Tuesday, March 17, 2009

Financial Data

President Obama defended his proposed $3.6 trillion budget on Tuesday against critics who say it is too ambitious, declaring that American families cannot always choose which crises to tackle first and neither can he as president,” begins a March 17, 2009 New York Times article by David Stout (“Obama Defends Budget Proposal"). Obama's point is obvious—and should not have to be said. (Some of his critics have seemed ignorant to me, and some have seemed malicious, and some have seemed self-serving. It is also odd that he is expected to undo eight years of damage in less than two months.)

Time magazine has picked twenty-five people to blame for the American economy’s collapse and allowed readers to vote for each online, proportioning blame: and thus far Phil Gramm is first, Christopher Cox second, Angelo Mozilo third, Joe Cassano fourth, and Franklin Raines fifth. Bernard Madoff is eighth. Stan O’Neal is eleventh. George W. Bush is fifteenth, and “the American consumer” is sixteenth, Alan Greenspan seventeenth, and Hank Paulson eighteenth. Bill Clinton is twenty-third. Such a list is interesting, amusing; and, seriously, I certainly think those involved in the mess, now and in the past, should be identified, but it would be more useful to examine the workings of the financial system (to provide a history and analyses) and to compare it to alternatives.

U.S. Congressman Barney Frank, chairman of the house financial services committee, wants to better regulate the country’s financial system, and may begin writing legislation to do so as early as May, reports the New York Times.

Companies are beginning to suspend investment in 401 (k) retirement plans for their employees—because of the cost. As well, the value of these investments have diminished with the chaos in the stock markets. “The average 401(k) plan at the end of 2007 held about $65,000, but half of them held less than $19,000, according to a trade group, the Investment Companies Institute. They would hold much less today because of stock market falls. The suspensions mean that individuals can continue to contribute to their plans, but their companies will not,” reports Deborah Brewster, the Financial Times (March 10, 2009). Of course, I never trusted investment in stock as a main form of financial security (stock investment is gambling).

The Obama administration's economic stimulus package has had positive effects, already: “Before enactment of the recovery package, at least 34 states began closing their shortfalls by reducing services to their residents, including some of their most vulnerable families and individuals,” declares the Center on Budget and Policy Priorities (“An Update on State Budget Cuts,” by Johnson, Oliff, and Koulish; updated March 13, 2009). Some states,now, are using stimulus/recovery package funds to reverse previously made budget cuts in public services. “Policymakers in at least 9 states, including Arizona, Colorado, Connecticut, Florida, Georgia, Maryland, Oregon, South Carolina and Virginia have already advanced or enacted plans to use these funds,” says the Center on Budget and Policy Priorities. There is a about a $350 billion shortfall, and the recovery package gives states about $140 billion, so states will still be making some budget cuts. However, I hope to see the results, which I expect to be significant, of the increased federally funded investment in education and infrastructure, etc.

Following a New Orleans Times-Picayune article about post-Katrina housing, and the failure of a program to provide housing following the devastating hurricane (the goal was for 18,000 living spaces, a partial replacement of the 81,000 lost—but only 1,073 were restored, the New Orleans paper reported). Harry Shearer in the online Huffington Post states, “So the contractor collected almost as much money for administration as it disbursed for actual repair of housing units. But the program's goal, ‘fallen well short of,’ was to restore less than a quarter of the housing units lost in the flooding. Blame, should one care to assign it, can fall almost equally on the state, on the private contractor, and on the Feds, for not realizing that the affordable housing crisis in New Orleans called for perhaps a more ambitious goal.”

How open is Louisiana state business to review? “While some of the budget categories allow expenditures to be tracked down to the private-sector vendor providing a service or product, not all of the categories contain this level of detail. Moreover, there is no indication what product or service was provided for the expenditures and there is very little salary information available beyond summary totals by budget unit,” states the Public Affairs Research Council of Louisiana, regarding the Louisiana Transparency and Accountability (LaTrac) database; and the research council calls for more financial transparency in the hows and whys of official financial expenditures in the state (“PAR names Top Five Sunshine Solutions,” March 12, 2009). March 15 through 21 is “sunshine week,” a period affirming open government; and the Public Research Council of Louisiana is promoting focus on the public records law (minimizing, clarifying); reasonable costs for public records; pretrial mediation for disputes involving public records; and online access to meetings, as well as greater financial transparency.