieved at a debt-to-G.D.P. ratio of around 60 percent. That wouldn’t be an extremely high debt level by international standards, but it would be the deepest in debt America has been since the years immediately following World War II. And it would leave us with considerably reduced room for maneuver if another crisis comes along.
Furthermore, the Obama budget only tells us about the next 10 years. That’s an improvement on Bush-era budgets, which looked only 5 years ahead. But America’s really big fiscal problems lurk over that budget horizon: sooner or later we’re going to have to come to grips with the forces driving up long-run spending — above all, the ever-rising cost of health care.
And even if fundamental health care reform brings costs under control, I at least find it hard to see how the federal government can meet its long-term obligations without some tax increases on the middle class. Whatever politicians may say now, there’s probably a value-added tax in our future.
But I don’t blame Mr. Obama for leaving some big questions unanswered in this budget. There’s only so much long-run thinking the political system can handle in the midst of a severe crisis; he has probably taken on all he can, for now. And this budget looks very, very good.
http://www.nytimes.com/2009/02/27/opinion/27krugman.html?_r=1&em=&pagewanted=print
Copyright 2009 The New York Times Company
Saturday, February 28, 2009
Wednesday, February 18, 2009
Bill Clinton: I should have better regulated derivatives
AUSTIN, Texas (CNN) -- Former President Bill Clinton was in Austin, Texas, over the weekend to host the Clinton Global Initiative University, which encourages college students and administrators to come up with creative ways to address global issues.
CNN's John Roberts sat down with Clinton to ask him about how the Obama administration is performing, how his wife, Hillary Clinton, is doing as secretary of state, and what responsibility he may have for the current financial crisis.
John Roberts: Mr. President, in terms of the overall economic downturn, Time magazine had an article out this week in which it named 25 of the people most responsible for the economic downturn, and you were there. They, they had a picture of you in what looked like a police lineup. They had a little button where you could vote who's the most responsible? They pointed to your signing of the Gramm-Leach-Bliley Act, the Commodity Futures Modernization Act. I wonder what you think about that.
Former President Bill Clinton: I think that the only thing that our administration did or didn't do that we should have done is to try to set in motion some more formal regulation of the derivatives market. They're wrong in saying that the elimination of the Glass-Steagall division between banks and investment banks contributed to this. Investment banks were already...banks were already doing investment business and investment companies were already in the banking business. The bill I signed actually at least puts some standards there. And if you look at the evidence of the banks that have gotten in trouble, the ones that were most directly involved in there ... in a diversified portfolio tended to do better.
Some of the conservatives said that I was responsible because I enforced the Community Reinvestment Act, and they said that's what made all these subprime mortgages be issued. That's also false. The community banks, the people that loan their money in the community instead of buying these esoteric securities, they're doing quite well. Watch Clinton defend his economic record »
Roberts: So what's your take on what Sen. [John] McCain said, that [President] Obama is off to a terrible start?
Clinton: I just disagree with him, but we have a different economic philosophy. For example, there's 100 economic studies which show that you get a better return in terms of economic growth on extending unemployment benefits or investing money in energy conservation jobs to improve buildings than you do giving people in my income group a tax cut. But it doesn't stop them. Those guys are on automatic. You punch a button and they give the answer they give you. There are a lot of tax cuts in that bill -- for middle-class families, for lower-income families. There's a $7,500 tax credit that will kick in when these plug-in electric vehicles go on the market, which could help us to become the world's leader in that and secure us jobs for a decade or more.
Roberts: Do you really think the president can change Washington? Can he bring the type of change to Washington that he campaigned on? He's already up against a wall against the Republicans in Congress -- not quite as big a wall as you found yourself up against in 1993, but he does seem to be having some difficulty. Do you think he really can bring change to Washington?
Clinton: Here's what I think will happen. I think that as we go along, if the American people stick with him and if he begins to have good results, then I think more and more Republicans will cooperate with him because they will see that he's right or because he carried their states or for any number of reasons.
Roberts: How long do you think he has?
Clinton: First, his next big challenge is to come forward with the details of how we're going to rewrite as many home mortgages as we can. How we're going to take some of these bad assets off the banks' books so they can get cleaned up and they can loan money and what conditions will we give more money to banks for. In other words, they're going to have to loan money from now on. That's what [Treasury] Secretary [Timothy] Geithner is working on. Those three things make a lot of sense. That's our long-term answer.
Roberts: But how much time do you think he has? A hundred days, six months, a year, two years?
Clinton: The public, I believe, will support him at least for a year in trying to work these things out. And he's been very straight forward in saying it might take as much as two years for the economy to really get in gear again. My instinct is it will happen a little quicker than that.
Roberts: What do you think of the job that President Obama did on steering the stimulus plan through Congress, and does he in fact have the experience necessary to be a good president, reach across party lines and craft a bipartisan bill?
Clinton: Well first of all, he has reached across, and it takes two to tango. I find it amazing that the Republicans who doubled the debt of the country in eight years and produced no new jobs doing it, gave us an economic record that was totally bereft of any productive result are now criticizing him for spending money. You know, I'm a fiscal conservative, I balanced the budget, I ran surpluses. If I were in his position today, I would be doing what he's doing. Why? Because the problem with the economy is the housing decline led to the general decline in values. Assets are going down. This stimulus is our bridge over troubled waters till the bank reforms kick in. He did the right thing, he did everything he could to get Republican support. He took some of their tax-cutting ideas.
But if you look at this bill, it is designed do three things. And it does all three. It puts money in the hands of people who need money to survive -- unemployment benefits, food stamp benefits, tax cuts. Second thing it does is to give money to state and local governments so they don't have to lay a million people off or raise taxes. Either one would be bad for the economy. The third thing is it does is create new jobs. Given the Congress he had and the environment and the speed with which they had to move, I think he did a fine job with this.
Roberts: Your wife is on a big trip over to the Far East, talking with the leaders of China. She's going to be taking on the North Korea issue. There's been some talk in the last week that with the appointment of all of these high profile envoys, from Richard Holbrooke to South Asia, George Mitchell to the Middle East, Dennis Ross in the same area, Vice President Joe Biden out there talking about foreign policy, that maybe she might get a little bit elbowed out here when she it comes to the big projects. Are you concerned about that? Do you talk to her about that?
Clinton: No. I'm not concerned about it. And these envoys are her idea, both the idea of the envoys and the people who were selected. She thinks that Joe Biden has got one of the best foreign policy minds and certainly some of the most important foreign policy experience we've had. Let me remind you when I was president, Al Gore had special relationships with both Russia and South Africa. And it didn't undermine the authority of either Warren Christopher or Madeleine Albright as secretary of state.
The reason they're doing this, and the reason the president agreed to support it -- and he came to the State Department to support the announcements of Holbrooke and Mitchell -- is that they all want to get off to a fast start and you've got to do a lot of things at once. It's inconceivable that she could devote the time and detailed attention right now to having a diplomatic strategy for Afghanistan and Pakistan that exactly parallels the military strategy that [the head of U.S. General Command] Gen. [David] Petraeus has or figures out how to start the Middle East peace negotiations again and what the timetable is and do all this other stuff.
So as long as they're working on a team and nobody is playing sharp elbows and this is a team -- these guys have got a team concept. The president has made it clear he wants everybody to be on the team, they all report in to her as well as to him. They're all working together. I'm very impressed by that. I think that she made a judgment that we needed in the country's interest to do everything at once. And I think she's right. Clinton says U.S. envoys are part of a team »
Roberts: Of course, bilateral relations between the United States and China, a big focus of your administration, did you talk to her at all about this trip?
Clinton: Sure I did. Just like she consulted with a lot of people, we talked about it. I told her what my take on the Chinese is and especially in light of the fact that I work there now in AIDS, I have a big AIDS project there. And I know how they think economically and I think she'll do quite well there. I think she made a really good decision obviously, she had to go to Japan and south Korea, but going to Indonesia, the word's biggest Muslim country, sends a loud signal because Indonesia has a part of it, Bali, which is predominantly Hindu, which has been the subject of terrorist attacks. It's a good deal, I mean the whole thing, it's the right place to start.
Roberts: A couple of real quick questions, what president do you think you're most like?
Clinton: Well, personally, I'm not sure. One guy wrote a book saying I was most like Thomas Jefferson, but the times in which I governed were most like Theodore Roosevelt. And the results I received were similar. He had enormous success, the country was better off when he quit than when he started, but several of the things he recommended were not actually done until his cousin, Franklin Roosevelt, became president more than 20 years later.
I think a lot of things that I recommended in terms of health care reform will come to fruition now that we have more modern Democratic Congress and a new Democratic Congress and the Obama administration there. I'll be surprised if we don't get health care reform and some of the things I recommended. I'm excited about it.
All AboutBill Clinton • HIV and AIDS • U.S. National Economy
Find this article at:
http://www.cnn.com/2009/POLITICS/02/16/bill.clinton.qanda/index.html?eref=rss_politics
CNN's John Roberts sat down with Clinton to ask him about how the Obama administration is performing, how his wife, Hillary Clinton, is doing as secretary of state, and what responsibility he may have for the current financial crisis.
John Roberts: Mr. President, in terms of the overall economic downturn, Time magazine had an article out this week in which it named 25 of the people most responsible for the economic downturn, and you were there. They, they had a picture of you in what looked like a police lineup. They had a little button where you could vote who's the most responsible? They pointed to your signing of the Gramm-Leach-Bliley Act, the Commodity Futures Modernization Act. I wonder what you think about that.
Former President Bill Clinton: I think that the only thing that our administration did or didn't do that we should have done is to try to set in motion some more formal regulation of the derivatives market. They're wrong in saying that the elimination of the Glass-Steagall division between banks and investment banks contributed to this. Investment banks were already...banks were already doing investment business and investment companies were already in the banking business. The bill I signed actually at least puts some standards there. And if you look at the evidence of the banks that have gotten in trouble, the ones that were most directly involved in there ... in a diversified portfolio tended to do better.
Some of the conservatives said that I was responsible because I enforced the Community Reinvestment Act, and they said that's what made all these subprime mortgages be issued. That's also false. The community banks, the people that loan their money in the community instead of buying these esoteric securities, they're doing quite well. Watch Clinton defend his economic record »
Roberts: So what's your take on what Sen. [John] McCain said, that [President] Obama is off to a terrible start?
Clinton: I just disagree with him, but we have a different economic philosophy. For example, there's 100 economic studies which show that you get a better return in terms of economic growth on extending unemployment benefits or investing money in energy conservation jobs to improve buildings than you do giving people in my income group a tax cut. But it doesn't stop them. Those guys are on automatic. You punch a button and they give the answer they give you. There are a lot of tax cuts in that bill -- for middle-class families, for lower-income families. There's a $7,500 tax credit that will kick in when these plug-in electric vehicles go on the market, which could help us to become the world's leader in that and secure us jobs for a decade or more.
Roberts: Do you really think the president can change Washington? Can he bring the type of change to Washington that he campaigned on? He's already up against a wall against the Republicans in Congress -- not quite as big a wall as you found yourself up against in 1993, but he does seem to be having some difficulty. Do you think he really can bring change to Washington?
Clinton: Here's what I think will happen. I think that as we go along, if the American people stick with him and if he begins to have good results, then I think more and more Republicans will cooperate with him because they will see that he's right or because he carried their states or for any number of reasons.
Roberts: How long do you think he has?
Clinton: First, his next big challenge is to come forward with the details of how we're going to rewrite as many home mortgages as we can. How we're going to take some of these bad assets off the banks' books so they can get cleaned up and they can loan money and what conditions will we give more money to banks for. In other words, they're going to have to loan money from now on. That's what [Treasury] Secretary [Timothy] Geithner is working on. Those three things make a lot of sense. That's our long-term answer.
Roberts: But how much time do you think he has? A hundred days, six months, a year, two years?
Clinton: The public, I believe, will support him at least for a year in trying to work these things out. And he's been very straight forward in saying it might take as much as two years for the economy to really get in gear again. My instinct is it will happen a little quicker than that.
Roberts: What do you think of the job that President Obama did on steering the stimulus plan through Congress, and does he in fact have the experience necessary to be a good president, reach across party lines and craft a bipartisan bill?
Clinton: Well first of all, he has reached across, and it takes two to tango. I find it amazing that the Republicans who doubled the debt of the country in eight years and produced no new jobs doing it, gave us an economic record that was totally bereft of any productive result are now criticizing him for spending money. You know, I'm a fiscal conservative, I balanced the budget, I ran surpluses. If I were in his position today, I would be doing what he's doing. Why? Because the problem with the economy is the housing decline led to the general decline in values. Assets are going down. This stimulus is our bridge over troubled waters till the bank reforms kick in. He did the right thing, he did everything he could to get Republican support. He took some of their tax-cutting ideas.
But if you look at this bill, it is designed do three things. And it does all three. It puts money in the hands of people who need money to survive -- unemployment benefits, food stamp benefits, tax cuts. Second thing it does is to give money to state and local governments so they don't have to lay a million people off or raise taxes. Either one would be bad for the economy. The third thing is it does is create new jobs. Given the Congress he had and the environment and the speed with which they had to move, I think he did a fine job with this.
Roberts: Your wife is on a big trip over to the Far East, talking with the leaders of China. She's going to be taking on the North Korea issue. There's been some talk in the last week that with the appointment of all of these high profile envoys, from Richard Holbrooke to South Asia, George Mitchell to the Middle East, Dennis Ross in the same area, Vice President Joe Biden out there talking about foreign policy, that maybe she might get a little bit elbowed out here when she it comes to the big projects. Are you concerned about that? Do you talk to her about that?
Clinton: No. I'm not concerned about it. And these envoys are her idea, both the idea of the envoys and the people who were selected. She thinks that Joe Biden has got one of the best foreign policy minds and certainly some of the most important foreign policy experience we've had. Let me remind you when I was president, Al Gore had special relationships with both Russia and South Africa. And it didn't undermine the authority of either Warren Christopher or Madeleine Albright as secretary of state.
The reason they're doing this, and the reason the president agreed to support it -- and he came to the State Department to support the announcements of Holbrooke and Mitchell -- is that they all want to get off to a fast start and you've got to do a lot of things at once. It's inconceivable that she could devote the time and detailed attention right now to having a diplomatic strategy for Afghanistan and Pakistan that exactly parallels the military strategy that [the head of U.S. General Command] Gen. [David] Petraeus has or figures out how to start the Middle East peace negotiations again and what the timetable is and do all this other stuff.
So as long as they're working on a team and nobody is playing sharp elbows and this is a team -- these guys have got a team concept. The president has made it clear he wants everybody to be on the team, they all report in to her as well as to him. They're all working together. I'm very impressed by that. I think that she made a judgment that we needed in the country's interest to do everything at once. And I think she's right. Clinton says U.S. envoys are part of a team »
Roberts: Of course, bilateral relations between the United States and China, a big focus of your administration, did you talk to her at all about this trip?
Clinton: Sure I did. Just like she consulted with a lot of people, we talked about it. I told her what my take on the Chinese is and especially in light of the fact that I work there now in AIDS, I have a big AIDS project there. And I know how they think economically and I think she'll do quite well there. I think she made a really good decision obviously, she had to go to Japan and south Korea, but going to Indonesia, the word's biggest Muslim country, sends a loud signal because Indonesia has a part of it, Bali, which is predominantly Hindu, which has been the subject of terrorist attacks. It's a good deal, I mean the whole thing, it's the right place to start.
Roberts: A couple of real quick questions, what president do you think you're most like?
Clinton: Well, personally, I'm not sure. One guy wrote a book saying I was most like Thomas Jefferson, but the times in which I governed were most like Theodore Roosevelt. And the results I received were similar. He had enormous success, the country was better off when he quit than when he started, but several of the things he recommended were not actually done until his cousin, Franklin Roosevelt, became president more than 20 years later.
I think a lot of things that I recommended in terms of health care reform will come to fruition now that we have more modern Democratic Congress and a new Democratic Congress and the Obama administration there. I'll be surprised if we don't get health care reform and some of the things I recommended. I'm excited about it.
All AboutBill Clinton • HIV and AIDS • U.S. National Economy
Find this article at:
http://www.cnn.com/2009/POLITICS/02/16/bill.clinton.qanda/index.html?eref=rss_politics
Bill Clinton: I should have better regulated derivatives
AUSTIN, Texas (CNN) -- Former President Bill Clinton was in Austin, Texas, over the weekend to host the Clinton Global Initiative University, which encourages college students and administrators to come up with creative ways to address global issues.
CNN's John Roberts sat down with Clinton to ask him about how the Obama administration is performing, how his wife, Hillary Clinton, is doing as secretary of state, and what responsibility he may have for the current financial crisis.
John Roberts: Mr. President, in terms of the overall economic downturn, Time magazine had an article out this week in which it named 25 of the people most responsible for the economic downturn, and you were there. They, they had a picture of you in what looked like a police lineup. They had a little button where you could vote who's the most responsible? They pointed to your signing of the Gramm-Leach-Bliley Act, the Commodity Futures Modernization Act. I wonder what you think about that.
Former President Bill Clinton: I think that the only thing that our administration did or didn't do that we should have done is to try to set in motion some more formal regulation of the derivatives market. They're wrong in saying that the elimination of the Glass-Steagall division between banks and investment banks contributed to this. Investment banks were already...banks were already doing investment business and investment companies were already in the banking business. The bill I signed actually at least puts some standards there. And if you look at the evidence of the banks that have gotten in trouble, the ones that were most directly involved in there ... in a diversified portfolio tended to do better.
Some of the conservatives said that I was responsible because I enforced the Community Reinvestment Act, and they said that's what made all these subprime mortgages be issued. That's also false. The community banks, the people that loan their money in the community instead of buying these esoteric securities, they're doing quite well. Watch Clinton defend his economic record »
Roberts: So what's your take on what Sen. [John] McCain said, that [President] Obama is off to a terrible start?
Clinton: I just disagree with him, but we have a different economic philosophy. For example, there's 100 economic studies which show that you get a better return in terms of economic growth on extending unemployment benefits or investing money in energy conservation jobs to improve buildings than you do giving people in my income group a tax cut. But it doesn't stop them. Those guys are on automatic. You punch a button and they give the answer they give you. There are a lot of tax cuts in that bill -- for middle-class families, for lower-income families. There's a $7,500 tax credit that will kick in when these plug-in electric vehicles go on the market, which could help us to become the world's leader in that and secure us jobs for a decade or more.
Roberts: Do you really think the president can change Washington? Can he bring the type of change to Washington that he campaigned on? He's already up against a wall against the Republicans in Congress -- not quite as big a wall as you found yourself up against in 1993, but he does seem to be having some difficulty. Do you think he really can bring change to Washington?
Clinton: Here's what I think will happen. I think that as we go along, if the American people stick with him and if he begins to have good results, then I think more and more Republicans will cooperate with him because they will see that he's right or because he carried their states or for any number of reasons.
Roberts: How long do you think he has?
Clinton: First, his next big challenge is to come forward with the details of how we're going to rewrite as many home mortgages as we can. How we're going to take some of these bad assets off the banks' books so they can get cleaned up and they can loan money and what conditions will we give more money to banks for. In other words, they're going to have to loan money from now on. That's what [Treasury] Secretary [Timothy] Geithner is working on. Those three things make a lot of sense. That's our long-term answer.
Roberts: But how much time do you think he has? A hundred days, six months, a year, two years?
Clinton: The public, I believe, will support him at least for a year in trying to work these things out. And he's been very straight forward in saying it might take as much as two years for the economy to really get in gear again. My instinct is it will happen a little quicker than that.
Roberts: What do you think of the job that President Obama did on steering the stimulus plan through Congress, and does he in fact have the experience necessary to be a good president, reach across party lines and craft a bipartisan bill?
Clinton: Well first of all, he has reached across, and it takes two to tango. I find it amazing that the Republicans who doubled the debt of the country in eight years and produced no new jobs doing it, gave us an economic record that was totally bereft of any productive result are now criticizing him for spending money. You know, I'm a fiscal conservative, I balanced the budget, I ran surpluses. If I were in his position today, I would be doing what he's doing. Why? Because the problem with the economy is the housing decline led to the general decline in values. Assets are going down. This stimulus is our bridge over troubled waters till the bank reforms kick in. He did the right thing, he did everything he could to get Republican support. He took some of their tax-cutting ideas.
But if you look at this bill, it is designed do three things. And it does all three. It puts money in the hands of people who need money to survive -- unemployment benefits, food stamp benefits, tax cuts. Second thing it does is to give money to state and local governments so they don't have to lay a million people off or raise taxes. Either one would be bad for the economy. The third thing is it does is create new jobs. Given the Congress he had and the environment and the speed with which they had to move, I think he did a fine job with this.
Roberts: Your wife is on a big trip over to the Far East, talking with the leaders of China. She's going to be taking on the North Korea issue. There's been some talk in the last week that with the appointment of all of these high profile envoys, from Richard Holbrooke to South Asia, George Mitchell to the Middle East, Dennis Ross in the same area, Vice President Joe Biden out there talking about foreign policy, that maybe she might get a little bit elbowed out here when she it comes to the big projects. Are you concerned about that? Do you talk to her about that?
Clinton: No. I'm not concerned about it. And these envoys are her idea, both the idea of the envoys and the people who were selected. She thinks that Joe Biden has got one of the best foreign policy minds and certainly some of the most important foreign policy experience we've had. Let me remind you when I was president, Al Gore had special relationships with both Russia and South Africa. And it didn't undermine the authority of either Warren Christopher or Madeleine Albright as secretary of state.
The reason they're doing this, and the reason the president agreed to support it -- and he came to the State Department to support the announcements of Holbrooke and Mitchell -- is that they all want to get off to a fast start and you've got to do a lot of things at once. It's inconceivable that she could devote the time and detailed attention right now to having a diplomatic strategy for Afghanistan and Pakistan that exactly parallels the military strategy that [the head of U.S. General Command] Gen. [David] Petraeus has or figures out how to start the Middle East peace negotiations again and what the timetable is and do all this other stuff.
So as long as they're working on a team and nobody is playing sharp elbows and this is a team -- these guys have got a team concept. The president has made it clear he wants everybody to be on the team, they all report in to her as well as to him. They're all working together. I'm very impressed by that. I think that she made a judgment that we needed in the country's interest to do everything at once. And I think she's right. Clinton says U.S. envoys are part of a team »
Roberts: Of course, bilateral relations between the United States and China, a big focus of your administration, did you talk to her at all about this trip?
Clinton: Sure I did. Just like she consulted with a lot of people, we talked about it. I told her what my take on the Chinese is and especially in light of the fact that I work there now in AIDS, I have a big AIDS project there. And I know how they think economically and I think she'll do quite well there. I think she made a really good decision obviously, she had to go to Japan and south Korea, but going to Indonesia, the word's biggest Muslim country, sends a loud signal because Indonesia has a part of it, Bali, which is predominantly Hindu, which has been the subject of terrorist attacks. It's a good deal, I mean the whole thing, it's the right place to start.
Roberts: A couple of real quick questions, what president do you think you're most like?
Clinton: Well, personally, I'm not sure. One guy wrote a book saying I was most like Thomas Jefferson, but the times in which I governed were most like Theodore Roosevelt. And the results I received were similar. He had enormous success, the country was better off when he quit than when he started, but several of the things he recommended were not actually done until his cousin, Franklin Roosevelt, became president more than 20 years later.
I think a lot of things that I recommended in terms of health care reform will come to fruition now that we have more modern Democratic Congress and a new Democratic Congress and the Obama administration there. I'll be surprised if we don't get health care reform and some of the things I recommended. I'm excited about it.
All AboutBill Clinton • HIV and AIDS • U.S. National Economy
Find this article at:
http://www.cnn.com/2009/POLITICS/02/16/bill.clinton.qanda/index.html?eref=rss_politics
CNN's John Roberts sat down with Clinton to ask him about how the Obama administration is performing, how his wife, Hillary Clinton, is doing as secretary of state, and what responsibility he may have for the current financial crisis.
John Roberts: Mr. President, in terms of the overall economic downturn, Time magazine had an article out this week in which it named 25 of the people most responsible for the economic downturn, and you were there. They, they had a picture of you in what looked like a police lineup. They had a little button where you could vote who's the most responsible? They pointed to your signing of the Gramm-Leach-Bliley Act, the Commodity Futures Modernization Act. I wonder what you think about that.
Former President Bill Clinton: I think that the only thing that our administration did or didn't do that we should have done is to try to set in motion some more formal regulation of the derivatives market. They're wrong in saying that the elimination of the Glass-Steagall division between banks and investment banks contributed to this. Investment banks were already...banks were already doing investment business and investment companies were already in the banking business. The bill I signed actually at least puts some standards there. And if you look at the evidence of the banks that have gotten in trouble, the ones that were most directly involved in there ... in a diversified portfolio tended to do better.
Some of the conservatives said that I was responsible because I enforced the Community Reinvestment Act, and they said that's what made all these subprime mortgages be issued. That's also false. The community banks, the people that loan their money in the community instead of buying these esoteric securities, they're doing quite well. Watch Clinton defend his economic record »
Roberts: So what's your take on what Sen. [John] McCain said, that [President] Obama is off to a terrible start?
Clinton: I just disagree with him, but we have a different economic philosophy. For example, there's 100 economic studies which show that you get a better return in terms of economic growth on extending unemployment benefits or investing money in energy conservation jobs to improve buildings than you do giving people in my income group a tax cut. But it doesn't stop them. Those guys are on automatic. You punch a button and they give the answer they give you. There are a lot of tax cuts in that bill -- for middle-class families, for lower-income families. There's a $7,500 tax credit that will kick in when these plug-in electric vehicles go on the market, which could help us to become the world's leader in that and secure us jobs for a decade or more.
Roberts: Do you really think the president can change Washington? Can he bring the type of change to Washington that he campaigned on? He's already up against a wall against the Republicans in Congress -- not quite as big a wall as you found yourself up against in 1993, but he does seem to be having some difficulty. Do you think he really can bring change to Washington?
Clinton: Here's what I think will happen. I think that as we go along, if the American people stick with him and if he begins to have good results, then I think more and more Republicans will cooperate with him because they will see that he's right or because he carried their states or for any number of reasons.
Roberts: How long do you think he has?
Clinton: First, his next big challenge is to come forward with the details of how we're going to rewrite as many home mortgages as we can. How we're going to take some of these bad assets off the banks' books so they can get cleaned up and they can loan money and what conditions will we give more money to banks for. In other words, they're going to have to loan money from now on. That's what [Treasury] Secretary [Timothy] Geithner is working on. Those three things make a lot of sense. That's our long-term answer.
Roberts: But how much time do you think he has? A hundred days, six months, a year, two years?
Clinton: The public, I believe, will support him at least for a year in trying to work these things out. And he's been very straight forward in saying it might take as much as two years for the economy to really get in gear again. My instinct is it will happen a little quicker than that.
Roberts: What do you think of the job that President Obama did on steering the stimulus plan through Congress, and does he in fact have the experience necessary to be a good president, reach across party lines and craft a bipartisan bill?
Clinton: Well first of all, he has reached across, and it takes two to tango. I find it amazing that the Republicans who doubled the debt of the country in eight years and produced no new jobs doing it, gave us an economic record that was totally bereft of any productive result are now criticizing him for spending money. You know, I'm a fiscal conservative, I balanced the budget, I ran surpluses. If I were in his position today, I would be doing what he's doing. Why? Because the problem with the economy is the housing decline led to the general decline in values. Assets are going down. This stimulus is our bridge over troubled waters till the bank reforms kick in. He did the right thing, he did everything he could to get Republican support. He took some of their tax-cutting ideas.
But if you look at this bill, it is designed do three things. And it does all three. It puts money in the hands of people who need money to survive -- unemployment benefits, food stamp benefits, tax cuts. Second thing it does is to give money to state and local governments so they don't have to lay a million people off or raise taxes. Either one would be bad for the economy. The third thing is it does is create new jobs. Given the Congress he had and the environment and the speed with which they had to move, I think he did a fine job with this.
Roberts: Your wife is on a big trip over to the Far East, talking with the leaders of China. She's going to be taking on the North Korea issue. There's been some talk in the last week that with the appointment of all of these high profile envoys, from Richard Holbrooke to South Asia, George Mitchell to the Middle East, Dennis Ross in the same area, Vice President Joe Biden out there talking about foreign policy, that maybe she might get a little bit elbowed out here when she it comes to the big projects. Are you concerned about that? Do you talk to her about that?
Clinton: No. I'm not concerned about it. And these envoys are her idea, both the idea of the envoys and the people who were selected. She thinks that Joe Biden has got one of the best foreign policy minds and certainly some of the most important foreign policy experience we've had. Let me remind you when I was president, Al Gore had special relationships with both Russia and South Africa. And it didn't undermine the authority of either Warren Christopher or Madeleine Albright as secretary of state.
The reason they're doing this, and the reason the president agreed to support it -- and he came to the State Department to support the announcements of Holbrooke and Mitchell -- is that they all want to get off to a fast start and you've got to do a lot of things at once. It's inconceivable that she could devote the time and detailed attention right now to having a diplomatic strategy for Afghanistan and Pakistan that exactly parallels the military strategy that [the head of U.S. General Command] Gen. [David] Petraeus has or figures out how to start the Middle East peace negotiations again and what the timetable is and do all this other stuff.
So as long as they're working on a team and nobody is playing sharp elbows and this is a team -- these guys have got a team concept. The president has made it clear he wants everybody to be on the team, they all report in to her as well as to him. They're all working together. I'm very impressed by that. I think that she made a judgment that we needed in the country's interest to do everything at once. And I think she's right. Clinton says U.S. envoys are part of a team »
Roberts: Of course, bilateral relations between the United States and China, a big focus of your administration, did you talk to her at all about this trip?
Clinton: Sure I did. Just like she consulted with a lot of people, we talked about it. I told her what my take on the Chinese is and especially in light of the fact that I work there now in AIDS, I have a big AIDS project there. And I know how they think economically and I think she'll do quite well there. I think she made a really good decision obviously, she had to go to Japan and south Korea, but going to Indonesia, the word's biggest Muslim country, sends a loud signal because Indonesia has a part of it, Bali, which is predominantly Hindu, which has been the subject of terrorist attacks. It's a good deal, I mean the whole thing, it's the right place to start.
Roberts: A couple of real quick questions, what president do you think you're most like?
Clinton: Well, personally, I'm not sure. One guy wrote a book saying I was most like Thomas Jefferson, but the times in which I governed were most like Theodore Roosevelt. And the results I received were similar. He had enormous success, the country was better off when he quit than when he started, but several of the things he recommended were not actually done until his cousin, Franklin Roosevelt, became president more than 20 years later.
I think a lot of things that I recommended in terms of health care reform will come to fruition now that we have more modern Democratic Congress and a new Democratic Congress and the Obama administration there. I'll be surprised if we don't get health care reform and some of the things I recommended. I'm excited about it.
All AboutBill Clinton • HIV and AIDS • U.S. National Economy
Find this article at:
http://www.cnn.com/2009/POLITICS/02/16/bill.clinton.qanda/index.html?eref=rss_politics
Tuesday, February 10, 2009
China monthly auto sales overtake US for 1st time
By ELAINE KURTENBACH, AP Business Writer Elaine Kurtenbach, Ap Business Writer
Tue Feb 10, 6:19 am ET
SHANGHAI – China's monthly vehicle sales surpassed those in the United States for the first time in January, moving this country closer to becoming the world's biggest auto market, data released Tuesday showed.
With its growing middle class and vast potential as a consumer market, China is vital for General Motors, Volkswagen and Toyota as they count on demand here to offset weakness in the U.S. and elsewhere.
But China's ascent in the global auto market has been hastened by the plunge in U.S. auto sales, which tumbled 37 percent in January to a 26-year low of 656,976 units.
Chinese vehicle sales also have cooled, but hardly as dramatically. In January, 735,000 vehicles were sold, down 14.4 percent from a monthly record 860,000 last January, the China Association of Automobile Manufacturers said.
Mike DiGiovanni, General Motors Corp.'s executive director of global market and industry analysis, said last week he expected Chinese auto sales could hit 10.7 million units in 2009, more than his estimate of 9.8 million unit sales in the U.S. this year. Autodata forecasts 2009 U.S. sales at 9.57 million.
China's vehicle market has grown dramatically in recent years, overtaking Japan in 2006 to become the world's second-largest by annual sales. With 1.3 billion people, China will inevitably leapfrog the U.S., with a population of 300 million, into the No. 1 spot, industry experts say.
Still, if American car demand revives in coming months, the United States will remain the world's largest market by annual sales — at least for another year.
China's best-selling automakers are GM and Germany's Volkswagen AG but its own ambitious producers, such as Chery Automobile Co., are growing fast.
General Motors says it sold a record 1.09 million vehicles in China, up 6 percent from 2008.
January sales in China were 0.8 percent below those in December and well below the 790,000 some analysts had anticipated.
To spur the slowing auto market here, the government has rolled out measures to help boost vehicle sales as part of a multibillion-dollar economic stimulus package while it also tries to promote cleaner, more energy-efficient engines.
The sales tax on cars with engines less than 1.6 liters has been cut by half to 5 percent through the end of the year. The government also is spending 5 billion yuan (about $730 million) on subsidies to farmers to replace three-wheeled vehicles or outdated trucks with small, 1.3-liter or less vehicles.
Another 10 billion yuan ($1.5 billion) is going into upgrading automakers' technology and developing alternative energy vehicles.
In 2008, China's auto sales grew 6.7 percent from the previous to 9.38 million units — the first time growth has fallen below 10 percent since 1999.
Trucks and buses make up a larger share of China's sales than those of the United States or Japan. Some observers say that makes direct comparisons misleading. But many rural Chinese use such commercial vehicles for everyday family use.
Copyright © 2009 The Associated Press
http://news.yahoo.com/s/ap/20090210/ap_on_bi_ge/as_china_auto_sales/print
Tue Feb 10, 6:19 am ET
SHANGHAI – China's monthly vehicle sales surpassed those in the United States for the first time in January, moving this country closer to becoming the world's biggest auto market, data released Tuesday showed.
With its growing middle class and vast potential as a consumer market, China is vital for General Motors, Volkswagen and Toyota as they count on demand here to offset weakness in the U.S. and elsewhere.
But China's ascent in the global auto market has been hastened by the plunge in U.S. auto sales, which tumbled 37 percent in January to a 26-year low of 656,976 units.
Chinese vehicle sales also have cooled, but hardly as dramatically. In January, 735,000 vehicles were sold, down 14.4 percent from a monthly record 860,000 last January, the China Association of Automobile Manufacturers said.
Mike DiGiovanni, General Motors Corp.'s executive director of global market and industry analysis, said last week he expected Chinese auto sales could hit 10.7 million units in 2009, more than his estimate of 9.8 million unit sales in the U.S. this year. Autodata forecasts 2009 U.S. sales at 9.57 million.
China's vehicle market has grown dramatically in recent years, overtaking Japan in 2006 to become the world's second-largest by annual sales. With 1.3 billion people, China will inevitably leapfrog the U.S., with a population of 300 million, into the No. 1 spot, industry experts say.
Still, if American car demand revives in coming months, the United States will remain the world's largest market by annual sales — at least for another year.
China's best-selling automakers are GM and Germany's Volkswagen AG but its own ambitious producers, such as Chery Automobile Co., are growing fast.
General Motors says it sold a record 1.09 million vehicles in China, up 6 percent from 2008.
January sales in China were 0.8 percent below those in December and well below the 790,000 some analysts had anticipated.
To spur the slowing auto market here, the government has rolled out measures to help boost vehicle sales as part of a multibillion-dollar economic stimulus package while it also tries to promote cleaner, more energy-efficient engines.
The sales tax on cars with engines less than 1.6 liters has been cut by half to 5 percent through the end of the year. The government also is spending 5 billion yuan (about $730 million) on subsidies to farmers to replace three-wheeled vehicles or outdated trucks with small, 1.3-liter or less vehicles.
Another 10 billion yuan ($1.5 billion) is going into upgrading automakers' technology and developing alternative energy vehicles.
In 2008, China's auto sales grew 6.7 percent from the previous to 9.38 million units — the first time growth has fallen below 10 percent since 1999.
Trucks and buses make up a larger share of China's sales than those of the United States or Japan. Some observers say that makes direct comparisons misleading. But many rural Chinese use such commercial vehicles for everyday family use.
Copyright © 2009 The Associated Press
http://news.yahoo.com/s/ap/20090210/ap_on_bi_ge/as_china_auto_sales/print
Monday, February 9, 2009
15 Companies That Might Not Survive 2009
By Rick Newman
Who's next?
With consumers shutting their wallets and corporate revenues plunging, the business landscape may start to resemble a graveyard in 2009. Household names like Circuit City and Linens 'n Things have already perished. And chances are, those bankruptcies were just an early warning sign of a much broader epidemic.
Moody's Investors Service, for instance, predicts that the default rate on corporate bonds - which foretells bankruptcies - will be three times higher in 2009 than in 2008, and 15 times higher than in 2007. That could equate to 25 significant bankruptcies per month.
We examined ratings from Moody's and data from other sources to develop a short list of potential victims that ought to be familiar to most consumers. Many of these firms are in industries directly hit by the slowdown in consumer spending, such as retail, automotive, housing and entertainment.
But there are other common threads. Most of these firms have limited cash for a rainy day, and a lot of debt, with large interest payments due over the next year. In ordinary times, it might not be so hard to refinance loans, or get new ones, to help keep the cash flowing. But in an acute credit crunch it's a different story, and at companies where sales are down and going lower, skittish lenders may refuse to grant any more credit. It's a terrible time to be cash-poor.
[See how Wall Street continues to doom itself.]
That's why Moody's assigns most of these firms its lowest rating for short-term liquidity. And all the firms on this list have long-term debt that Moody's rates Caa or lower, which means the borrower is considered at least a "very high" credit risk.
Once a company defaults on its debt, or fails to make a payment, the next step is usually a Chapter 11 bankruptcy filing. Some firms continue to operate while in Chapter 11, retaining many of their employees. Those firms often shed debt, restructure, and emerge from bankruptcy as healthier companies.
But it takes fresh financing to do that, and with money scarce, more bankrupt firms than usual are likely to liquidate - like Circuit City. That's why corporate failures are likely to be a major drag on the economy in 2009: In a liquidation, the entire workforce often gets axed, with little or no severance. That will only add to unemployment, which could hit 9 or even 10 percent by the end of the year.
[Want to land a plum job without paying taxes? Here's how.]
It's possible that none of the firms on this list will liquidate, or even declare Chapter 11. Some may come up with unexpected revenue or creative financing that helps avert bankruptcy, while others could be purchased in whole or in part by creditors or other investors. But one way or another, the following 15 firms will probably look a lot different a year from now than they do today:
Rite Aid. (Ticker symbol: RAD; about 100,000 employees; 1-year stock-price decline: 92%). This drugstore chain tried to boost its performance by acquiring competitors Brooks and Eckerd in 2007. But there have been some nasty side effects, like a huge debt load that makes it the most leveraged drugstore chain in the U.S., according to Zacks Equity Research. That big retail investment came just as megadiscounter Wal-Mart was starting to sell prescription drugs, and consumers were starting to cut bank on spending. Management has twice lowered its outlook for 2009. Prognosis: Mounting losses, with no turnaround in sight.
Claire's Stores. (Privately owned; about 18,000 employees.) Leon Black's once-renowned private-equity firm, the Apollo Group, paid $3.1 billion for this trendy teen-focused accessory store in 2007, when buyout funds were bulging. But cash flow has been negative for much of the past year and analysts believe Claire's is close to defaulting on its debt. A horrible retail outlook for 2009 offers no relief, suggesting Claire's could follow Linens 'n Things - another Apollo purchase - and declare Chapter 11, possibly shuttering all of its 3,000-plus stores.
[See 5 pieces missing from Obama's stimulus plan.]
Chrysler. (Privately owned; about 55,000 employees). It's never a good sign when management insists the company is not going out of business, which is what CEO Bob Nardelli has been doing lately. Of the three Detroit automakers, Chrysler is the most endangered, with a product portfolio that's overreliant on gas-guzzling trucks and SUVs and almost totally devoid of compelling small cars. A recent deal with Fiat seems dubious, since the Italian automaker doesn't have to pony up any money, and Chrysler desperately needs cash. The company is quickly burning through $4 billion in government bailout money, and with car sales down 40 percent from recent peaks, Chrysler may be the weakling that can't cut it in tough times.
Dollar Thrifty Automotive Group. (DTG; about 7,000 employees; stock down 95%). This car-rental company is a small player compared to Enterprise, Hertz, and Avis Budget. It's also more reliant on leisure travelers, and therefore more susceptible to a downturn as consumers cut spending. Dollar Thrifty is also closely tied to Chrysler, which supplies 80 percent of its fleet. Moody's predicts that if Chrysler declares Chapter 11, Dollar Thrifty would suffer deeply as well.
Realogy Corp. (Privately owned; about 13,000 employees). It's the biggest real-estate brokerage firm in the country, but that's a bad thing when there are double-digit declines in both sales and prices, as there were in 2009. Realogy, which includes the Coldwell Banker, ERA, and Sotheby's franchises, also carries a high debt load, dating to its purchase by the Apollo Group in 2007 - the very moment when the housing market was starting to invert from a soaring ride into a sickening nosedive. Realogy has been trying to refinance much of its debt, prompting lawsuits. One deal was denied by a judge in December, reducing the firm's already tight wiggle room.
[See why "Wall Street talent" is an oxymoron.]
Station Casinos. (Privately owned, about 14,000 employees). Las Vegas has already been creamed by a biblical real-estate bust, and now it may face the loss of its home-grown gambling joints, too. Station - which runs 15 casinos off the strip that cater to locals - recently failed to make a key interest payment, which is often one of the last steps before a Chapter 11 filing. For once, the house seems likely to lose.
Loehmann's Capital Corp. (Privately owned; about 1,500 employees). This clothing chain has the right formula for lean times, offering women's clothing at discount prices. But the consumer pullback is hitting just about every retailer, and Loehmann's has a lot less cash to ride out a drought than competitors like Nordstrom Rack and TJ Maxx. If Loehmann's doesn't get additional financing in 2009 - a dicey proposition, given skyrocketing unemployment and plunging spending - the chain could run out of cash.
Sbarro. (Privately owned; about 5,500 employees). It's not the pizza that's the problem. Many of this chain's 1,100 storefronts are in malls, which is a double whammy: Traffic is down, since consumers have put away their wallets. Sbarro can't really boost revenue by adding a breakfast or late-night menu, like other chains have done. And competitors like Domino's and Pizza Hut have less debt and stronger cash flow, which could intensify pressure on Sbarro as key debt payments come due in 2009.
Six Flags. (SIX; about 30,000 employees; stock down 84%). This theme-park operator has been losing money for several years, and selling off properties to try to pay down debt and get back into the black. But the ride may end prematurely. Moody's expects cash flow to be negative in 2009, and if consumers aren't spending during the peak summer season, that could imperil the company's ability to pay debts coming due later this year and in 2010.
Blockbuster. (BBI; about 60,000 employees; stock down 57%). The video-rental chain has burned cash while trying to figure out how to maximize fees without alienating customers. Its operating income has started to improve just as consumers are cutting back, even on movies. Video stores in general are under pressure as they compete with cable and Internet operators offering the same titles. A key test of Blockbuster's viability will come when two credit lines expire in August. One possible outcome, according to Valueline, is that investors take the company private and then go public again when market conditions are better.
Krispy Kreme. (KKD; about 4,000 employees; stock down 50%). The donuts might be good, but Krispy Kreme overestimated Americans' appetite - and that's saying something. This chain overexpanded during the donut heyday of the 1990s - taking on a lot of debt - and now requires high volumes to meet expenses and interest payments. The company has cut costs and closed underperforming stores, but still hasn't earned an operating profit in three years. And now that consumers are cutting back on everything, such improvements may fail to offset top-line declines, leading Krispy Kreme to seek some kind of relief from lenders over the next year.
Landry's Restaurants. (LNY; about 17,000 employees; stock down 66%). This restaurant chain, which operates Chart House, Rainforest Café, and other eateries, needs $400 million in new financing to finalize a buyout deal dating to last June. If lenders come through, the company should have enough cash to ride out the recession. But at least two banks have already balked, leading to downgrades of the company's debt and the prospect of a cash-flow crunch.
Sirius Satellite Radio. (SIRI - parent company; about 1,000 employees; stock down 96%). The music rocks, but satellite radio has yet to be profitable, and huge contracts for performers like Howard Stern are looking unsustainable. Sirius is one of two satellite-radio services owned by parent company Sirius XM, which was formed when Sirius and XM merged last year. So far, the merger hasn't generated the savings needed to make the company profitable, and Moody's thinks there's a "high likelihood" that Sirius will fail to repay or refinance its debt in 2009. One outcome could be a takeover, at distressed prices, by other firms active in the satellite business.
Trump Entertainment Resorts Holdings. (TRMP; about 9,500 employees; stock down 94%). The casino company made famous by The Donald has received several extensions on interest payments, while it tries to sell at least one of its Atlantic City properties and pay down a stack of debt. But with casino buyers scarce, competition circling, and gamblers nursing their losses from the recession, Trump Entertainment may face long odds of skirting bankruptcy.
BearingPoint. (BGPT; about 16,000 employees; stock down 21%). This Virginia-based consulting firm, spun out of KPMG in 2001, is struggling to solve its own operating problems. The firm has consistently lost money, revenue has been falling, and management stopped issuing earnings guidance in 2008. Stable government contracts generate about 30 percent of the firm's business, but the firm may sell othehttp://finance.yahoo.com/news/15-Companies-That-Might-Not-usnews-14279875.html/printr divisions to help pay off debt. With a key interest payment due in April, management needs to hustle - or devise its own exit strategy.
- With Carol Hook, Danielle Burton and Stephanie Salmon
© Copyright 2008 U.S.News & World Report, L.P
Who's next?
With consumers shutting their wallets and corporate revenues plunging, the business landscape may start to resemble a graveyard in 2009. Household names like Circuit City and Linens 'n Things have already perished. And chances are, those bankruptcies were just an early warning sign of a much broader epidemic.
Moody's Investors Service, for instance, predicts that the default rate on corporate bonds - which foretells bankruptcies - will be three times higher in 2009 than in 2008, and 15 times higher than in 2007. That could equate to 25 significant bankruptcies per month.
We examined ratings from Moody's and data from other sources to develop a short list of potential victims that ought to be familiar to most consumers. Many of these firms are in industries directly hit by the slowdown in consumer spending, such as retail, automotive, housing and entertainment.
But there are other common threads. Most of these firms have limited cash for a rainy day, and a lot of debt, with large interest payments due over the next year. In ordinary times, it might not be so hard to refinance loans, or get new ones, to help keep the cash flowing. But in an acute credit crunch it's a different story, and at companies where sales are down and going lower, skittish lenders may refuse to grant any more credit. It's a terrible time to be cash-poor.
[See how Wall Street continues to doom itself.]
That's why Moody's assigns most of these firms its lowest rating for short-term liquidity. And all the firms on this list have long-term debt that Moody's rates Caa or lower, which means the borrower is considered at least a "very high" credit risk.
Once a company defaults on its debt, or fails to make a payment, the next step is usually a Chapter 11 bankruptcy filing. Some firms continue to operate while in Chapter 11, retaining many of their employees. Those firms often shed debt, restructure, and emerge from bankruptcy as healthier companies.
But it takes fresh financing to do that, and with money scarce, more bankrupt firms than usual are likely to liquidate - like Circuit City. That's why corporate failures are likely to be a major drag on the economy in 2009: In a liquidation, the entire workforce often gets axed, with little or no severance. That will only add to unemployment, which could hit 9 or even 10 percent by the end of the year.
[Want to land a plum job without paying taxes? Here's how.]
It's possible that none of the firms on this list will liquidate, or even declare Chapter 11. Some may come up with unexpected revenue or creative financing that helps avert bankruptcy, while others could be purchased in whole or in part by creditors or other investors. But one way or another, the following 15 firms will probably look a lot different a year from now than they do today:
Rite Aid. (Ticker symbol: RAD; about 100,000 employees; 1-year stock-price decline: 92%). This drugstore chain tried to boost its performance by acquiring competitors Brooks and Eckerd in 2007. But there have been some nasty side effects, like a huge debt load that makes it the most leveraged drugstore chain in the U.S., according to Zacks Equity Research. That big retail investment came just as megadiscounter Wal-Mart was starting to sell prescription drugs, and consumers were starting to cut bank on spending. Management has twice lowered its outlook for 2009. Prognosis: Mounting losses, with no turnaround in sight.
Claire's Stores. (Privately owned; about 18,000 employees.) Leon Black's once-renowned private-equity firm, the Apollo Group, paid $3.1 billion for this trendy teen-focused accessory store in 2007, when buyout funds were bulging. But cash flow has been negative for much of the past year and analysts believe Claire's is close to defaulting on its debt. A horrible retail outlook for 2009 offers no relief, suggesting Claire's could follow Linens 'n Things - another Apollo purchase - and declare Chapter 11, possibly shuttering all of its 3,000-plus stores.
[See 5 pieces missing from Obama's stimulus plan.]
Chrysler. (Privately owned; about 55,000 employees). It's never a good sign when management insists the company is not going out of business, which is what CEO Bob Nardelli has been doing lately. Of the three Detroit automakers, Chrysler is the most endangered, with a product portfolio that's overreliant on gas-guzzling trucks and SUVs and almost totally devoid of compelling small cars. A recent deal with Fiat seems dubious, since the Italian automaker doesn't have to pony up any money, and Chrysler desperately needs cash. The company is quickly burning through $4 billion in government bailout money, and with car sales down 40 percent from recent peaks, Chrysler may be the weakling that can't cut it in tough times.
Dollar Thrifty Automotive Group. (DTG; about 7,000 employees; stock down 95%). This car-rental company is a small player compared to Enterprise, Hertz, and Avis Budget. It's also more reliant on leisure travelers, and therefore more susceptible to a downturn as consumers cut spending. Dollar Thrifty is also closely tied to Chrysler, which supplies 80 percent of its fleet. Moody's predicts that if Chrysler declares Chapter 11, Dollar Thrifty would suffer deeply as well.
Realogy Corp. (Privately owned; about 13,000 employees). It's the biggest real-estate brokerage firm in the country, but that's a bad thing when there are double-digit declines in both sales and prices, as there were in 2009. Realogy, which includes the Coldwell Banker, ERA, and Sotheby's franchises, also carries a high debt load, dating to its purchase by the Apollo Group in 2007 - the very moment when the housing market was starting to invert from a soaring ride into a sickening nosedive. Realogy has been trying to refinance much of its debt, prompting lawsuits. One deal was denied by a judge in December, reducing the firm's already tight wiggle room.
[See why "Wall Street talent" is an oxymoron.]
Station Casinos. (Privately owned, about 14,000 employees). Las Vegas has already been creamed by a biblical real-estate bust, and now it may face the loss of its home-grown gambling joints, too. Station - which runs 15 casinos off the strip that cater to locals - recently failed to make a key interest payment, which is often one of the last steps before a Chapter 11 filing. For once, the house seems likely to lose.
Loehmann's Capital Corp. (Privately owned; about 1,500 employees). This clothing chain has the right formula for lean times, offering women's clothing at discount prices. But the consumer pullback is hitting just about every retailer, and Loehmann's has a lot less cash to ride out a drought than competitors like Nordstrom Rack and TJ Maxx. If Loehmann's doesn't get additional financing in 2009 - a dicey proposition, given skyrocketing unemployment and plunging spending - the chain could run out of cash.
Sbarro. (Privately owned; about 5,500 employees). It's not the pizza that's the problem. Many of this chain's 1,100 storefronts are in malls, which is a double whammy: Traffic is down, since consumers have put away their wallets. Sbarro can't really boost revenue by adding a breakfast or late-night menu, like other chains have done. And competitors like Domino's and Pizza Hut have less debt and stronger cash flow, which could intensify pressure on Sbarro as key debt payments come due in 2009.
Six Flags. (SIX; about 30,000 employees; stock down 84%). This theme-park operator has been losing money for several years, and selling off properties to try to pay down debt and get back into the black. But the ride may end prematurely. Moody's expects cash flow to be negative in 2009, and if consumers aren't spending during the peak summer season, that could imperil the company's ability to pay debts coming due later this year and in 2010.
Blockbuster. (BBI; about 60,000 employees; stock down 57%). The video-rental chain has burned cash while trying to figure out how to maximize fees without alienating customers. Its operating income has started to improve just as consumers are cutting back, even on movies. Video stores in general are under pressure as they compete with cable and Internet operators offering the same titles. A key test of Blockbuster's viability will come when two credit lines expire in August. One possible outcome, according to Valueline, is that investors take the company private and then go public again when market conditions are better.
Krispy Kreme. (KKD; about 4,000 employees; stock down 50%). The donuts might be good, but Krispy Kreme overestimated Americans' appetite - and that's saying something. This chain overexpanded during the donut heyday of the 1990s - taking on a lot of debt - and now requires high volumes to meet expenses and interest payments. The company has cut costs and closed underperforming stores, but still hasn't earned an operating profit in three years. And now that consumers are cutting back on everything, such improvements may fail to offset top-line declines, leading Krispy Kreme to seek some kind of relief from lenders over the next year.
Landry's Restaurants. (LNY; about 17,000 employees; stock down 66%). This restaurant chain, which operates Chart House, Rainforest Café, and other eateries, needs $400 million in new financing to finalize a buyout deal dating to last June. If lenders come through, the company should have enough cash to ride out the recession. But at least two banks have already balked, leading to downgrades of the company's debt and the prospect of a cash-flow crunch.
Sirius Satellite Radio. (SIRI - parent company; about 1,000 employees; stock down 96%). The music rocks, but satellite radio has yet to be profitable, and huge contracts for performers like Howard Stern are looking unsustainable. Sirius is one of two satellite-radio services owned by parent company Sirius XM, which was formed when Sirius and XM merged last year. So far, the merger hasn't generated the savings needed to make the company profitable, and Moody's thinks there's a "high likelihood" that Sirius will fail to repay or refinance its debt in 2009. One outcome could be a takeover, at distressed prices, by other firms active in the satellite business.
Trump Entertainment Resorts Holdings. (TRMP; about 9,500 employees; stock down 94%). The casino company made famous by The Donald has received several extensions on interest payments, while it tries to sell at least one of its Atlantic City properties and pay down a stack of debt. But with casino buyers scarce, competition circling, and gamblers nursing their losses from the recession, Trump Entertainment may face long odds of skirting bankruptcy.
BearingPoint. (BGPT; about 16,000 employees; stock down 21%). This Virginia-based consulting firm, spun out of KPMG in 2001, is struggling to solve its own operating problems. The firm has consistently lost money, revenue has been falling, and management stopped issuing earnings guidance in 2008. Stable government contracts generate about 30 percent of the firm's business, but the firm may sell othehttp://finance.yahoo.com/news/15-Companies-That-Might-Not-usnews-14279875.html/printr divisions to help pay off debt. With a key interest payment due in April, management needs to hustle - or devise its own exit strategy.
- With Carol Hook, Danielle Burton and Stephanie Salmon
© Copyright 2008 U.S.News & World Report, L.P
Saturday, February 7, 2009
New Plan to Help Banks Sell Bad Assets
By STEPHEN LABATON
WASHINGTON — After weeks of internal debate, the Obama administration has settled on a plan to inject billions of dollars in fresh capital into banks and entice investors to purchase their most troubled assets.
The new financial industry rescue plan, to be outlined in broad terms on Monday in a speech by the Treasury secretary, Timothy F. Geithner, will not require banks to increase their lending. That is despite criticism that institutions that already received money from the Troubled Asset Relief Program, or TARP, either hoarded it or used the funds to acquire other banks.
The incentives to investors could be in the form of commitments to absorb some of the losses from any assets they purchase, should their values continue to decline. The goal is to relieve the banks of their worst assets so that private investors might then provide more capital.
Officials hope that that part of the plan is not labeled a “bad bank” administered by the government, although they expect that some might call it that.
No matter what it is called, the government would assume some of the risk of declining assets at the heart of the economic crisis. But by relying on a combination of private investors and government guarantees, the administration hopes to reduce its exposure to losses and avoid the problem of having to place a value on assets that the institutions have been unable to sell.
A central element of the plan would be a major expansion of a lending facility begun in November by the Federal Reserve Bank of New York when it was headed by Mr. Geithner. The program, which was initially financed by $200 billion in Fed money and $20 billion in seed capital from the $700 billion bailout fund, lent money to investors to buy securities backed by student, auto and credit card loans, as well as loans guaranteed by the Small Business Administration.
Obama administration officials say they have rejected nationalizing institutions by taking large ownership stakes. They also will not immediately seek additional money from Congress beyond the $350 billion left in the TARP fund.
With reports of lavish executive pay, extravagant corporate retreats and expensive office renovations at some of the institutions receiving assistance, political support for the program has sharply eroded in recent weeks. And as the White House has put forward a stimulus package of about $800 billion, there is recognition that Congress will very likely balk now at another request for bailout money.
But lawmakers said they expected the administration to seek more money for the rescue program later this year.
The banking plan will involve a close review of financial institutions, possibly including a so-called stress test to measure whether they have enough resources to weather a continued economic decline. It will also enable the government, when it provides a new round of investment, to convert the warrants for preferred stock it has already received from many institutions into common stock. The move, which essentially would swap debt for equity, would help relieve the balance sheets of those institutions, although it would also hurt other existing shareholders by diluting their common stock.
Lawmakers said they were told that Mr. Geithner would not spell out the details of much of the program next week, including how the government would use more than $50 billion from that program to help homeowners facing foreclosure.
For weeks, administration officials have been exploring several alternatives for reducing the wave of foreclosures. One proposal involves Fannie Mae and Freddie Mac, the mortgage finance companies now under government control, to help further stabilize the housing markets by providing guarantees on low-rate mortgages.
Another proposal, said to be favored by Lawrence H. Summers, the senior White House economic official, would provide incentives to entice investors in pools of mortgages — and the companies that service mortgages — to refinance troubled home loans.
An announcement on that part of the plan is expected to be made by President Obama, lawmakers said, possibly as early as next week.
Although critics have blamed the administration of George W. Bush for mismanaging the TARP fund by not pressing the banks receiving assistance to increase their lending, the new round of capital injections is not expected to come with government demands that the institutions provide more loans. But the new administration was expected to take other steps to encourage institutions to increase their lending, as well as to explain how much their lending had increased or decreased each quarter.
Democratic lawmakers who have been given previews on aspects of the plan praised it.
“The plan is very smart,” said Senator Charles E. Schumer, Democrat of New York, who declined to provide details of his discussions about the plan with senior administration officials. “It avoids one-size-fits-all. It will have an overarching effect on many institutions. But it doesn’t put all institutions in the same box.”
While some of the elements of the plan are similar to those used by the Bush administration, officials said on Friday that they hoped to overcome the mounting criticism of the earlier effort by lawmakers and economists by making the program more transparent and equitable.
This week’s new restrictions on executive pay and last week’s announcement of new lobbying rules that banks and other groups seeking assistance must follow have been part of the effort by the Obama administration to restore credibility to the program and regain support in Congress. That effort will be essential if the administration returns to Congress for more money.
http://www.nytimes.com/2009/02/07/business/07medhome.html?em
Copyright 2009 The New York Times Company
WASHINGTON — After weeks of internal debate, the Obama administration has settled on a plan to inject billions of dollars in fresh capital into banks and entice investors to purchase their most troubled assets.
The new financial industry rescue plan, to be outlined in broad terms on Monday in a speech by the Treasury secretary, Timothy F. Geithner, will not require banks to increase their lending. That is despite criticism that institutions that already received money from the Troubled Asset Relief Program, or TARP, either hoarded it or used the funds to acquire other banks.
The incentives to investors could be in the form of commitments to absorb some of the losses from any assets they purchase, should their values continue to decline. The goal is to relieve the banks of their worst assets so that private investors might then provide more capital.
Officials hope that that part of the plan is not labeled a “bad bank” administered by the government, although they expect that some might call it that.
No matter what it is called, the government would assume some of the risk of declining assets at the heart of the economic crisis. But by relying on a combination of private investors and government guarantees, the administration hopes to reduce its exposure to losses and avoid the problem of having to place a value on assets that the institutions have been unable to sell.
A central element of the plan would be a major expansion of a lending facility begun in November by the Federal Reserve Bank of New York when it was headed by Mr. Geithner. The program, which was initially financed by $200 billion in Fed money and $20 billion in seed capital from the $700 billion bailout fund, lent money to investors to buy securities backed by student, auto and credit card loans, as well as loans guaranteed by the Small Business Administration.
Obama administration officials say they have rejected nationalizing institutions by taking large ownership stakes. They also will not immediately seek additional money from Congress beyond the $350 billion left in the TARP fund.
With reports of lavish executive pay, extravagant corporate retreats and expensive office renovations at some of the institutions receiving assistance, political support for the program has sharply eroded in recent weeks. And as the White House has put forward a stimulus package of about $800 billion, there is recognition that Congress will very likely balk now at another request for bailout money.
But lawmakers said they expected the administration to seek more money for the rescue program later this year.
The banking plan will involve a close review of financial institutions, possibly including a so-called stress test to measure whether they have enough resources to weather a continued economic decline. It will also enable the government, when it provides a new round of investment, to convert the warrants for preferred stock it has already received from many institutions into common stock. The move, which essentially would swap debt for equity, would help relieve the balance sheets of those institutions, although it would also hurt other existing shareholders by diluting their common stock.
Lawmakers said they were told that Mr. Geithner would not spell out the details of much of the program next week, including how the government would use more than $50 billion from that program to help homeowners facing foreclosure.
For weeks, administration officials have been exploring several alternatives for reducing the wave of foreclosures. One proposal involves Fannie Mae and Freddie Mac, the mortgage finance companies now under government control, to help further stabilize the housing markets by providing guarantees on low-rate mortgages.
Another proposal, said to be favored by Lawrence H. Summers, the senior White House economic official, would provide incentives to entice investors in pools of mortgages — and the companies that service mortgages — to refinance troubled home loans.
An announcement on that part of the plan is expected to be made by President Obama, lawmakers said, possibly as early as next week.
Although critics have blamed the administration of George W. Bush for mismanaging the TARP fund by not pressing the banks receiving assistance to increase their lending, the new round of capital injections is not expected to come with government demands that the institutions provide more loans. But the new administration was expected to take other steps to encourage institutions to increase their lending, as well as to explain how much their lending had increased or decreased each quarter.
Democratic lawmakers who have been given previews on aspects of the plan praised it.
“The plan is very smart,” said Senator Charles E. Schumer, Democrat of New York, who declined to provide details of his discussions about the plan with senior administration officials. “It avoids one-size-fits-all. It will have an overarching effect on many institutions. But it doesn’t put all institutions in the same box.”
While some of the elements of the plan are similar to those used by the Bush administration, officials said on Friday that they hoped to overcome the mounting criticism of the earlier effort by lawmakers and economists by making the program more transparent and equitable.
This week’s new restrictions on executive pay and last week’s announcement of new lobbying rules that banks and other groups seeking assistance must follow have been part of the effort by the Obama administration to restore credibility to the program and regain support in Congress. That effort will be essential if the administration returns to Congress for more money.
http://www.nytimes.com/2009/02/07/business/07medhome.html?em
Copyright 2009 The New York Times Company
Senators Reach Deal on Stimulus Plan as Jobs Vanish
By CARL HULSE and DAVID M. HERSZENHORN
WASHINGTON — Senate Democrats reached an agreement with Republican moderates on Friday to pare a huge economic recovery measure, clearing the way for approval of a package that President Obama said was urgently needed in light of mounting job losses.
The deal, announced on the Senate floor, was a result of two days of tense negotiations and political theater. Mr. Obama dispatched his chief of staff to Capitol Hill to help conclude the talks and reassure senators in his own party, and he called three key Republicans to applaud them for their patriotism.
Earlier, when it looked as if a vote might take place Friday night, officials said, a government plane was dispatched to Florida to bring back Senator Edward M. Kennedy, a Massachusetts Democrat who has brain cancer.
The fine print was not immediately available, and the numbers were shifting. But in essence, the Democratic leadership and two centrist Republicans announced they had struck a deal on about $110 billion in cuts to the roughly $900 billion legislation — a deal expected to provide at least the 60 votes needed to send the bill out of the Senate and into negotiations with the House, which has passed its own version.
The pact, which is expected to be approved in the next few days, was concluded just hours after the Labor Department announced that 598,000 jobs were lost in January. The contraction in jobs is already steeper than in any other recession since at least the early 1980s. And economists warn that several more shoes are about to drop, a message that added urgency to the Senate deliberations.
As the negotiations were under way, lawmakers said it was time to stop quibbling about the exact parameters of the legislation — which mixes safety-net spending, tax cuts and a huge infusion of dollars into federal programs — and to begin work toward a final agreement that could be sent to Mr. Obama next week.
“Our country can’t wait another day for another approach,” said Senator Ben Nelson, a Nebraska Democrat who is a leader of the bipartisan coalition that worked out the agreement.
The details were negotiated at an afternoon meeting in the office of the Senate majority leader, Harry Reid of Nevada, involving Mr. Reid, other top Democrats and two Republicans, Susan Collins of Maine and Arlen Specter of Pennsylvania. After they came to terms, the senators brought in the White House chief of staff, Rahm Emanuel, for assurance that the deal was acceptable to the administration. Mr. Emanuel signaled it was.
“With today’s unemployment numbers reaching more than 3.6 million workers,” Mr. Emanuel said after the session, “delay and failure were not an option.”
Mr. Obama called Ms. Collins and Mr. Specter, as well as Senator Olympia J. Snowe of Maine, another Republican expected to support the deal, to acknowledge they were acting against pressure from their party and, one official said, to thank them for their patriotism in helping advance the bill at a critical time.
Earlier in the day, Mr. Obama urged Congress to act expeditiously. “It is inexcusable and irresponsible for any of us to get bogged down in distraction, delay or politics as usual while millions of Americans are being put out of work,” said Mr. Obama, who has recently shown less patience for Republican resistance to the bill.
Most Senate Republicans remained opposed to the measure, criticizing it as a case study in excessive spending that would do little to lift the economy. Some conservatives indicated Friday night that they would push for time to study the new legislation before any final vote.
“We want to stimulate the economy, not mortgage the future of our children and grandchildren by the kind of fiscally profligate spending embodied in this legislation,” said Senator John McCain of Arizona, the defeated Republican presidential nominee, who has emerged as a chief opponent of the proposal.
Republicans were clearly irritated at the outcome and faulted those involved in working out the bargain. “When you say this was the best we could do, I disagree with you,” Senator Lindsey Graham of South Carolina said on the floor. “This not remotely close to what we could have done if we had sat down in a true bipartisan fashion and found a better way.”
The Senate’s proposed cuts took aim at an array of popular spending programs that critics said should not be part of a fiscal recovery bill, even if they represent laudable policy goals, because they would not deliver a quick enough jolt to the economy.
Even Mr. Obama’s signature tax cut for middle-class Americans was scaled back as part of the deal. Under the new plan, tax credits of up to $500 for individuals and $1,000 for couples would begin to phase out at lower income levels than first proposed, saving the government $2 billion.
The biggest cut, roughly $40 billion in aid to states, was likely to spur a fierce fight in negotiations with the House over the final bill. Many states, hit hard by the recession, face wrenching cuts in services and layoffs of public employees as they struggle to comply with laws requiring them to balance their budgets.
When debate began this week, the price tag on the Senate version of the stimulus bill was roughly $884 billion, but it grew to more than $900 billion as senators added provisions including tax breaks totaling $30 billion for purchases of homes and cars.
Lawmakers said that by poring over the 736-page bill they had excised about $110 billion, bringing the total cost to about $780 billion — $40 billion less than the stimulus bill approved by the House last week. Because of consumer tax breaks and spending for health research that had been added in the Senate, the new total for the measure could be about $820 billion. But even the senators behind the compromise were uncertain of the number.
In addition to the large cut in state aid, the Senate agreement would cut nearly $20 billion proposed for school construction; $8 billion to refurbish federal buildings and make them more energy efficient; $1 billion for the early childhood program Head Start; and $2 billion from a plan to expand broadband data networks in rural and underserved areas.
The administration had initially hoped that it could win the support of as many as 80 senators, but that goal disappeared after House Republicans voted unanimously against the measure. As questions were raised about the total spending, getting even three or four Republican senators to sign on became difficult.
Ms. Collins said she believed the changes had significantly improved the measure. Mr. Specter said that while he still had reservations, he had come to accept Mr. Obama’s push to enact the economic plan by mid-February. “I believe we do have to act,” Mr. Specter said, “and under the circumstances this is the best we can do.”
But several other Republicans who had taken part in the talks said they could not support the compromise.
“Unfortunately, there was too much in the Democratic counterproposal that was not stimulative,” said Senator George V. Voinovich of Ohio, “and that did not provide the jump-start our economy so desperately needs.”
The Senate Republican leader, Mitch McConnell of Kentucky, said most Republicans remained unconvinced that the package would reinvigorate the economy.
“You have to balance the likelihood of success versus the crushing debt that we’re levying on the backs of our children, our grandchildren and, yes, their children,” Mr. McConnell said.
Mr. Reid urged Republicans to get behind the plan. “This is a critical day for this new Congress and our country,” he said. “Faced with this grave and growing economic crisis, Republicans must decide today whether they will join the president and Congressional Democrats on that road to recovery.”
http://www.nytimes.com/2009/02/07/us/politics/07stimulus.html?exprod=myyahoo
Copyright 2009 The New York Times Company
WASHINGTON — Senate Democrats reached an agreement with Republican moderates on Friday to pare a huge economic recovery measure, clearing the way for approval of a package that President Obama said was urgently needed in light of mounting job losses.
The deal, announced on the Senate floor, was a result of two days of tense negotiations and political theater. Mr. Obama dispatched his chief of staff to Capitol Hill to help conclude the talks and reassure senators in his own party, and he called three key Republicans to applaud them for their patriotism.
Earlier, when it looked as if a vote might take place Friday night, officials said, a government plane was dispatched to Florida to bring back Senator Edward M. Kennedy, a Massachusetts Democrat who has brain cancer.
The fine print was not immediately available, and the numbers were shifting. But in essence, the Democratic leadership and two centrist Republicans announced they had struck a deal on about $110 billion in cuts to the roughly $900 billion legislation — a deal expected to provide at least the 60 votes needed to send the bill out of the Senate and into negotiations with the House, which has passed its own version.
The pact, which is expected to be approved in the next few days, was concluded just hours after the Labor Department announced that 598,000 jobs were lost in January. The contraction in jobs is already steeper than in any other recession since at least the early 1980s. And economists warn that several more shoes are about to drop, a message that added urgency to the Senate deliberations.
As the negotiations were under way, lawmakers said it was time to stop quibbling about the exact parameters of the legislation — which mixes safety-net spending, tax cuts and a huge infusion of dollars into federal programs — and to begin work toward a final agreement that could be sent to Mr. Obama next week.
“Our country can’t wait another day for another approach,” said Senator Ben Nelson, a Nebraska Democrat who is a leader of the bipartisan coalition that worked out the agreement.
The details were negotiated at an afternoon meeting in the office of the Senate majority leader, Harry Reid of Nevada, involving Mr. Reid, other top Democrats and two Republicans, Susan Collins of Maine and Arlen Specter of Pennsylvania. After they came to terms, the senators brought in the White House chief of staff, Rahm Emanuel, for assurance that the deal was acceptable to the administration. Mr. Emanuel signaled it was.
“With today’s unemployment numbers reaching more than 3.6 million workers,” Mr. Emanuel said after the session, “delay and failure were not an option.”
Mr. Obama called Ms. Collins and Mr. Specter, as well as Senator Olympia J. Snowe of Maine, another Republican expected to support the deal, to acknowledge they were acting against pressure from their party and, one official said, to thank them for their patriotism in helping advance the bill at a critical time.
Earlier in the day, Mr. Obama urged Congress to act expeditiously. “It is inexcusable and irresponsible for any of us to get bogged down in distraction, delay or politics as usual while millions of Americans are being put out of work,” said Mr. Obama, who has recently shown less patience for Republican resistance to the bill.
Most Senate Republicans remained opposed to the measure, criticizing it as a case study in excessive spending that would do little to lift the economy. Some conservatives indicated Friday night that they would push for time to study the new legislation before any final vote.
“We want to stimulate the economy, not mortgage the future of our children and grandchildren by the kind of fiscally profligate spending embodied in this legislation,” said Senator John McCain of Arizona, the defeated Republican presidential nominee, who has emerged as a chief opponent of the proposal.
Republicans were clearly irritated at the outcome and faulted those involved in working out the bargain. “When you say this was the best we could do, I disagree with you,” Senator Lindsey Graham of South Carolina said on the floor. “This not remotely close to what we could have done if we had sat down in a true bipartisan fashion and found a better way.”
The Senate’s proposed cuts took aim at an array of popular spending programs that critics said should not be part of a fiscal recovery bill, even if they represent laudable policy goals, because they would not deliver a quick enough jolt to the economy.
Even Mr. Obama’s signature tax cut for middle-class Americans was scaled back as part of the deal. Under the new plan, tax credits of up to $500 for individuals and $1,000 for couples would begin to phase out at lower income levels than first proposed, saving the government $2 billion.
The biggest cut, roughly $40 billion in aid to states, was likely to spur a fierce fight in negotiations with the House over the final bill. Many states, hit hard by the recession, face wrenching cuts in services and layoffs of public employees as they struggle to comply with laws requiring them to balance their budgets.
When debate began this week, the price tag on the Senate version of the stimulus bill was roughly $884 billion, but it grew to more than $900 billion as senators added provisions including tax breaks totaling $30 billion for purchases of homes and cars.
Lawmakers said that by poring over the 736-page bill they had excised about $110 billion, bringing the total cost to about $780 billion — $40 billion less than the stimulus bill approved by the House last week. Because of consumer tax breaks and spending for health research that had been added in the Senate, the new total for the measure could be about $820 billion. But even the senators behind the compromise were uncertain of the number.
In addition to the large cut in state aid, the Senate agreement would cut nearly $20 billion proposed for school construction; $8 billion to refurbish federal buildings and make them more energy efficient; $1 billion for the early childhood program Head Start; and $2 billion from a plan to expand broadband data networks in rural and underserved areas.
The administration had initially hoped that it could win the support of as many as 80 senators, but that goal disappeared after House Republicans voted unanimously against the measure. As questions were raised about the total spending, getting even three or four Republican senators to sign on became difficult.
Ms. Collins said she believed the changes had significantly improved the measure. Mr. Specter said that while he still had reservations, he had come to accept Mr. Obama’s push to enact the economic plan by mid-February. “I believe we do have to act,” Mr. Specter said, “and under the circumstances this is the best we can do.”
But several other Republicans who had taken part in the talks said they could not support the compromise.
“Unfortunately, there was too much in the Democratic counterproposal that was not stimulative,” said Senator George V. Voinovich of Ohio, “and that did not provide the jump-start our economy so desperately needs.”
The Senate Republican leader, Mitch McConnell of Kentucky, said most Republicans remained unconvinced that the package would reinvigorate the economy.
“You have to balance the likelihood of success versus the crushing debt that we’re levying on the backs of our children, our grandchildren and, yes, their children,” Mr. McConnell said.
Mr. Reid urged Republicans to get behind the plan. “This is a critical day for this new Congress and our country,” he said. “Faced with this grave and growing economic crisis, Republicans must decide today whether they will join the president and Congressional Democrats on that road to recovery.”
http://www.nytimes.com/2009/02/07/us/politics/07stimulus.html?exprod=myyahoo
Copyright 2009 The New York Times Company
On the Edge
By PAUL KRUGMAN
A not-so-funny thing happened on the way to economic recovery. Over the last two weeks, what should have been a deadly serious debate about how to save an economy in desperate straits turned, instead, into hackneyed political theater, with Republicans spouting all the old clichés about wasteful government spending and the wonders of tax cuts.
It’s as if the dismal economic failure of the last eight years never happened — yet Democrats have, incredibly, been on the defensive. Even if a major stimulus bill does pass the Senate, there’s a real risk that important parts of the original plan, especially aid to state and local governments, will have been emasculated.
Somehow, Washington has lost any sense of what’s at stake — of the reality that we may well be falling into an economic abyss, and that if we do, it will be very hard to get out again.
It’s hard to exaggerate how much economic trouble we’re in. The crisis began with housing, but the implosion of the Bush-era housing bubble has set economic dominoes falling not just in the United States, but around the world.
Consumers, their wealth decimated and their optimism shattered by collapsing home prices and a sliding stock market, have cut back their spending and sharply increased their saving — a good thing in the long run, but a huge blow to the economy right now. Developers of commercial real estate, watching rents fall and financing costs soar, are slashing their investment plans. Businesses are canceling plans to expand capacity, since they aren’t selling enough to use the capacity they have. And exports, which were one of the U.S. economy’s few areas of strength over the past couple of years, are now plunging as the financial crisis hits our trading partners.
Meanwhile, our main line of defense against recessions — the Federal Reserve’s usual ability to support the economy by cutting interest rates — has already been overrun. The Fed has cut the rates it controls basically to zero, yet the economy is still in free fall.
It’s no wonder, then, that most economic forecasts warn that in the absence of government action we’re headed for a deep, prolonged slump. Some private analysts predict double-digit unemployment. The Congressional Budget Office is slightly more sanguine, but its director, nonetheless, recently warned that “absent a change in fiscal policy ... the shortfall in the nation’s output relative to potential levels will be the largest — in duration and depth — since the Depression of the 1930s.”
Worst of all is the possibility that the economy will, as it did in the ’30s, end up stuck in a prolonged deflationary trap.
We’re already closer to outright deflation than at any point since the Great Depression. In particular, the private sector is experiencing widespread wage cuts for the first time since the 1930s, and there will be much more of that if the economy continues to weaken.
As the great American economist Irving Fisher pointed out almost 80 years ago, deflation, once started, tends to feed on itself. As dollar incomes fall in the face of a depressed economy, the burden of debt becomes harder to bear, while the expectation of further price declines discourages investment spending. These effects of deflation depress the economy further, which leads to more deflation, and so on.
And deflationary traps can go on for a long time. Japan experienced a “lost decade” of deflation and stagnation in the 1990s — and the only thing that let Japan escape from its trap was a global boom that boosted the nation’s exports. Who will rescue America from a similar trap now that the whole world is slumping at the same time?
Would the Obama economic plan, if enacted, ensure that America won’t have its own lost decade? Not necessarily: a number of economists, myself included, think the plan falls short and should be substantially bigger. But the Obama plan would certainly improve our odds. And that’s why the efforts of Republicans to make the plan smaller and less effective — to turn it into little more than another round of Bush-style tax cuts — are so destructive.
So what should Mr. Obama do? Count me among those who think that the president made a big mistake in his initial approach, that his attempts to transcend partisanship ended up empowering politicians who take their marching orders from Rush Limbaugh. What matters now, however, is what he does next.
It’s time for Mr. Obama to go on the offensive. Above all, he must not shy away from pointing out that those who stand in the way of his plan, in the name of a discredited economic philosophy, are putting the nation’s future at risk. The American economy is on the edge of catastrophe, and much of the Republican Party is trying to push it over that edge.
http://www.nytimes.com/2009/02/06/opinion/06krugman.html?_r=1&em=&pagewanted=print
Copyright 2009 The New York Times Company
A not-so-funny thing happened on the way to economic recovery. Over the last two weeks, what should have been a deadly serious debate about how to save an economy in desperate straits turned, instead, into hackneyed political theater, with Republicans spouting all the old clichés about wasteful government spending and the wonders of tax cuts.
It’s as if the dismal economic failure of the last eight years never happened — yet Democrats have, incredibly, been on the defensive. Even if a major stimulus bill does pass the Senate, there’s a real risk that important parts of the original plan, especially aid to state and local governments, will have been emasculated.
Somehow, Washington has lost any sense of what’s at stake — of the reality that we may well be falling into an economic abyss, and that if we do, it will be very hard to get out again.
It’s hard to exaggerate how much economic trouble we’re in. The crisis began with housing, but the implosion of the Bush-era housing bubble has set economic dominoes falling not just in the United States, but around the world.
Consumers, their wealth decimated and their optimism shattered by collapsing home prices and a sliding stock market, have cut back their spending and sharply increased their saving — a good thing in the long run, but a huge blow to the economy right now. Developers of commercial real estate, watching rents fall and financing costs soar, are slashing their investment plans. Businesses are canceling plans to expand capacity, since they aren’t selling enough to use the capacity they have. And exports, which were one of the U.S. economy’s few areas of strength over the past couple of years, are now plunging as the financial crisis hits our trading partners.
Meanwhile, our main line of defense against recessions — the Federal Reserve’s usual ability to support the economy by cutting interest rates — has already been overrun. The Fed has cut the rates it controls basically to zero, yet the economy is still in free fall.
It’s no wonder, then, that most economic forecasts warn that in the absence of government action we’re headed for a deep, prolonged slump. Some private analysts predict double-digit unemployment. The Congressional Budget Office is slightly more sanguine, but its director, nonetheless, recently warned that “absent a change in fiscal policy ... the shortfall in the nation’s output relative to potential levels will be the largest — in duration and depth — since the Depression of the 1930s.”
Worst of all is the possibility that the economy will, as it did in the ’30s, end up stuck in a prolonged deflationary trap.
We’re already closer to outright deflation than at any point since the Great Depression. In particular, the private sector is experiencing widespread wage cuts for the first time since the 1930s, and there will be much more of that if the economy continues to weaken.
As the great American economist Irving Fisher pointed out almost 80 years ago, deflation, once started, tends to feed on itself. As dollar incomes fall in the face of a depressed economy, the burden of debt becomes harder to bear, while the expectation of further price declines discourages investment spending. These effects of deflation depress the economy further, which leads to more deflation, and so on.
And deflationary traps can go on for a long time. Japan experienced a “lost decade” of deflation and stagnation in the 1990s — and the only thing that let Japan escape from its trap was a global boom that boosted the nation’s exports. Who will rescue America from a similar trap now that the whole world is slumping at the same time?
Would the Obama economic plan, if enacted, ensure that America won’t have its own lost decade? Not necessarily: a number of economists, myself included, think the plan falls short and should be substantially bigger. But the Obama plan would certainly improve our odds. And that’s why the efforts of Republicans to make the plan smaller and less effective — to turn it into little more than another round of Bush-style tax cuts — are so destructive.
So what should Mr. Obama do? Count me among those who think that the president made a big mistake in his initial approach, that his attempts to transcend partisanship ended up empowering politicians who take their marching orders from Rush Limbaugh. What matters now, however, is what he does next.
It’s time for Mr. Obama to go on the offensive. Above all, he must not shy away from pointing out that those who stand in the way of his plan, in the name of a discredited economic philosophy, are putting the nation’s future at risk. The American economy is on the edge of catastrophe, and much of the Republican Party is trying to push it over that edge.
http://www.nytimes.com/2009/02/06/opinion/06krugman.html?_r=1&em=&pagewanted=print
Copyright 2009 The New York Times Company
Friday, February 6, 2009
Economy Shed 598,000 Jobs in January
By EDMUND L. ANDREWS
WASHINGTON — The United States lost almost 600,000 jobs last month and the unemployment rate rose to 7.6 percent, its highest level in more than 16 years, the Labor Department said Friday.
It was the biggest monthly job loss since the economy tipped into a recession more than a year ago, and it was even worse than most forecasters had been predicting.
In addition, the government revised the estimates for previous months to include another 400,000 job losses. For December, the government revised the job loss to 577,000 compared with an initial reading of 524,000. Overall, it said, the nation has lost 3.6 million jobs since it slipped into a recession in December 2007.
“Businesses are panicked and fighting for survival and slashing their payrolls,” said Mark Zandi, chief economist at Moody’s Economy.com. “I think we’re trapped in a very adverse, self-reinforcing cycle. The downturn is intensifying, and likely to intensify further unless policy makers respond aggressively.”
Despite the jobless number, Wall Street opened strongly with all three major exchanges up more than 1.5 percent.
As in previous months, employers in January slashed their payrolls in almost every industry except health care Manufacturers eliminated 207,000 jobs, more than in any year since 1982. The construction industry eliminated 111,000 jobs. And retailers, who were wrapping up their worst holiday shopping season in years, eliminated 45,000 jobs.
One modest exception to the bad news was in workers’ wages, which have thus far not reflected the dramatic plunge in employment. Hour earnings edged up to $18.46, up five cents, and average weekly earnings climbed $614.72, up $1.67.
But overall, the new data reinforced the impression of an economy that has become increasingly trapped a vicious circle slumping consumer demand, falling business investment, rising unemployment and mounting losses in the banking system.
Christina D. Romer, head of the President’s Council of Economic Advisers, said the report reinforced the need for Washington to acted quickly on a economic stimulus package. “If we fail to act,” Ms. Romer said, “we are likely to lose millions more jobs and the unemployment rate could reach double digits.”
Although the United States officially slipped into a recession in December 2007, the decline was erratic and temporarily disguised by the impact of the emergency tax-rebate last spring.
Since September, analysts say, economic activity suddenly plunged on almost every front. The monthly pace of job losses shot up to about 500,000 a month for the last three months of 2008, and the new report offered no hint that bottom is in sight. Last week, the number of Americans filing first-time jobless claims reached a 26-year high, with 626,000 filling out initial applications.
“This is a horror show we’re watching,” said Lawrence Mishel, president of the Economic Policy Institute, a left-of-center economic research organization in Washington. “By every measure available-loss of employment and hours, rise of unemployment, shrinkage of the employment to population rate- this recession is steeper than any recession of the last forty years, including the harsh recession of the early 1980s.”
Most forecasters had predicted that the economy would lose about 540,000 in January. Instead, the Labor Department estimated that 598,000 jobs disappeared.
To be sure, monthly payroll numbers are subject to big revisions in the months that follow. But most other indicators of the job market had been trending worse as well.
Major retailers, rocked by one of the worst holiday shopping seasons in memory, have been shutting stores and laying of armies of workers in recent weeks. On Thursday, the nation’s retailers reported that sales fell 1.6 percent in January, the fourth consecutive month of steep sales declines.
And in sign that the country’s slowdown continues to reach beyond its borders, Canada, America’s largest trading partner, reported Friday that its unemployment rate jumped to 7.2 percent in January, from 6.7 percent in December.
In Washington, Friday’s gloomy job report put more pressure on Congress to pass an economic stimulus bill. The House passed a bill last week that would provide more than $800 billion in spending and tax cuts. In the Senate, still bogged down by objections from Republicans, lawmakers were hoping to be able to muster enough votes to pass a measure on Friday
For comparison, the unemployment rate was 4.9 percent in January 2008. But some analysts contend that the current unemployment rate of 7.6 percent understates the labor market’s problems because the percentage of adults participating in the labor force has slumped in recent years, and those people are not listed as “unemployed.”
Peter Morici, an economist at the University of Maryland, estimated that if the labor force participation rate today was as high as it was when President Bush took office, the unemployment rate would be 9.4 percent.
Ian Shepherdson, chief North American economist for High Frequency Economics in Valhalla, N.Y., said the government had become the only source of energy left to break the cycle of slumping demand for goods and falling production.
“The public sector needs to act,” Mr. Shepherdson wrote in a note to clients. “It needs to prevent an endless spiral of attempts to increase saving, leading to reduced spending, leading to reduced incomes, leading to further attempts to raise savings, and so on.”
“We remain firmly of the view that the package now in Congress is the bare minimum required to slow the shrinkage of the economy over the next year.”
Many economists expect that the economy will continue to contract until July at the very least, but at a slowing pace in the second quarter. That would make it the longest recession since the 1930s, outlasting the two record-holders, the mid-1970s and early 1980s downturns. Each of these recessions lasted 16 months. The current recession, which started in December 2007, would reach that milestone in April.
The Federal Reserve continues to pump money into the financial system at a furious pace. Since September, the central bank has more than doubled its reserves, from $900 billion to more than $2 trillion, by literally creating new money.
The Fed has used some of that money to help bail out financial institutions, from Citigroup and Bank of America to the American International Group.
It has been pumping hundreds of billions of dollars into new lending programs, stepping in for banks and other financial institutions to buy up a widening array of corporate debt. Later this month, the Fed will begin a $200 billion program, in conjunction with the Treasury, to finance consumer debt ranging from car loans and credit card debt to student loans.
But analysts say that the big problem is not a shortage of money, but a shortage of demand for products by businesses and consumers. As a result, banks are overloaded with excess reserves, made available by the Fed, which they are often simply parking at the Fed.
Jack Healy contributed reporting from New York.
http://www.nytimes.com/2009/02/07/business/economy/07jobs.html?_r=1&exprod=myyahoo&pagewanted=print
Copyright 2009 The New York Times Company
WASHINGTON — The United States lost almost 600,000 jobs last month and the unemployment rate rose to 7.6 percent, its highest level in more than 16 years, the Labor Department said Friday.
It was the biggest monthly job loss since the economy tipped into a recession more than a year ago, and it was even worse than most forecasters had been predicting.
In addition, the government revised the estimates for previous months to include another 400,000 job losses. For December, the government revised the job loss to 577,000 compared with an initial reading of 524,000. Overall, it said, the nation has lost 3.6 million jobs since it slipped into a recession in December 2007.
“Businesses are panicked and fighting for survival and slashing their payrolls,” said Mark Zandi, chief economist at Moody’s Economy.com. “I think we’re trapped in a very adverse, self-reinforcing cycle. The downturn is intensifying, and likely to intensify further unless policy makers respond aggressively.”
Despite the jobless number, Wall Street opened strongly with all three major exchanges up more than 1.5 percent.
As in previous months, employers in January slashed their payrolls in almost every industry except health care Manufacturers eliminated 207,000 jobs, more than in any year since 1982. The construction industry eliminated 111,000 jobs. And retailers, who were wrapping up their worst holiday shopping season in years, eliminated 45,000 jobs.
One modest exception to the bad news was in workers’ wages, which have thus far not reflected the dramatic plunge in employment. Hour earnings edged up to $18.46, up five cents, and average weekly earnings climbed $614.72, up $1.67.
But overall, the new data reinforced the impression of an economy that has become increasingly trapped a vicious circle slumping consumer demand, falling business investment, rising unemployment and mounting losses in the banking system.
Christina D. Romer, head of the President’s Council of Economic Advisers, said the report reinforced the need for Washington to acted quickly on a economic stimulus package. “If we fail to act,” Ms. Romer said, “we are likely to lose millions more jobs and the unemployment rate could reach double digits.”
Although the United States officially slipped into a recession in December 2007, the decline was erratic and temporarily disguised by the impact of the emergency tax-rebate last spring.
Since September, analysts say, economic activity suddenly plunged on almost every front. The monthly pace of job losses shot up to about 500,000 a month for the last three months of 2008, and the new report offered no hint that bottom is in sight. Last week, the number of Americans filing first-time jobless claims reached a 26-year high, with 626,000 filling out initial applications.
“This is a horror show we’re watching,” said Lawrence Mishel, president of the Economic Policy Institute, a left-of-center economic research organization in Washington. “By every measure available-loss of employment and hours, rise of unemployment, shrinkage of the employment to population rate- this recession is steeper than any recession of the last forty years, including the harsh recession of the early 1980s.”
Most forecasters had predicted that the economy would lose about 540,000 in January. Instead, the Labor Department estimated that 598,000 jobs disappeared.
To be sure, monthly payroll numbers are subject to big revisions in the months that follow. But most other indicators of the job market had been trending worse as well.
Major retailers, rocked by one of the worst holiday shopping seasons in memory, have been shutting stores and laying of armies of workers in recent weeks. On Thursday, the nation’s retailers reported that sales fell 1.6 percent in January, the fourth consecutive month of steep sales declines.
And in sign that the country’s slowdown continues to reach beyond its borders, Canada, America’s largest trading partner, reported Friday that its unemployment rate jumped to 7.2 percent in January, from 6.7 percent in December.
In Washington, Friday’s gloomy job report put more pressure on Congress to pass an economic stimulus bill. The House passed a bill last week that would provide more than $800 billion in spending and tax cuts. In the Senate, still bogged down by objections from Republicans, lawmakers were hoping to be able to muster enough votes to pass a measure on Friday
For comparison, the unemployment rate was 4.9 percent in January 2008. But some analysts contend that the current unemployment rate of 7.6 percent understates the labor market’s problems because the percentage of adults participating in the labor force has slumped in recent years, and those people are not listed as “unemployed.”
Peter Morici, an economist at the University of Maryland, estimated that if the labor force participation rate today was as high as it was when President Bush took office, the unemployment rate would be 9.4 percent.
Ian Shepherdson, chief North American economist for High Frequency Economics in Valhalla, N.Y., said the government had become the only source of energy left to break the cycle of slumping demand for goods and falling production.
“The public sector needs to act,” Mr. Shepherdson wrote in a note to clients. “It needs to prevent an endless spiral of attempts to increase saving, leading to reduced spending, leading to reduced incomes, leading to further attempts to raise savings, and so on.”
“We remain firmly of the view that the package now in Congress is the bare minimum required to slow the shrinkage of the economy over the next year.”
Many economists expect that the economy will continue to contract until July at the very least, but at a slowing pace in the second quarter. That would make it the longest recession since the 1930s, outlasting the two record-holders, the mid-1970s and early 1980s downturns. Each of these recessions lasted 16 months. The current recession, which started in December 2007, would reach that milestone in April.
The Federal Reserve continues to pump money into the financial system at a furious pace. Since September, the central bank has more than doubled its reserves, from $900 billion to more than $2 trillion, by literally creating new money.
The Fed has used some of that money to help bail out financial institutions, from Citigroup and Bank of America to the American International Group.
It has been pumping hundreds of billions of dollars into new lending programs, stepping in for banks and other financial institutions to buy up a widening array of corporate debt. Later this month, the Fed will begin a $200 billion program, in conjunction with the Treasury, to finance consumer debt ranging from car loans and credit card debt to student loans.
But analysts say that the big problem is not a shortage of money, but a shortage of demand for products by businesses and consumers. As a result, banks are overloaded with excess reserves, made available by the Fed, which they are often simply parking at the Fed.
Jack Healy contributed reporting from New York.
http://www.nytimes.com/2009/02/07/business/economy/07jobs.html?_r=1&exprod=myyahoo&pagewanted=print
Copyright 2009 The New York Times Company
Thursday, February 5, 2009
The Action Americans Need
By Barack Obama
Thursday, February 5, 2009; A17
By now, it's clear to everyone that we have inherited an economic crisis as deep and dire as any since the days of the Great Depression. Millions of jobs that Americans relied on just a year ago are gone; millions more of the nest eggs families worked so hard to build have vanished. People everywhere are worried about what tomorrow will bring.
What Americans expect from Washington is action that matches the urgency they feel in their daily lives -- action that's swift, bold and wise enough for us to climb out of this crisis.
Because each day we wait to begin the work of turning our economy around, more people lose their jobs, their savings and their homes. And if nothing is done, this recession might linger for years. Our economy will lose 5 million more jobs. Unemployment will approach double digits. Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse.
That's why I feel such a sense of urgency about the recovery plan before Congress. With it, we will create or save more than 3 million jobs over the next two years, provide immediate tax relief to 95 percent of American workers, ignite spending by businesses and consumers alike, and take steps to strengthen our country for years to come.
This plan is more than a prescription for short-term spending -- it's a strategy for America's long-term growth and opportunity in areas such as renewable energy, health care and education. And it's a strategy that will be implemented with unprecedented transparency and accountability, so Americans know where their tax dollars are going and how they are being spent.
In recent days, there have been misguided criticisms of this plan that echo the failed theories that helped lead us into this crisis -- the notion that tax cuts alone will solve all our problems; that we can meet our enormous tests with half-steps and piecemeal measures; that we can ignore fundamental challenges such as energy independence and the high cost of health care and still expect our economy and our country to thrive.
I reject these theories, and so did the American people when they went to the polls in November and voted resoundingly for change. They know that we have tried it those ways for too long. And because we have, our health-care costs still rise faster than inflation. Our dependence on foreign oil still threatens our economy and our security. Our children still study in schools that put them at a disadvantage. We've seen the tragic consequences when our bridges crumble and our levees fail.
Every day, our economy gets sicker -- and the time for a remedy that puts Americans back to work, jump-starts our economy and invests in lasting growth is now.
Now is the time to protect health insurance for the more than 8 million Americans at risk of losing their coverage and to computerize the health-care records of every American within five years, saving billions of dollars and countless lives in the process.
Now is the time to save billions by making 2 million homes and 75 percent of federal buildings more energy-efficient, and to double our capacity to generate alternative sources of energy within three years.
Now is the time to give our children every advantage they need to compete by upgrading 10,000 schools with state-of-the-art classrooms, libraries and labs; by training our teachers in math and science; and by bringing the dream of a college education within reach for millions of Americans.
And now is the time to create the jobs that remake America for the 21st century by rebuilding aging roads, bridges and levees; designing a smart electrical grid; and connecting every corner of the country to the information superhighway.
These are the actions Americans expect us to take without delay. They're patient enough to know that our economic recovery will be measured in years, not months. But they have no patience for the same old partisan gridlock that stands in the way of action while our economy continues to slide.
So we have a choice to make. We can once again let Washington's bad habits stand in the way of progress. Or we can pull together and say that in America, our destiny isn't written for us but by us. We can place good ideas ahead of old ideological battles, and a sense of purpose above the same narrow partisanship. We can act boldly to turn crisis into opportunity and, together, write the next great chapter in our history and meet the test of our time.
The writer is president of the United States
Thursday, February 5, 2009; A17
By now, it's clear to everyone that we have inherited an economic crisis as deep and dire as any since the days of the Great Depression. Millions of jobs that Americans relied on just a year ago are gone; millions more of the nest eggs families worked so hard to build have vanished. People everywhere are worried about what tomorrow will bring.
What Americans expect from Washington is action that matches the urgency they feel in their daily lives -- action that's swift, bold and wise enough for us to climb out of this crisis.
Because each day we wait to begin the work of turning our economy around, more people lose their jobs, their savings and their homes. And if nothing is done, this recession might linger for years. Our economy will lose 5 million more jobs. Unemployment will approach double digits. Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse.
That's why I feel such a sense of urgency about the recovery plan before Congress. With it, we will create or save more than 3 million jobs over the next two years, provide immediate tax relief to 95 percent of American workers, ignite spending by businesses and consumers alike, and take steps to strengthen our country for years to come.
This plan is more than a prescription for short-term spending -- it's a strategy for America's long-term growth and opportunity in areas such as renewable energy, health care and education. And it's a strategy that will be implemented with unprecedented transparency and accountability, so Americans know where their tax dollars are going and how they are being spent.
In recent days, there have been misguided criticisms of this plan that echo the failed theories that helped lead us into this crisis -- the notion that tax cuts alone will solve all our problems; that we can meet our enormous tests with half-steps and piecemeal measures; that we can ignore fundamental challenges such as energy independence and the high cost of health care and still expect our economy and our country to thrive.
I reject these theories, and so did the American people when they went to the polls in November and voted resoundingly for change. They know that we have tried it those ways for too long. And because we have, our health-care costs still rise faster than inflation. Our dependence on foreign oil still threatens our economy and our security. Our children still study in schools that put them at a disadvantage. We've seen the tragic consequences when our bridges crumble and our levees fail.
Every day, our economy gets sicker -- and the time for a remedy that puts Americans back to work, jump-starts our economy and invests in lasting growth is now.
Now is the time to protect health insurance for the more than 8 million Americans at risk of losing their coverage and to computerize the health-care records of every American within five years, saving billions of dollars and countless lives in the process.
Now is the time to save billions by making 2 million homes and 75 percent of federal buildings more energy-efficient, and to double our capacity to generate alternative sources of energy within three years.
Now is the time to give our children every advantage they need to compete by upgrading 10,000 schools with state-of-the-art classrooms, libraries and labs; by training our teachers in math and science; and by bringing the dream of a college education within reach for millions of Americans.
And now is the time to create the jobs that remake America for the 21st century by rebuilding aging roads, bridges and levees; designing a smart electrical grid; and connecting every corner of the country to the information superhighway.
These are the actions Americans expect us to take without delay. They're patient enough to know that our economic recovery will be measured in years, not months. But they have no patience for the same old partisan gridlock that stands in the way of action while our economy continues to slide.
So we have a choice to make. We can once again let Washington's bad habits stand in the way of progress. Or we can pull together and say that in America, our destiny isn't written for us but by us. We can place good ideas ahead of old ideological battles, and a sense of purpose above the same narrow partisanship. We can act boldly to turn crisis into opportunity and, together, write the next great chapter in our history and meet the test of our time.
The writer is president of the United States
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