Tuesday, May 20, 2008
Nation's growing deficit worse that government admits
A couple of stories in popular periodicals and newspapers add more perspective to the nation’s current financial crisis.
The Monday May 19 issue of USA Today has a scare front page story by Dennis Cauchon, “Bill for taxpayers swells by trillions: Deficit far bigger than government estimate.” The link now is this. (Search usatoday.com for "Medicare"; the search for "Cauchon" or "deficit" doesn't yet work there.)
The article is written with the idea of the federal government as a corporation that has the fiduciary responsibility to report like one. Medicare’s obligation has grown by $1.2 trillion in the last year, with an unfunded liability of over $30 trillion. That’s about $100000 per person!! One problem seems to be goofy accounting, well known from the growing problems with pensions in both the private and public sectors.
The June 2008 issue of Reader’s Digest has an account (“Home Sick”) of the foreclosure crisis by Lisa Collier Cool, on p 160, that echoes the explanations of Suze Orman on Oprah (or even the comedy on Saturday Night Live). After the dot-com bust, greedy people looking for fast bucks found the next bust thing. Since agents didn’t forfeit their commissions when selling houses with questionable loans, and since banks passed on the risks to investment houses that “securitized” the subprime mortgages, nobody cared about the math of this obvious ponzi scheme. The writer gives stories of how real estate agents themselves went broke and lost homes, or nearly did. The link is here.
On page 166, Mark Gimein has a story “Mr. Foreclosure” about the business of buying uninhabitable and stripped foreclosed houses, fixing them and turning them around and selling them. This is not exploitive "flipping," which is more what the original "real estate boom" a few years ago was about. Now, it’s hard work (it requires a fixer-upper background) but for a while it will earn big profits. The link is here. Another profitable business in some cities is turning homes or foreclosed condo units into quickly rentable units.
And, they say, Mr. and Mrs. Clinton left office with the nation essentially financially healthy (well, the dot-com bust had started). Somehow, with our manufacturing more and more outsourced, we turn to manipulative schemes to "make a living" of "get rich quick."