Well, everyone has an imaginary scenario, so here's mine.

The Obama Administration announces next week today that since the GOP refuses to participate in good faith in the actual work of governing the United States, in order to avoid defaulting on our national debt and sending the world into a global financial meltdown, the Administration would accede to Republican demands that all deficit reduction be accomplished solely by making radical cuts to existing government programs with no increase in taxes.

However, in the spirit of the Time Honored Conservative Principle of Federalism, the President adds that the cuts would not be allocated programmatically, but geographically by state.

[snip]

Under the Obama Administration's proposed "Reward Wealth Producers and Penalize Moochers American Value Re-alignment" Act, "wealth producing" states such as New York, California, Illinois who have traditionally received less than a dollar back for every dollar they pay in taxes would be exempt from any budgetary cuts, and would qualify for across-the-board tax cuts since wealth-producing states should always be accommodated and encouraged in every way possible, regardless of circumstances.

On the other hand, the "welfare mooching, deficit-teat-sucking" states such as Kansas, Arizona, Kentucky and Alaska who have for years gotten away with parasitically looting their wealth-producing neighbors by receiving more than a dollar back for every dollar they pay in taxes will now assume 100% of the responsibility for eliminating the federal budget deficit. Each of these welfare mooching, deficit-teat-sucking states will be given a block rescission amount representing the percentage of the federal deficit for which they will be now be help legally responsible.

Labels: debt, deficits, Greedy Republican Bastards, wussy-ass Democrats

Congressional Republicans are vowing that before they will agree to raise the current $14.25 trillion federal debt ceiling — a step that will become necessary in as little as five weeks — President Obama and Senate Democrats will have to agree to far deeper spending cuts for next year and beyond than those contained in the six-month budget deal agreed to late Friday night that cut $38 billion and averted a government shutdown.

Republicans have also signaled that they will again demand fundamental changes in policy on health care, the environment, abortion rights and more, as the price of their support for raising the debt ceiling.

“We want to see real structural, cultural-type changes tied to this debt ceiling. We’re not interested in a one-off kind of savings, or anything small,” said Representative Mick Mulvaney, a first-term Republican from South Carolina. “There has got to be game-changing kinds of changes to get us to vote for it.”

He dismissed warnings about default as “just posturing,” and said Democrats should bear the responsibility for passing any measure to increase the borrowing limit.

“It’s their debt,” he said. “Make them do it. That’s my attitude.”

Of the nearly $14.2 trillion in debt, roughly $5 trillion is money the government has borrowed from other accounts, mostly from Social Security revenues, according to federal figures. Several major policies from the past decade when Republicans controlled the White House and Congress — tax cuts, a Medicare prescription-drug benefit and wars in Iraq and Afghanistan — account for more than $3.2 trillion.

The recession cost more than $800 billion in lost revenues from businesses and individuals and in automatic spending for safety-net programs like unemployment compensation. Mr. Obama’s stimulus spending and tax cuts added about $600 billion through the fiscal year that ended Sept. 30.

Once the limit is reached, the Treasury Department would not be able to borrow as it does routinely to finance federal operations and roll over existing debt; ultimately it would be unable to pay off maturing debt, putting the United States government — the global standard-setter for creditworthiness — into default.

The repercussions in that event would be as much economic as political, rippling from the bond market into the lives of ordinary citizens through higher interest rates and financial uncertainty of the sort that the economy is only now overcoming, more than three years after the onset of the last recession.

Labels: America Gone Mad, america R.I.P., budget, debt, repub

It's not a crime to owe money, and debtors' prisons were abolished in the United States in the 19th century. But people are routinely being thrown in jail for failing to pay debts. In Minnesota, which has some of the most creditor-friendly laws in the country, the use of arrest warrants against debtors has jumped 60 percent over the past four years, with 845 cases in 2009, a Star Tribune analysis of state court data has found.

Not every warrant results in an arrest, but in Minnesota many debtors spend up to 48 hours in cells with criminals. Consumer attorneys say such arrests are increasing in many states, including Arkansas, Arizona and Washington, driven by a bad economy, high consumer debt and a growing industry that buys bad debts and employs every means available to collect.

Whether a debtor is locked up depends largely on where the person lives, because enforcement is inconsistent from state to state, and even county to county.

In Illinois and southwest Indiana, some judges jail debtors for missing court-ordered debt payments. In extreme cases, people stay in jail until they raise a minimum payment. In January, a judge sentenced a Kenney, Ill., man "to indefinite incarceration" until he came up with $300 toward a lumber yard debt.

[snip]

In Minnesota, judges have issued arrest warrants for people who owe as little as $85 -- less than half the cost of housing an inmate overnight. Debtors targeted for arrest owed a median of $3,512 in 2009, up from $2,201 five years ago.

Those jailed for debts may be the least able to pay.

"It's just one more blow for people who are already struggling," said Beverly Yang, a Land of Lincoln Legal Assistance Foundation staff attorney who has represented three Illinois debtors arrested in the past two months. "They don't like being in court. They don't have cars. And if they had money to pay these collectors, they would."

The laws allowing for the arrest of someone for an unpaid debt are not new.

What is new is the rise of well-funded, aggressive and centralized collection firms, in many cases run by attorneys, that buy up unpaid debt and use the courts to collect.

Labels: debt, Everybody Knows That the Dice Are Loaded, hopelessness

In a glass tower on the outskirts of New Delhi, dozens of young Indians are on the telephone, calling America’s out of work, forgetful and debt-stricken and asking for cash.

“Are you sure that’s all you can afford?” one operator in a row of cubicles asks politely. “Well, how do you take care of your everyday expenses?” presses another.

Americans are used to receiving calls from India for insurance claims and credit card sales. But debt collection represents a growing business for outsourcing companies, especially as the American economy slows and its consumers struggle to pay for their purchases.

Armed with a sophisticated automated system that dials tens of thousands of Americans every hour, and puts confidential information like Social Security numbers, addresses and credit history at operators’ fingertips, this new breed of collectors is chasing down late car payments, overdue credit card debt and lapsed installment loans. Debt collectors in India often cost about one-quarter the price of their American counterparts, and are often better at the job, debt collection company executives say.

“India will be the only place we grow this year,” said J. Brandon Black, the chief executive of the Encore Capital Group, a debt collection company based in San Diego. India is the company’s largest operating area, with about half the company’s collection force of more than 300.

Although the stereotype of a collector may be “some guy with chains and a cut-off shirt,” Mr. Black said, collectors in India are “very polite, very respectful, and they don’t raise their voice.” He added, “People respond to that.”

Companies like Encore buy bad loans from banks and credit card issuers for pennies on the dollar and pocket the cash they collect. The delinquent borrowers often owe at least a thousand dollars.

So far just a tiny fraction, maybe 5 percent, of American debt collection is done outside the country, industry executives estimate. But new business is in the pipeline.

Financial services clients are saying, “We want you to collect my debt, to analyze it and change the way that we sell” the loans, said Tiger Tyagarajan, executive vice president at Genpact, the business processing company spun off from General Electric that has roots in India. Genpact, which works with lenders to get customers to pay, rather than buying loans directly like Encore, employs thousands of debt collectors in India, Romania, Mexico and the Philippines, and is hiring in all those locations.

In the past, the prevailing wisdom about wringing money from late payers has been “if you’re calling the Midwest, you want someone from the Midwest to twist their arm,” said Mark Hughes, an analyst with Sun Trust Robinson Humphrey who covers the industry. That theory is changing as the pool of trained phone professionals in India and other locations deepens, and companies look outside the United States for lower costs.

Telephone debt collection represents new, more aggressive territory for India. “This is really a sales job,” Mr. Hughes said. “It is commission-intensive, and you’re paid on your ability to collect.”

Like many sales teams, Encore’s collectors in India gather for a daily pep talk before their shift. In one recent session, they were schooled on the intricacies of American tax policy.

“One hundred thirty million U.S. families will get a tax rebate this season” as part of the new economic stimulus package, Manu Sharma, the team leader, explained to a roomful of top-earning collection agents, most in their 20s. Those who qualify for the rebates will get as much $600 a person or $1,200 a household, he said, and “the I.R.S. is going to start paying this money in May.”

Start bringing up the rebate during calls, he told them. “This gives you an advantage so you can increase your wallet share,” he went on. “Get them set up on minimum balance arrangements” based around their tax rebates.

Labels: debt, outsourcing

Oil prices rose Thursday after dipping briefly below $96 a barrel, indicating traders were back in a buying mood after pocketing gains from crude's recent rally.

Oil prices had surged to a record above $98 a barrel in the previous session amid supply concerns, the weak U.S. dollar and OPEC's apparent reluctance to pump more crude into the market.

Converted into chemicals, the oil and gas become petrochemicals that are used to develop plastic, polyester, rubbers, detergent, and chemical fertilizers and other pesticides. But it's also used in fragrances and lipstick, in candles and telephones, in pharmaceuticals and insecticides.
Petroleum is used to make artificial limbs and soaps, but it's not used to produce dairy products. Cows are. But cows need to fatten up before they're milked and slaughtered, and they're mostly fed a diet heavy on corn. As more corn is directed to energy production, the price for corn has risen and dairy farmers have passed those costs up the food chain.
Those higher feed costs alone have infused an extra $47 a year per person into grocery bills, according to an Iowa State University study in May.
And don't forget: Farmers sow crops with tractors and use trucks to haul goods, all of which are fueled by diesel. Those higher transportation costs also get pushed up the food chain.
Consumers at the supermarket check-out counter see that they're paying sometimes record-high prices for milk, cheese and yogurt at the same time that the costs of Tide, Pampers, Ivory soap, M&Ms and Cheerios are creeping up.

The U.S. Treasury Department said on Wednesday publicly held U.S. debt breached $9 trillion this week for the first time ever, just five weeks after Congress had raised the statutory borrowing limit.

At the end of September, U.S. President George W. Bush signed a measure to increase the debt limit ceiling to $9.815 trillion from $8.965 trillion, allowing the government to keep issuing debt.

3. Housing. Are you part of the 67% that now "owns" a home? Do you live in any of these markets? Then I sure hope you haven't been using your house as a piggybank, because the value of your house is going to drop like a stone over the next few years. Now this isn't all the Administration's fault, except to the extent that Republican laissez-faire contributed to the development of mortgage products that allowed people who couldn't possibly afford it get into homes they couldn't afford -- products that were like those "no interest for 15 months" payment plans that appliance stores offer. But the Bushistas didn't care as long as it was just middle-class individuals in danger of losing their homes. When the financial markets started to feel the pain, suddenly the idea of letting millions of people lose their homes wasn't something that "the market should sort out" any longer.

The increase in the debt limit is the fifth since Bush took office in January 2001. The U.S. debt stood at about $5.6 trillion at the start of his presidency.

In approving the debt limit increase, Congressional lawmakers said the $850 billion increase should be large enough to allow the government to continue borrowing into 2009, well beyond next year's presidential and congressional elections.

Labels: debt, housing bubble, oil

Need some cash?

If you're like a lot of people, you've found that what's in your wallet is nothing like what's in your house.

As wages stagnated and real estate prices doubled in the first half of this decade, homeowners discovered their home was their best credit card.

Refinanced home loans, home equity lines and second mortgages have become the way to pay for Hummers, high-tech kitchens and vacation cruises. The interest rates are usually lower than the rates on credit cards, the interest paid is tax deductible, and there's been a lot more cash available in house equity.

The numbers are staggering. New Jersey homeowners borrowed $183 billion on mortgage refinancings and home equity loans from 2003 through 2005, the peak refinancing years, an Asbury Park Press analysis shows. Some homeowners may have refinanced more than once in that time. Nonetheless, that's enough to pay for all the fast food meals in America this year or to run state government for the next six years -- tax free.

But now bankers and economists worry some homeowners have overspent like families at Disney World. Default rates on mortgage loans are rising, and real estate prices are falling as higher interest rates have made loans less affordable.

[snip]

James F. Brown, a Spring Lake Heights mortgage banker, said demand for loans that effectively provide cash from house equity has been so high that he has, in recent years, tried to persuade people to borrow less money and not put themselves in so much debt.

Brown, 52, a 24-year mortgage industry veteran, said he's failed to dissuade a single borrower.

Brown said he recalls the days when people tried to actually pay off their mortgage and have a party to burn the paperwork. That's not a modern-day attitude, he said.

"People are sitting back and saying: 'Tell me how much equity is in my house, I want to consolidate my debt, and I'm not worried if I ever pay my house off,' " Brown said

You are in trouble if John Bittel calls you.

If Bittel contacts you, it means your mortgage company is ready to throw you out of your house.

Bittel, of Stafford, is a property investor. He buys houses from people who can't pay their mortgage loans, or he buys them at foreclosure. Then he renovates the houses and either rents or sells them.

Bittel admits he and other investors may look like vultures to those who don't understand the business. But they play an important role in the real estate market, he said.

"Even a vulture has a purpose," Bittel said after one sheriff's sale last month. "He cleans up the mess."

[snip]

The man whose job it is to represent lenders at the Monmouth County sheriff's sale auctions, at which foreclosed properties are sold, said he sees a lot more trouble coming.

That's especially true for owners of large, suburban homes who bought during the boom times, have since run into financial trouble, and now are dealing with a declining market, said real estate broker Dennis Kessler, the lenders' agent in Monmouth County.

"We're seeing more foreclosure action at the top of the market than at the bottom," Kessler said. "You see a lot of people who can't sell their homes, and they're really extended out."

[snip]

Many homeowners in trouble during a real estate downturn attempt to rent out their houses in order to cover the mortgage. That won't work for many this time, Kessler said.

"You can't rent a McMansion that's worth $800,000 and has $20,000 a year in property taxes," he said.

[snip]

Dennis DeBernardis, 57, of Freehold, a property investor and retired New York City police officer, sat motionless after a sheriff's sale in Monmouth County last month.

He had researched the loans on the properties and driven by the houses, but never raised his hand once to offer a bid.

"There's no equity in these," he said. "What's coming through is these interest-only, balloon mortgages, no-money-down loans."

The scene has been much the same for investors in Ocean County.

"Look at these judgment amounts — they're huge," said Bittel, the Stafford investor, as he slapped the sale list. "That house has a $254,000 judgment. It's only worth $200,000. Look at this one in Brick: $500,000 to buy it today. Forget it."

After a while, Bittel and other investors predict, the banks will have to start unloading properties for whatever price buyers will pay.

When that happens, real estate prices in general will drop, since those sales will be used as comparisons for homeowners who put their homes on the market, Bittel said.

Labels: debt, economics, homeownership, real estate

Military leaders are struggling to choose Army units to stay in Iraq and Afghanistan longer or go there earlier than planned, but five years of war have made fresh troops harder to find.

Faced with a military buildup in Iraq that could drag into next year, Pentagon officials are trying to identify enough units to keep up to 20 brigade combat teams in Iraq. A brigade usually has about 3,500 troops.

The likely result will be extending the deployments of brigades scheduled to come home at the end of the summer, and sending others earlier than scheduled.

Nearly 90 percent of Army National Guard units in the United States are rated "not ready" -- largely as a result of shortfalls in billions of dollars' worth of equipment -- jeopardizing their capability to respond to crises at home and abroad, according to a congressional commission that released a preliminary report yesterday on the state of U.S. military reserve forces.

The report found that heavy deployments of the National Guard and reserves since 2001 for the wars in Iraq and Afghanistan and for other anti-terrorism missions have deepened shortages, forced the cobbling together of units and hurt recruiting.

"We can't sustain the [National Guard and reserves] on the course we're on," said Arnold L. Punaro, chairman of the 13-member Commission on the National Guard and Reserves, established by Congress in 2005. The independent commission, made up mainly of former senior military and civilian officials appointed by both parties, is tasked to study the mission, readiness and compensation of the reserve forces.

"The Department of Defense is not adequately equipping the National Guard for its domestic missions," the commission's report found. It faulted the Pentagon for a lack of budgeting for "civil support" in domestic emergencies, criticizing the "flawed assumption" that as long as the military is prepared to fight a major war, it is ready to respond to a disaster or emergency at home.

Labels: debt, George W. Bush, idiocy, Iraq, terrorism