Category: Public Finance

Hello President Biden, the Ball Is In Your Court

Mary Pat Campbell

Link: https://mishtalk.com/economics/hello-president-biden-the-ball-is-in-your-court

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Key Provisions 

  • Claw back unspent Covid-19 funds.
  • Impose tougher work requirements for recipients of food stamps and other government aid.
  • Halt Biden’s plans to forgive up to $20,000 in student loans.
  • End many of the landmark renewable energy tax breaks Biden signed into law last year. It would tack on a sweeping Republican bill to boost oil, gas and coal production.

Hello Joe, the Ball is in Your Court

Republicans only had 4 votes to spare but with some last minute haggling, the bill passed 217-215. 

It wasn’t a pretty serve by McCarthy, but the ball cleared the net and landed in play.

The only way to get the ball back in the Republican court would be for the Senate to pass a measure or amend the House bill.

Author(s): Mike Shedlock

Publication Date: 8 May 2023

Publication Site: Mish Talk

Income tax withholding payments stumble again

Mary Pat Campbell

Link: https://angrybearblog.com/2023/04/income-tax-withholding-payments-stumble-again

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The important data this week will include new home sales tomorrow, Q1 GDP and initial jobless claims on Thursday, and most importantly of all (imo) real personal income and spending, along with real manufacturing and trade sales on Friday.

In the meantime, today let me take another look at a significant coincident indicator, income tax withholding payments, because the situation has changed in the past week.

….

For the nation as a whole Matt Trivisonno has the YoY data, measuring the entire 365 day total of tax withholding vs. the entire previous 365 days, and has a public graph with a 3 month delay. Here’s his latest:

Like the California graph, it shows a steep deceleration during 2022, which had been as high as +21% YoY in March, down to only about +6% by the end of December. Thereafter through January, the YoY data stabilizes.

Indeed, by my own calculations, for the first three months of fiscal 2023 ending December 31, withholding tax payments were only up +1.2% YoY. But for Q2 they rebounded sharply, up +5.4% YoY. 

But in the last 10 days they have stumbled. For the first 14 withholding days in April, payments are down -3.4%, $189.7 Billion vs. $196.3 Billion one year ago. For the last 4 weeks as a whole, withholding payments are down -5.0%, $270.2 Billion vs. $284.5 Billion.

Author(s): New Deal democrat

Publication Date: 25 April 2023

Publication Site: Angry Bear

Debt ceiling fears push the cost of insuring against a US government default to highest level since 2008 crash

Mary Pat Campbell

Link: https://finance.yahoo.com/news/debt-ceiling-fears-push-cost-184617316.html

Excerpt:

The cost of insurance against the US failing to repay its debts rose to its highest level since the financial crisis last week, as traders worried that political deadlock in Washington might lead to a default.

One-year government credit default swaps traded at 106 basis points Saturday – the most expensive they’ve been since 2008, according to a Financial Times report that cited Bloomberg data.

Credit default swaps – or CDSs – are a form of insurance against a borrower not making scheduled payments on their debt.

The price of one-year government CDSs has spiked 15 basis points in 2023 with traders spooked by the looming threat of a debt-ceiling crisis, the FT reported.

The debt ceiling is a limit on how much the government can borrow, set by Congress. The US hit its $31.4 trillion debt limit in January – and that means it could run out of money to pay its bills as soon as July if lawmakers don’t vote to raise the ceiling, according to the Congressional Budget Office.

Author(s): George Glover

Publication Date: 24 Apr 2023

Publication Site: Yahoo Finance

How an Auditor Shortage Could Hurt Local Governments

Mary Pat Campbell

Link: https://www.route-fifty.com/finance/2023/04/how-auditor-shortage-could-hurt-local-governments/385337/

Excerpt:

It’s no surprise to anyone at this point that local governments are struggling to find workers. But finance departments are especially hard-hit when it comes to brain drain. A National Association of State Treasurers study found that 60% of public finance workers are over 45 while less than 20% are younger than 35.

The private sector is facing similar issues. According to the American Institute of Certified Public Accountants (AICPA), the accounting profession has an acute shortage of workers as the population of graduates with accounting degrees has declined over the years. 

….

ACFRs, unlike quarterly or other interim reports, are the official account of a government’s finances for the previous year and show how those numbers compare with previous years. It takes some time for finance departments to gather the year-end data, but getting those numbers audited is the last and generally the most time-consuming step before publishing the annual financial report. In some cases, like in Indiana and Ohio, the audit is conducted or signed off by the state auditor’s office. In other instances, localities hire a firm to audit their financial statements.

According to new data published by the University of Illinois Chicago and Merritt Research Services, the last decade has seen a 13% increase in the median amount of time for local government audits to be completed. That means most governments are posting their ACFRs at least three weeks later in the year compared with a decade ago. Nearly half of the increase has occurred over the last two years. The research focuses on the median—rather than the average—because some governments are extreme outliers and take a year and a half or even more than two years to file their annual report. 

Author(s): Liz Farmer

Publication Date: 18 Apr 2023

Publication Site: Route Fifty

Wall Street Boosts States’ Credit Scores as Recession Worries Cloud Outlook

Mary Pat Campbell

Link: https://www.bloomberg.com/news/articles/2023-04-19/wall-street-boosts-states-credit-scores-as-recession-woes-cloud-outlook

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Illinois, Massachusetts and New Jersey this year have garnered higher credit scores from rating companies, including brighter outlooks for the states as well. The upgrades also helped shrink bond yield spreads in the primary and secondary municipal markets, signaling investor perception of state debt is improving.

The better state ratings are due in part to the positive effect of federal pandemic aid, which some states used for one-time expenses while others set cash aside for the future. State treasuries also saw an influx of tax revenue from residents — bolstered by US stimulus money sent to individuals — who spent on services at home at the height of the pandemic, and on travel after Covid lockdowns were eased. 

Still, a slowdown in the US economy this year is causing concern that states can no longer expect a cash haul. The likelihood that the economy in the next 12 months will slide into a recession is greater now than a month earlier, according to a March 20-27 Bloomberg survey of 48 economists.

The poll, conducted after several bank closures roiled financial markets, put the odds of a contraction at 65%, up from 60% in February, amid interest-rate hikes by the Federal Reserve and growing risks of tighter credit conditions. 

Author(s): Skylar Woodhouse

Publication Date: 19 Apr 2023

Publication Site: Bloomberg

What’s behind the US baby bust? Americans are prioritizing careers and leisure activities over having a family

Mary Pat Campbell

Link: https://www.dailymail.co.uk/health/article-11628235/Whats-baby-bust.html

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Fertility in the US has long been falling. A half-century ago in 1970, the average woman was having 2.39 children over her entire life-span. 

In 1920 – a full century ago – the rate was at 3.17. Earliest available data from 1800 puts the rate at 7.04. 

The Census Bureau predicts there will be 94.7million Americans over the age of 65 by 2060, accounting for 23 percent of the nation’s population. In 2020, the most recent Census, 56million Americans were over 65 – accounting for just 17 percent of the population.

A half-century ago in 1970, seniors made up around 10 percent of the US population.

This puts an excess burden on social programs like Medicare and Social Security, as this portion of the population pulls away its resources but does not pay into them.

Author(s): MANSUR SHAHEEN DEPUTY HEALTH EDITOR FOR DAILYMAIL.COM

Publication Date: 16 January 2023

Publication Site: Daily Mail UK

China Is Facing a Moment of Truth About Its Low Retirement Age

Mary Pat Campbell

Link: https://www.wsj.com/articles/china-is-facing-a-moment-of-truth-about-its-low-retirement-age-5ed9b57f

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China has one of the lowest retirement ages among major economies. Under a policy unchanged since the 1950s, it allows women to retire as early as at age 50 and men at 60. Now, local governments are running out of money just as a wave of retirees hits. That is leaving Beijing with little choice but to ask people to work longer—a move economists say is long overdue but one still likely to meet with resistance.

China’s version of “baby boomers”—those born after China emerged from devastating starvation in the early 1960s—are retiring in droves. Even with government subsidies, by 2035 China’s state-led urban pension fund will run out of money accumulated over the previous two decades, leaving it to rely entirely on new workers’ contributions, according to projections made in 2019 by the Chinese Academy of Social Sciences, a government think tank. 

Former central bank Gov. Zhou Xiaochuan warned in a February speech that China must address its pension shortfall and communicate that many Chinese may need to rely on private pension savings

Author(s): Livan Qi

Publication Date: 11 April 2023

Publication Site: Wall Street Journal

Riots erupt across France as Constitutional Council validates Macron’s pension cuts

Mary Pat Campbell

Link: https://www.wsws.org/en/articles/2023/04/15/mwio-a15.html

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https://twitter.com/ClementAgostini/status/1646927984928907278?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1646927984928907278%7Ctwgr%5E75aaeb79c11e244c2303bd011418b6ddb22ac1c8%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fwww.wsws.org%2Fen%2Farticles%2F2023%2F04%2F15%2Fmwio-a15.html

Excerpt:

At 6 p.m. yesterday, France’s Constitutional Council ruled that President Emmanuel Macron’s pension cuts are constitutional, removing the last legal obstacle to their adoption as law. The Elysée presidential palace announced 15 minutes later that Macron will promulgate the pension cuts as law within 48 hours.

The Council’s predictable approval of a law opposed by 80 percent of the French people, which Macron rammed through without even a vote in parliament, again tears the “democratic” mask off the capitalist state. It imposes the diktat of the banks, which plan amid the NATO-Russia war in Ukraine to massively divert social spending into strengthening the military-police machine. The struggle against the pension cuts can only be waged as a political struggle directed against the entire capitalist state machine.

The Council’s decision also exposes the forces in the union bureaucracy and the pseudo-left parties who, warning of “violence” by protesters, told workers to place their hopes in trade union “mediation” with Macron. Everyone involved, including masses of workers and youth, knew very well that Macron would ignore the “mediation.” On the other hand, two-thirds of the French people supported a general strike to block the economy and bring down Macron.

Author(s): Alex Lantier

Publication Date: 14 April 2023

Publication Site: World Socialist Web Site

NJ Actuarial Reports – The Believable Numbers 6/30/22

Mary Pat Campbell

Link: https://burypensions.wordpress.com/2023/04/03/nj-actuarial-reports-the-believable-numbers-6-30-22/

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The June 30, 2022 actuarial reports for the New Jersey Retirement System are now all out and there are a few numbers therein that can be taken seriously (none involving liabilities or even the market value of assets considering all those self-valued alternative investments). The main purpose of these official actuarial reports is to determine the ‘required’ contributions which practically all parties have a vested interest in understating so we get a bunch of fanciful numbers where possible. However, these numbers you can’t pretty up:

Author(s): John Bury

Publication Date: 3 April 2023

Publication Site: burypensions

ILLINOIS CASINO REVENUE DOWN $200M SINCE 2012, AS CHICAGO BETS ON CASINO

Mary Pat Campbell

Link: https://www.illinoispolicy.org/illinois-casino-revenue-down-200m-since-2012-as-chicago-bets-on-casino/

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Chicago is in line for casino gaming soon, but its success is dwindling as video gaming machines and sports betting rise.

The casino industry for decades has been a significant contributor to the Illinois economy, but from 2012 to 2022 its seen a $200 million decline, according to data from the Illinois Gaming Board.

One of the reasons for the decline is the emergence of other forms of gaming which weren’t available to Illinoisans in 2012. Video gaming terminals, for example, have nearly doubled from $395 million in revenue during 2019 to $762 million in 2022.

They allow players to place bets on video poker and slot machines in local bars and restaurants, providing a more accessible and convenient experience than casinos.

Author(s): Dylan Sharkey

Publication Date: 11 April 2023

Publication Site: Illinois Policy Institute

Big City Pensions and the Urban Doom Loop

Mary Pat Campbell

Link: https://manhattan.institute/article/big-city-pensions-and-the-urban-doom-loop#new_tab

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Key Findings:

  • Pension spending increased in all of the 10 largest American cities over the last decade, with a few cities experiencing a doubling or even tripling of their expenditures in 2021 dollars.
  • Almost all cities saw an increase in pension spending per employee.
  • There is large variation in the amount per employee that American cities are spending on pensions.
  • To respond to rising pension demands, some cities have reduced employment, often in the area of public safety.
  • A worsening market environment for pension funds will necessitate increased pension expenditures by cities in 2023 and beyond, exacerbating pressures to limit or reduce employment and, thus, city services.

Author(s): Daniel DiSalvo, Jordan McGillis

Publication Date: 6 April 2023

Publication Site: Manhattan Institute

The Sustainability of State & Local Pensions: A Public Finance Approach

Mary Pat Campbell

Link: https://crr.bc.edu/briefs-state-local-pensions/the-sustainability-of-state-local-pensions-a-public-finance-approach/

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Key findings:

  • Many experts favor full prefunding of state and local pensions to maintain fiscal sustainability, which means big contribution hikes.
  • This analysis explores an alternative: stabilizing pension debt as a share of GDP.
  • Under current contribution rates, baseline projections show no sign of a major crisis in the next two decades even if asset returns are low.
  • Yet, many plans will be at risk over the long term of exhausting their assets, so action will be needed.
  • Plans can reach a sustainable footing by stabilizing their debt-to-GDP ratio, with much smaller contribution hikes than under full funding.

Author(s): Louise Sheiner

Publication Date: 11 April 2023

Publication Site: Center for Retirement Research at Boston College