U.S. ECONOMIC/FINANCIAL NEWS
Sinking U.S. Dollar No Longer a 'Safe Harbor'
"What became of the dollar as a safe harbor?" asks a panicked headline in the Wall Street Journal Jan. 3, reflecting fears of the imminent death of the international monetary-financial system. The business section front-page article worries that for the year, the dollar is down 17.6% to a three-year low against the euro--its first annual decline since the euro went into circulation in 1999; down 16.6% to a three-year low against the Swiss franc; and down 9.5% against the yen. Foreign investors, the Journal notes, have accelerated their pullout (begun in 2000) from U.S. stocks and dollar-denominated assets, moving into gold. (Through October, foreign net purchases of U.S. corporate bonds have plunged by 23%.) The recent rise in gold prices, to five-year highs, is due to the weaker dollar, not the risk of an Iraq war, says the manager of a gold fund. "People are looking for some place, any place else, to put their money."
Labor Department To Cease Publishing Monthly Report on Factory Layoffs
The U.S. Labor Department will no longer publish its monthly report on factory layoffs, because they are laying off the staff that used to prepare it, for lack of funds. Because funding from the Labor Department's Employment and Training Administration (ETA) was cut off on Dec. 31, 2002, the Bureau of Labor Statistics (BLS) will no longer publish the monthly Mass Lay-offs Statistics report, which detailed, by state, the number of layoffs of 50 or more workers for each industry (some due to plant closings), based on new filings for unemployment insurance benefits. The Labor Department could no longer afford the report, about $6.6 million per year, said Mason Bishop, deputy assistant secretary for the ETA. The final report, issued Dec. 24, said U.S. employers initiated 2,150 mass layoffs in November, affecting over 240,000 workers--with manufacturing industries accounting for 33% of mass layoffs.
"The states have come to rely on this information as an economic indicator and a tool for operational decisions on service delivery and funding allocations for dislocated-worker programs," wrote Catherine Leapheart, president of the National Association of State Work Force Agencies, in a letter to Labor Secretary Elaine Chao.
U.S. Corporate Bankruptcies Shatter Record in 2002
Overall, 186 public companies listing $368 billion in assets filed for bankruptcy this past year, dwarfing the previous asset-total record of $259 billion set in 2001, according to tracking service BankruptcyData.com Dec. 30. The debris included five of the 10 largest bankruptcies ever, a list led by WorldCom and including insurance and finance giant Conseco, Global Crossing (telecom), UAL (United Airline's parent) and Adelphia Communications.
Welfare 'Reform' Crushed Under Weight of New Depression Caseloads
Welfare caseloads, which had been slashed by more than half in the late 1990s, following passage of the 1996 Welfare "Reform" bill, are now again rising as official unemployment has reached 6%, wrote Washington Post columnist E.J. Dionne of the Brookings Institute in an op-ed Jan. 3. From July through September, 38 of the 50 states, plus the District of Columbia, reported increases (averaging 2.0%) in the welfare rolls--at a time when states are facing "the most dire fiscal situation since World War II," as the Federal government is cutting the value of the block grant to the states to support programs for the poor (part of the 1996 reform). At the same time, "aid to working families not receiving cash welfare is at its highest level since the Great Depression," according to Douglas Besharov of the American Enterprise Institute.
Over the past year (September 2001-September 2002), welfare caseloads increased, by an average 8.5%, in 25 states--four more states than the previous year. Nevada had a whopping 31% caseload increase, and Wisconsin saw a substantial 15.8% increase.
Most states--27 of the 50--have experienced a caseload increase (averaging 12.7%) since March 2001, the "official" start of the "recession." Staggering increases occurred in Nevada (60.1%), Mississippi (26.6%), Wisconsin (23.7%), Arizona (22.6%), South Carolina (22.6%), and Indiana (22.4%).
United, Under Pressure from Creditors, Continues Bloodletting
United Airlines, under pressure from creditors to cut costs, announced Jan. 3 it will eliminate 1,688 more jobs--1,500 of them by Jan. 19. In order to "help meet the strict requirements of its Chapter 11 financing"--slashing $2.4 billion in annual labor costs--the nation's second-largest airline will fire 1,500 management and salaried employees by Jan. 19. In addition, it will close all 32 remaining city ticket offices, effective Jan. 28, resulting in 188 layoffs. On Jan. 4, the company will close reservations centers in San Francisco, Long Beach, and Indianapolis, resulting in a previously announced 686 layoffs. (See related article in IN DEPTH.)
Angelinos Vote Overwhelmingly To Raise Taxes To Pay for Health Care
"The [health-care] system keeps getting tremendously strained. It is extraordinarily fragile right now," David Altman, the chief medical officer for Los Angeles County's largest trauma center, said, as he welcomed the unexpected passage in November of a tax-increase referendum. Not since California's infamous 1978 anti-tax Proposition 13 has the county fielded a ballot initiative for a tax hike; this one passed by a landslide, with 73% voting in favor of it. At stake is the shutdown of two more public hospitals. The county, faced with a $500-million deficit, had already slashed medical services, closing 11 clinics, converting one hospital to an outpatient facility, and reducing beds and services at yet another. The new taxes garnered will keep the hospitals open for now, but new cuts loom.
The health-care crisis there is aggravated by three factors. First, the county has 2.5 million residents without health insurance, and of the 800,000 people who seek help at emergency rooms, 75% (600,000) are uninsured. Second, the state's $35-billion-plus revenue shortfall will leave Gov. Gray Davis and legislators with no choice but to cut benefits and eligibility in the Medicaid program--unless they wake up and adopt Lyndon LaRouche's economic recovery approach before it's too late. The more than 300,000 citizens who will be cut from the rolls will be forced to rely on hospital emergency rooms, adding further to the fragility of the system. Third, the deepening depression conditions of more layoffs, people losing health coverage, and health services slashed due to budget holes, will increase demand at public hospitals.
The National Association of Public Hospitals and Health Systems reports that half its members now operate in debt, up a third from last year! One example given in a Washington Post article Dec. 31 is Michigan. Officials report clinics and hospitals that serve the poor are having to cut hours and offer only core services, due to the state's financial crisis. A Michigan Health and Hospitals Association spokeswoman said, "The economic realities of health care are as bad as ever. Many of our members are trying to hang on, but things are tenuous at best."
Bridge and Toll Road Fees Soar as Government Funds Dry Up
Americans are also paying higher taxes in the form of steep rises in fees for bridges and toll roads, whose costs have begun to spike as states cut capital spending programs and the Federal government withholds new funds, USA Today reported Jan. 2. Tolls on San Francisco's Golden Gate Bridge increased from $3 to $5 in September, and Michigan authorities plan to hike the $1.50 toll to $2.50 on the five-mile-long Mackinac Bridge soon. The 600,000 users of the New Jersey Turnpike likewise will pay a 17% higher toll as of today. Without adequate Federal and state funds, toll authorities nationally, which manage 4,989 miles of toll roads, bridges, and tunnels, are increasing fees to pay for urgent upkeep costs. Many of these structures were built 50 or more years ago, and thus require significant investment for maintenance.
Laid-Off Techies: 'Will Work for Stock Options'
A growing number of laid-off techies are working for stock options, but no paycheck or health benefits, the San Francisco Chronicle wrote Dec. 22. Rather than wait for work that may never come, unemployed tech workers are working for free in so-called "equity-only" jobs with start-up IT companies. They are offered stock options and a letter of intent promising to hire them--if the company receives funding. Some could lose unemployment benefits that they currently receive. Moreover, state officials warn that such agreements violate state labor laws, which stipulate that all workers must be paid at least the minimum wage. The techies, according to the start-up companies, are not considered employees, but so-called "independent contractors."
Home Foreclosures Surged in Twin Cities' Suburbs
Home foreclosures significantly increased in the wealthier suburbs of Minneapolis and St. Paul, Minn. after the Twin Cities lost nearly 30,000 high-paying transportation and high-tech manufacturing jobs over an 18-month period, the Star Tribune reported Dec. 29. By the end of November, foreclosure sales in the newer suburbs of Sherburne County were already up 50% over all of 2001. Foreclosures in Carver County, home to some of the highest household incomes and home values in the region, have almost tripled this year, and personal bankruptcy filings have jumped by 26%.
HMOs Reap Huge Profits as Health Insurance Premiums Skyrocket
Except for Cigna, third-quarter earnings rose by 47% on average for 11 major managed-care insurers, according to a report by a Merrill Lynch analyst, published in USA Today Jan. 2. Both premiums and profits are expected to rise again this year. "They did really well financially, and they'll do really well again this year," said Carl Mercurio, the publisher of Managed Healthcare Market Report. Premiums are expected to increase by an average of 15.4% this year, while health costs to insurers are expected to grow by 12%, with HMOs using the difference to boost profit.
Phantom Pension-Fund Earnings Were Two-Thirds of Corporate Profits in 2001
If actual pension fund gains--or losses--on investments in the stock market, rather than inflated estimated gains, had been counted in financial statements, overall earnings for the S&P 500 would have been 69% lower than the companies reported for 2001, or $68.7 billion rather than $219 billion, according to a study by Credit Suisse First Boston, Bloomberg reported Jan. 1. In other words, about $150 billion in corporate profit didn't exist! In reporting gains they hadn't made, the companies didn't violate any rules--but were following accounting practices as written in 1985 by the Financial Accounting Standards Board.
Weyerhaeuser, the world's biggest lumber company, for example, relied on reported pension earnings for 66% (or $234 million) of its net income in 2001, assuming an 11% rate of return--but its pension fund actually lost 9.5% on investments.
The pension-fund "time bomb" will reduce reported corporate profit by billions of dollars in 2003, as many of the largest companies pour money into underfunded pension funds.
|