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Posts tagged ‘Great Recession’

Reid Seeking Votes for New Jobless Benefits Deal.


Senate Majority Leader Harry Reid said Wednesday he is seeking votes for a new measure that would extend jobless benefits for three more months for people out of work the longest.

Reid, D-Nev., said he still lacks the 60 votes needed to end Republican delaying tactics against the measure. But he told reporters that he has 58 or 59 votes and hopes his chamber will debate the package next week.

Democrats are pushing the bill amid an election-year effort to portray themselves as defenders of families struggling to make ends meet during the sluggish recovery from the Great Recession.

The proposal would cost a bit over $6 billion and be paid for by giving large corporations more time to meet their pension obligations, Democratic officials said.

That would raise federal revenue over the short term because it would lower companies’ pension fund contributions, which are tax deductible. It would reduce federal revenue later as corporate pension contributions increase.

The bill’s details were described by Democratic officials who spoke on condition of anonymity because they were not authorized to publicly discuss private talks.

Sen. Dean Heller, R-Nev., has been a leading Republican in efforts to round up GOP support for a compromise. Nevada’s unemployment rate of 8.8 percent last month was one of the nation’s highest.

“Sen. Heller is continuing to talk with his Democratic and Republican colleagues about a number of ideas to move unemployment insurance legislation forward,” said Heller spokesman Chandler Smith.

The program expired on Dec. 28, cutting off benefits for more than 1 million long-term unemployed people.

Efforts to revive the benefits have stalled in the Senate, where most Republicans have opposed the proposed extension.

Under the expired program, an average $256 weekly had gone to laid-off workers who exhausted their state-provided benefits, which generally last 26 weeks. Federal payments were available for up to 47 more weeks, depending on unemployment in each state.

 

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Source: Newsmax.com

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World Braces for Retirement Crisis.


A global retirement crisis is bearing down on workers of all ages.

Spawned years before the Great Recession and the 2008 financial meltdown, the crisis was significantly worsened by those twin traumas. It will play out for decades, and its consequences will be far-reaching.

Many people will be forced to work well past the traditional retirement age of 65. Living standards will fall and poverty rates will rise for the elderly in wealthy countries that built safety nets for seniors after World War II. In developing countries, people’s rising expectations will be frustrated if governments can’t afford retirement systems to replace the tradition of children caring for aging parents.

The problems are emerging as the generation born after World War II moves into retirement.

“The first wave of under-prepared workers is going to try to go into retirement and will find they can’t afford to do so,” says Norman Dreger, a retirement specialist with the consulting firm Mercer in Frankfurt, Germany.

The crisis is a convergence of three factors:

— Countries are slashing retirement benefits and raising the age to start collecting them. These countries are awash in debt since the recession hit. And they face a demographics disaster as retirees live longer and falling birth rates mean there will be fewer workers to support them.

— Companies have eliminated traditional pension plans that guaranteed employees a monthly check in retirement.

— Individuals spent freely and failed to save before the recession and saw much of their wealth disappear once it hit.

Those factors have been documented individually. What is less appreciated is their combined ferocity and global scope.

“Most countries are not ready to meet what is sure to be one of the defining challenges of the 21st century,” the Center for Strategic and International Studies in Washington concludes.

Mikio Fukushima, who is 52 and lives in Tokyo, worries that he might need to move somewhere cheaper, maybe Malaysia, after age 70 to get by comfortably on income from his investments and a public pension of just $10,000 a year.

People like Fukushima who are fretting over their retirement prospects stand in contrast to many who are already retired. Many workers were recipients of generous corporate pensions and government benefits that had yet to be cut.

Jean-Pierre Bigand, 66, retired Sept. 1, in time to enjoy all the perks of a retirement system in France that’s now in peril. Bigand lives in the countryside outside the city of Rouen in Normandy. He has a second home in Provence. He’s just taken a vacation on Oleron Island off the Atlantic coast and is planning a five-week trip to Guadeloupe.

“Travel is our biggest expense,” he says.

UNDER SIEGE

The notion of extended, leisurely retirements is relatively new. Germany established the world’s first widely available state pension system in 1889. The United States introduced Social Security in 1935. In the prosperous years after World War II, governments expanded pensions. In addition, companies began to offer pensions that paid employees a guaranteed amount each month in retirement — so-called defined-benefit pensions.

The average age at which men could retire with full government pension benefits fell from 64.3 years in 1949 to 62.4 years in 1999 in the relatively wealthy countries that belong to the Organization for Economic Cooperation and Development.

“That was the Golden Age,” Mercer consultant Dreger says.

It would not last. As the 2000s dawned, governments — and companies — looked at actuarial tables and birth rates and realized they couldn’t afford the pensions they’d promised.

The average man in 30 countries the OECD surveyed will live 19 years after retirement. That’s up from 13 years in 1958, when many countries were devising their generous pension plans.

The OECD says the average retirement age would have to reach 66 or 67, from 63 now, to “maintain control of the cost of pensions” from longer lifespans.

Compounding the problem is that birth rates are falling just as the bulge of people born in developed countries after World War II retires.

Populations are aging rapidly as a result. The higher the percentage of older people, the harder it is for a country to finance its pension system because relatively fewer younger workers are paying taxes.

In response, governments are raising retirement ages and slashing benefits. In 30 high- and middle-income OECD countries, the average age at which men can collect full retirement benefits will rise to 64.6 in 2050, from 62.9 in 2010; for women, it will rise from 61.8 to 64.4

In the wealthy countries it studied, the OECD found that the pension reforms of the 2000s will cut retirement benefits by an average 20 percent.

Even France, where government pensions have long been generous, has begun modest reforms to reduce costs.

“France is a retirees’ paradise now,” says Richard Jackson, senior fellow at the CSIS. “You’re not going to want to retire there in 20 to 25 years.”

The fate of government pensions is important because they are the cornerstone of retirement income. Across the 34-country OECD, governments provide 59 percent of retiree income, on average.

THE FINANCIAL CRISIS MAKES THINGS WORSE

The outlook worsened once the global banking system went into a panic in 2008 and tipped the world into the worst recession since the 1930s.

Government budget deficits swelled in Europe and the United States. Tax revenue shrank, and governments pumped money into rescuing their banks and financing unemployment benefits. All that escalated pressure on governments to reduce spending on pensions.

The Great Recession threw tens of millions out of work worldwide. For others, pay stagnated, making it harder to save. Because government retirement benefits are based on lifetime earnings, they’ll now be lower. The Urban Institute, a Washington think tank, estimates that lost wages and pay raises will shrink the typical American worker’s income at age 70 by 4 percent — an average of $2,300 a year.

Leslie Lynch, 52, of Glastonbury, Conn., had $30,000 in her 401(k) retirement account when she lost her $65,000-a-year job last year at an insurance company. She’d worked there 28 years. She’s depleted her retirement savings trying to stay afloat.

“I don’t believe that I will ever retire now,” she says.

Many of those facing a financial squeeze in retirement can look to themselves for part of the blame. They spent many years before the Great Recession borrowing and spending instead of saving.

The National Institute on Retirement Security estimates that Americans are at least $6.8 trillion short of what they need to have saved for a comfortable retirement. For those 55 to 64, the shortfall comes to $113,000 per household.

THE ASIA CHALLENGE

In Asia, workers are facing a different retirement worry, a byproduct of their astonishing economic growth.

Traditionally, Chinese and Koreans could expect their grown children to care for them as they aged. But newly prosperous young people increasingly want to live on their own. They also are more likely to move to distant cities to take jobs, leaving parents behind. Countries like China and South Korea are at an “awkward” stage, Jackson says: The old ways are vanishing, but new systems of caring for the aged aren’t yet in place.

Yoo Tae-we, 47, a South Korean manager at a trading company that imports semiconductor components, doesn’t expect his son to support him as he and his siblings did their parents.

“We have to prepare for our own futures rather than depending on our children,” he says.

China pays generous pensions to civil servants and urban workers. They can retire early with full benefits — at 60 for men and 50 or 55 for women. Their pensions will prove to be a burden as China ages and each retiree is supported by contributions from fewer workers.

The elderly are rapidly becoming a bigger share of China’s population because of a policy begun in 1979 and only recently relaxed that limited couples to one child.

China is considering raising its retirement ages. But the government would likely meet resistance.

THE END OF TRADITIONAL PENSIONS

Corporations, too, are cutting pension costs by eliminating traditional defined-benefit plans. They don’t want to bear the cost of guaranteeing employees’ pensions. They’ve moved instead to so-called defined-contribution plans, such as 401(k)s, in the United States. These plans shift responsibility for saving to employees.

But people have proved terrible at taking advantage of these plans. They don’t always enroll. They don’t contribute enough. They dip into the accounts when they need money.

They also make bad investment choices — buying stocks when times are good and share prices are high and bailing when prices are low.

Several countries are trying to coax workers to save more.

Australia passed a law in 1993 that makes retirement savings mandatory. Employers must contribute the equivalent of 9.25 percent of workers’ wages to 401(k)-style retirement accounts.

In 2006, the United States encouraged companies to require employees to opt out of a 401(k) instead of choosing to opt in. That means workers start saving for retirement automatically if they make no decision.

EASING THE PAIN

Rebounding stock prices and a slow rise in housing prices are helping households recover their net worth. In the United States, retirement accounts hit a record $12.5 trillion the first three months of 2013.

But Boston College’s Center for Retirement Research says the recovery in housing and stock prices still leaves about 50 percent of American households at risk of being unable to maintain their standard of living in retirement.

When they look into the future, retirement experts see more changes in government pensions and longer careers than many workers had expected:

Cuts in government pension programs like Social Security will likely hit most retirees but will probably fall hardest on the wealthy

Those planning to work past 65 can take some comfort knowing they’ll be healthier, overall, than older workers in years past. They’ll also be doing jobs that aren’t as physically demanding. In addition, life expectancy at 65 now stretches well into the 80s for people in the 34 OECD countries — an increase of about five years since the late 1950s.

“My parents retired during the Golden Age of retirement,” says Mercer consultant Dreger, 37. “My dad, who is 72, retired at 57. That’s not going to happen to somebody in my generation.”

 

© Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Source: Newsmax.com

Household Incomes Stabilize for First Time Since 2007.


Family incomes stabilized last year for the first time since the Great Recession began in 2007, according to a recent U.S. Census Bureau report. It’s considered a good measure of trends in American prosperity.

The report, released Tuesday, says the inflation-adjusted median annual household income dropped a statistically insignificant 0.2 percent in 2012 to $51,017, an improvement compared to the 1.5 percent drop in 2011 and the 2.6 percent decrease in 2010, The Wall Street Journal reported.

“The bleeding has stopped, I suppose, but incomes have yet to increase,” Richard Fry, an economist at the Pew Research Center, told the Journal. “Asset prices are rising, but when we look out at Main Street, at what households are getting, there isn’t much growth.”

The recovery still has a way to go because incomes still are 8.3 percent below the $55,627 level they were when the recession began in 2007.

The Journal noted that while the recovery is slow, the fact that incomes have at least stabilized is a good sign for the economy overall, along with the rally in stocks and rebounding real estate prices.

Still, with more than 11 million people still looking for work, businesses are not very motivated to increase wages. Further complicating matters, is the fact that most recent job growth has occurred in lower-paying areas of the economy.

The Census report also revealed that the nation’s poverty rate is unchanged at 15 percent, still significantly higher than the pre-recession level of 12.5 percent.

© 2013 Newsmax. All rights reserved.

By Courtney Coren

Poverty in New Jersey Hits 52-Year High Under Christie.


New Jersey’s poverty level hit a 52-year-high in 2011 despite the economic recovery on the national level.

In a report released Sunday, Legal Services of New Jersey said 24.7 percent of New Jersey residents — at total of 2.1 million— was termed poor in 2011, The Star-Ledger reports. The number is almost 1 percent higher than in 2010 and 3.8 percent above levels from before the Great Recession began.

“This is not just a one-year or five-year or 10-year variation,” Melville D. Miller Jr., the president of LSNJ, told the Star-Ledger. “This is the worst that it’s been since the 1960 Census.”

The numbers may go higher, the Star-Ledger noted, as 2012 Census figures are released in the coming weeks reflecting the devastation of Hurricane Sandy.

New Jersey is one of the wealthiest states in the country, but that also means its cost of living is higher, making the state poverty rate twice that of the nation overall.

State Sen. Barbara Buono, who is trying to unseat incumbent Gov. Chris Christie as the Democratic nominee for that office later this year blamed the numbers as a “damning commentary on (Christie’s) failed conservative economic philosophy that protects millionaires from paying their fair share at the expense of everyone else.”

Christie campaign spokesman Kevin Roberts replied that Buono and her allies in the Legislature had failed working families “by walking away from Governor Christie’s compromise proposal to raise the minimum wage and increase the earned income tax credit. No amount of distortions or revisionist history can paper over her hypocrisy and failure.”

© 2013 Newsmax. All rights reserved.
By Greg Richter

Obama to Begin New Series of Economic Addresses.


Drawing renewed attention to the economy, President Barack Obama will return this week to an Illinois college where he once spelled out a vision for an expanded and strengthened middle class as a freshman U.S. senator, long before the Great Recession would test his presidency.

The address Wednesday at Knox College in Galesburg, Ill., will be the first in a new series of economic speeches that White House aides say Obama intends to deliver over the next several weeks ahead of key budget deadlines in the fall. A new fiscal year begins in October, and the government will soon hit its borrowing limit.

The speech comes just a week before Congress is scheduled to leave for its monthlong August recess and is designed to build public pressure on lawmakers in hopes of averting the showdowns over taxes and spending that have characterized past budget debates.

In his economic pitch, Obama will talk about efforts to expand manufacturing, sign up the uninsured for health care coverage, revitalize the housing industry and broaden educational opportunities for preschoolers and college students. He will also promote the economic benefits of an immigration overhaul.

The White House is promoting the speech as part of an arc of economic messages from the president that began at Knox College in 2005, when Obama was in his first year in the Senate. Since then, Obama has sought to raise the profile of his economic agenda with periodic speeches, including one at Georgetown University in Washington in 2009 and one in Osawatomie, Kan., in 2011. The White House posted a video highlighting Obama’s previous economic addresses.

The president will also speak Wednesday at the University of Central Missouri in Warrensburg, Mo.

Obama’s focus on the economy comes as he has experienced a degree of success with the Senate, which passed an overhaul of immigration laws and unclogged a Republican blockade against several presidential nominations. It also reflects a belief at the White House that the administration has been able to manage a series of confrontations with Congress over the Internal Revenue Service, phone surveillance of Americans and the deadly attack on the U.S. consulate in Benghazi, Libya.

“The president thinks Washington has largely taken its eye off the ball on the most important issue facing the country,” Obama senior adviser Dan Pfeiffer said Sunday evening in a message sent to the White House’s public email list. “Instead of talking about how to help the middle class, too many in Congress are trying to score political points, refight old battles and trump up phony scandals.”

Obama’s agenda still faces stiff opposition in the House, where Republicans have a majority. On immigration, for example, Speaker John Boehner has said the House will not pass the Senate bill and, instead, intends to deal with the issue on a piecemeal basis.

Obama is pushing to end the federal budget cuts that kicked in this year so they don’t extend into the next fiscal year. That could create a showdown with congressional Republicans in September, as the end of the current fiscal year approaches. Some Republicans also want more deficit reduction as a price for raising the debt ceiling, a bargain Obama says he will not make.

Republicans are fundamentally opposed to Obama’s mix of budget cuts and tax increases. It wasn’t until after last year’s election that Republicans agreed to increase taxes for the wealthiest Americans in a deal that kept taxes for most Americans at rates set during the administration of President George W. Bush.

Appearing on CBS’ “Face the Nation” Sunday, Boehner said the way to get the economy moving again is by stopping unnecessary regulations and bringing the federal deficit under control.

Describing “this new normal of slow economic growth, no increase in jobs that are available, wages are being basically frozen,” Boehner said: “We’re squeezing the middle class. And I would argue the president’s policies are getting in the way of the economy growing, whether it’s Obamacare, whether it’s all these needless regulations that are coming out of the government.”

Obama has some wind at his back as the economy continues its recovery from the recession that began during the Bush administration. Housing is coming back, the stock market is on an upswing and consumer confidence is generally higher. But unemployment, while down from a peak of 10 percent in 2009, remains high at 7.6 percent and economic growth remains modest.

Pfeiffer said Obama will unveil some new ideas, outline steps Congress can take and identify measures he can initiate on his own.

“He’ll talk about the progress we’ve made together, the challenges that remain and the path forward,” Pfeiffer said.

© Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Source: NEWSmax.com

Feds Showing Little Enthusiasm for Detroit Bailout.


During the bleakest days of the Great Recession, Congress agreed in bipartisan votes to bail out two of Detroit’s biggest businesses, General Motors and Chrysler.

Today, however, there seems little appetite from either Democrats or Republicans in Washington for a federal rescue of the birthplace of the automobile industry. Detroit now stands as the largest American city ever to file for bankruptcy protection.

Such a bailout would be huge, perhaps as much as $20 billion. Federal resources are strained, with the national debt at $16.7 trillion and the federal government struggling under the constraints of automatic spending cuts that took effect in March.

President Barack Obama has had a hard enough time getting his present proposals though Congress, where Democrats hold a narrow majority in the Senate and Republicans are in firm control of the House.

“I think it would be a waste of the president’s time to even propose it. His plate is so full and throwing Detroit into the mix is the last thing in the world he’d want,” said Ross Baker, a political science professor at Rutgers University who specializes in Congress. “I think the era of big government bailouts is over.”

Political leaders in Washington haven’t pushed for a bailout of Detroit, which was the nation’s fourth-largest city in the 1950s but since has had a declining population, accelerated by hard times for the auto industry during and right after the punishing 2008-2009 recession.

Congress is still in near-gridlock territory. Opportunities for spending vast sums of money on a bailout for Detroit seem severely limited. The White House is taking a wait-and-see approach, but clearly exhibiting little enthusiasm for another big bailout.

“Can we help Detroit? We don’t know,” Vice President Joe Biden said in a response to a reporter’s question about a possible federal rescue. Presidential spokesman Jay Carney, when asked directly if a bailout was a possibility, appeared to rule out such assistance.

“We will, of course, as we would with any city in this country, work with that city and have policy discussions with leaders in the city, and make suggestions and offer assistance where we can,” Carney said. “But on the issue of insolvency … that’s something that local leaders and creditors are going to have to resolve. But we will be partners in an effort to assist the city and the state as they move forward.”

Local leaders aren’t pushing for a federal bailout after the city filed for Chapter 9 bankruptcy protection Thursday, and Republican Gov. Rick Snyder isn’t, either.

“People should not expect bailouts at either the federal or the state level,” Snyder said in an interview with The Associated Press. “We’ve been very diligent about this. We want to be a supportive partner at the state level. I believe the federal government does (too).”

Members of Michigan’s congressional delegation aren’t clamoring just yet for a federal bailout. “We just need to step back and think about it,” said Rep. Sander Levin, D-Mich.

The city’s emergency manager, Kevyn Orr, says that for now, Detroit will stay open, bills will be paid and city services provided.

But the bankruptcy case could take years to resolve. Ahead of the filing, the city’s two pension funds sued to block a bankruptcy. Bankruptcy could change pension and retiree benefits, which are guaranteed under state law. The impact on current city workers is unclear.

President Gerald Ford, after threatening in 1975 to veto any bill that would bail out New York City, went along with a $2.3 billion rescue loan that had strings attached.

More recently, the federal government threw a financial lifeline to both General Motors and Chrysler (the Ford Motor Company didn’t request the aid) and acted to protect major Wall Street and banking institutions from insolvency. Federal stimulus spending and rescue loans started in the final year of the George W. Bush administration and extended through the Obama presidency.

Now, with the economy slowly recovering, most of the direct government anti-recession aid has ended although the Federal Reserve continues to provide financial stimulus by keeping short-term interest rates extremely low while buying $85 billion a month in government and mortgage bonds to keep mortgage and other long-term rates low.

“The chances of a federal bailout are remote” given partisan gridlock in Washington, said Bruce Katz, a former official with the Department of Housing and Urban Development who now is director of the metropolitan policy program for the Washington-based Brookings Institution.

“But I don’t think the federal government is off the hook,” Katz said. “It is a substantial investor in Detroit. Whether it’s community development block grants or federal contracts or assistance to nongovernmental recipients, there’s a substantial amount of federal money that goes into Detroit. There’s a role for the federal government. And it needs to make its resources more flexible than today and align them with the priorities of Detroit.”

“A lot of this could be done administratively, but in the end it will have to have some congressional engagement. This is almost like a Hurricane Sandy situation,” Katz said.

Norman Ornstein, an expert on Congress with the American Enterprise Institute, said that “despite the great success with the bailout of the auto industry,” such rescues by the government “are going to be hard to come by in the future.”

As to extending a helping hand for Detroit, Ornstein said it would be hard to get any federal aid package past House Republicans, “who I just can’t imagine have any interest in doing anything for Detroit.” The city is heavily Democratic.

© Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Source: NEWSmax.com

Americans Have Rebuilt Less Than Half of Wealth Lost to Recession, St. Louis Fed Says.


The average U.S. household has a long way to go to recover the wealth it lost to the Great Recession, a report by the Federal Reserve Bank of St. Louis concluded.

The typical household has regained less than half its wealth, the analysis found. A separate Federal Reserve report in March calculated that Americans as a whole had regained 91 percent of their losses.

Household wealth plunged $16 trillion from the third quarter of 2007 through the first quarter of 2009. By the final three months of 2012, American households as a group had regained $14.7 trillion.

Editor’s Note: The Truth About the Economy — Government Documents Lead to Eerie Conclusion

Yet once those figures are adjusted for inflation and averaged across the U.S. population, the picture doesn’t look so bright: The average household has recovered only 45 percent of its wealth, the St. Louis Fed concluded.

That suggests that consumer spending could remain modest as many Americans try to rebuild their wealth by saving more and paying off debts.

The number of U.S. households grew 3.8 million to 115 million from the third quarter of 2007 through the final three months of last year, the report said. As a result, the rebound in wealth has been spread across more people and reduced the average wealth for each household.

In addition, though inflation has averaged just 2 percent over the past five years, it’s eroded some of the purchasing power of Americans’ regained wealth.

The St. Louis Fed’s analysis noted that the rebound in wealth hasn’t been equally distributed. As a result, many households are even further behind than the average.

Nearly two-thirds of the increase in household wealth since 2009 is due to rising stock prices, the authors note. Stock indexes reached record highs this month. Those gains disproportionately benefit affluent households: About 80 percent of stocks are held by the wealthiest 10 percent of the population.

For middle- and lower-income households, home values represent the biggest chunk of total wealth. And home prices remain about 30 percent below their peak, even after jumping nearly 11 percent in the past year.

The analysis was written by William Emmons, an economist at the St. Louis Fed, and Ray Boshara, who directs its new Center for Household Financial Stability.

“It’s like the economy is this airplane and not all the engines are firing,” Emmons said.

Still, wealthier households account for a disproportionate share of consumer spending: About 20 percent of Americans account for about 40 percent of spending.

Consequently, the rise in stock prices should provide some lift to spending, Emmons said.

The average household had a net worth of $539,500 at the end of last year, according to a separate paper the St. Louis Fed released Thursday. That was up from $469,900 in the first quarter of 2009. But it was sharply below the peak of $641,000 in the first quarter of 2007.

Editor’s Note: The Truth About the Economy — Government Documents Lead to Eerie Conclusion

© Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Source: NEWSmax.com

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