An article from the Wall Street Journal from August 26th, Leasing of Landmark Turnpike Puts State at Policy Crossroads, discusses a proposal to lease the Pennsylvania Turnpike to a group of private investors. The Pennsylvania Turnpike is the oldest superhighway in the nation, but it needs $12.8 billion in repairs and capital improvements.
The governor of Pennsylvania, who is proposing the deal, argues the state needs financial relief from a reduced tax base and tax revenues. The article describes Wall Street as eager to close the deal because many U.S. and foreign investors have investible funds looking for a return.
Savers may recognize that Pennsylvania, like all states, can sell tax free bonds directly to investors and then use the funds to make repairs and capital improvements for itself. If loanable funds are available, they are available to Pennsylvania as well as private investors.
The deal allows for the private investor group to raise tolls 25 percent in 2009 and then by inflation afterward, something the state can do as well.
Others worry about jobs and wages because the proposed deal allows union contracts to expire in 2011. We have to hope the governor does not intend to let others take the blame for lower wages and job cuts, but anything private investors can do to save money the state can do as well.
In effect, the governor is saying his state cannot raise taxes to make payments of interest and principal to service and retire bonds because high state taxes already bear so heavily on wages and working class citizens they cannot afford to pay more.
However, if business and individual interests have loanable funds while there are unfunded projects that need those funds, then extollers of free markets should have to explain why those funds don’t flow directly to where they are needed.
One explanation lies in America's unequal distribution of income and taxes. Lower tax rates on working class Americans and higher tax rates on business and upper income individuals will make it much easier for the states to pay for the investment funds they need.
Whether these tax changes are fair or unfair is irrelevant to the issue. What is relevant is that tax relief for working class Americans will reduce pressures to turn over public assets to private interests.
The article mentions opposition to the governor's proposal. One woman is quoted as saying, "Americans built this turnpike. … Why do we need someone else to operate it?"
People recognize that it is degrading for Americans to sell public assets to private and foreign interests. It is also unnecessary.
Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com
This week, we participated in the Carnival of Personal Finance hosted by Sound Money Matters.
While there weren't too many stories directly related to online banking and using the Internet to save you money, there were a lot of great tips. Here are a couple of the highlights:
The 60 Percent Solution and Mint.com - Cash on the Barrelhead
Super, super cool, because everything goes into pie charts, which is the only way that money (or math of any kind, really) makes sense to my brain. Just click, and you can see one month of where your money is. Or three months, etc. Click on any pie slice for the gory details of what your money is doing. After we’ve got enough data in it, we’ll be able to see (in bar graph–I like those, too) how our spending stacks up against other people.
29 Steps I Took to Leave the Workforce at Age 29 - My Dollar Plan
At age 29 I left the corporate world behind and I’m embarking on a new chapter in my life: spending more time with my kids (ages 1 and 2), following my passion (teaching others about personal finance), and an overall life of freedom not tied to a JOB! Here’s how I did it (and how you can too!)
Are You a Millionaire in the Making? - The Dough Roller
Becoming a millionaire is about the simple, daily choices we all make. So with that, let’s see whether you are a millionaire in the making.
Savers might want to read Treasury Secretary Paulson's press conference statement titled "Comprehensive Approach to Market Developments." He is asking for $700 billion for the U.S. Treasury to buy defaulted mortgages.
An economy runs on a flow of transactions. Billions in defaulted mortgage payments cuts down the flow, which will spread to other payments.
The government must support these financial institutions or watch the economy slide into recession or worse, but that does not mean the Secretary's plan is the best one.
The Federal Reserve Bank has both the ability and authority to support these institutions without an appropriation or legislation — so it is not clear why the Treasury is requesting funds for itself. Treasury Secretary Paulson does not tell us why the Treasury should be the purchaser when the Federal Reserve Bank has the liquid funds to support these institutions.
The Treasury Secretary's statement gives causes for these current defaults. He explains that the Treasury has been coping with financial problems on a case by case basis, but now the time has come "to address the root cause of our financial system's stresses."
One paragraph later he suggests the root cause: "lax lending practices earlier this decade led to irresponsible lending and irresponsible borrowing. This simply put too many families into mortgages they could not afford."
The statement blames irresponsible lending and irresponsible borrowing, but these defaults show that many banks and major financial institutions had billions of dollars of loanable funds, which were available for loans to businesses and corporations to fund plant and equipment or other business needs.
We have to think a bank with qualified business or corporate borrowers, or qualified home buyers would lend to them before lending to unqualified borrowers in the sub prime lending market. The term sub-prime defines a loan where lenders knowingly lend to unqualified borrowers.
Lending billions to unqualified borrowers suggests there was a large surplus of loanable funds.
Remember too that the Federal Government is a qualified borrower that needs billions of savers' dollars pay for its deficits, but still they had billions for unqualified borrowers.
Toward the end of his statement Secretary Paulson tells the country he will be working with members of Congress "to alleviate the pressure of these bad loans on our system, so credit can flow once again to American consumers and companies."
As savers we hope that happens, but lax lending practices were not the root cause. When Secretary Paulson tells us how and why an economy generates billions in loanble funds for unqualified borrowers then we will learn about the root cause of this failure.
While WaMu is currently having some problems — at least five companies are reportedly considering purchasing the bank — but since it is FDIC insured, you shouldn't worry about putting money into it.
APYs have been going up and down for the past few months with no obvious trend — just like the stock market.
Suze Orman, author of Women & Money: Owning the Power to Control Your Destiny and a number of other books, sits down with the Freakonomics blog to answer a number of reader-submitted financial questions.
There are a ton — literally, a ton — of questions about dealing with lots of student debt. Perhaps the Freakonomics readers are mostly academic, graduate-school types.
This one is my favorite question:
Q: In 25 words or less, what’s the best financial advice either 1) you have received or 2) you give out now to others? Bonus points if you answer in haiku format.
Can you afford it?
Unpaid credit card balance?
One word, friend: denied!
Suze Orman Answers Your Money Questions - Freakonomics
This week, we participated in the Carnival of Personal Finance #170, hosted by The Personal Financier.
It included the embarrassing, but true story of how I went to the wrong airport for my flight to Denver.
There are a number of great posts in the carnival, but here are three right up our alley:
Switching to Paperless Statements to Save Money, Time and the Planet - Our Fourpence Worth
But after years of accessing my accounts and paying bills online, and running out of places to stash all my account statements, I’ve decided that it’s probably a better system that will end up saving me money, time (which is also money), space and paper cuts.
Protecting your identity and financial information online - Finance ViewPoint
In today's cyber-age these type of scams and phishing emails are growing and unfortunately new victims are found every day. However there are a number of easy and cost effective ways you can protect your identity and financial information if you transact over the Internet.
Why Paying Bills Electronically Is Good for the Environment - BrokeFamily.com
Want to go Green?
Well, here’s an easy way to be kind to the environment - receive and pay your bills electronically.
Recently the two presidential candidates and their two parties started arguing about a government project called "The Bridge to Nowhere."
The Gravina Island Bridge, also known as the "Bridge to Nowhere", was a proposed bridge to replace the ferry that currently connects Ketchikan, Alaska, to the Ketchikan International Airport on Gravina Island. The bridge was projected to cost $398 million. Members of the Alaskan congressional delegation, particularly Rep. Don Young and Sen. Ted Stevens, were the bridge's biggest advocates in Congress, and helped push for federal funding. The project encountered fierce opposition outside of Alaska as a symbol of pork barrel spending and is labeled as one of the more prominent "bridges to nowhere".
Both sides now agree the project was wasteful government spending, but both sides claim their opposition to the project shows their commitment to save the taxpayer's money and cut government spending. It is easy to be against wasteful government spending, but neither side has much to say about the role of government in America's jobs or what might happen if government starts saving instead of spending.
Starting in December 2007, seasonally adjusted national establishment employment is down 605,000 jobs. The decline was a mixture of
If we back up a whole year to August 2007 and look at change over the last 12 months, national employment is down 283,000 jobs but government employment is up 274,000 jobs.
If we back up two years to August 2006 and look at change for the last 24 months, then national employment is up 1.1 million jobs, but government employment is up 476,000. The government increase in jobs is offsetting losses in manufacturing and construction that are not made up by new jobs in private services.
Actually, 22.5 million people work on government payrolls in local, state and federal governments, but many more work on private payrolls as part of government sponsored and government funded projects like the Bridge to Nowhere. The terms "government contractor," "outsourcing" and "privatization" all signify private businesses, but they are private businesses doing government funded and government sponsored work.
Government employment added to government sponsored employment is more than a mere 22 million: much more.
America puts a heavy burden on its jobs by funding social security, Medicare, workman's compensation, unemployment insurance, and health insurance as a cost of employment. The personal income tax requires a higher rate on wages than on corporate dividends.
Both candidates say they will create jobs and we hope they do. It would be a better campaign if the candidates would suggest some new policies toward work and pay.
Right now, and for the foreseeable future, cuts in government spending will cause an unacceptable loss of jobs. The candidates want us to think they can manage the government to save, but without some new attitudes and new policies our government cannot save, it must spend.
E-Loan, which at one point had the highest online savings account, has introduced a new product: the Savings Plus account.
Offering a tiered APY, the Savings Plus Account requires monthly deposits of at least $100.
Accounts that do not have at least $100 deposited for more than 60 days will be converted into a standard online savings account, according to the terms of service.
Here's the breakdown on the tiered APYs:
Current users of E-Loan's online savings account can convert to a Savings Plus account.
Existing E-LOAN Savings Accounts can easily be converted to Savings Plus. Just log in, click "Transfer Funds" and set up a recurring deposit of at least $100 a month and type in Promo Code RREC08.
There are no fees with the account, but a $5,000 minimum is needed to open.
E-Loan's online savings account is currently offering a 3.01% APY.
After a summertime promotion, HSBC Direct is lowering its online savings account APY to 3.25% APY.
While I'm a fan of HSBC and use it to hold our housing fund, dropping back to 3.25% puts it further out of the top-rate leaderboard, with DollarSavingsDirect (3.75% APY), FNBO Direct (3.50% APY) and WT Direct (3.26% APY) leading the way.
The bank says it has chosen 20 people from the 150 videos submitted into the contest. Each of the 20 received $500 in cash, while five finalists will have their savings matched up to $5,000.
“Interest in the Challenge from across the country has been phenomenal and we’re impressed by the wide variety of clever and creative videos we received,” said Rajive Johri, President, First National Bank of Omaha. “FNBO Direct obviously tapped in to something that’s very important to Americans. Selecting the five finalists and the eventual grand prize winner will be difficult,” said Johri.
FNBO says that the savings challenge will be "documented in real-time," with the grand prize winner receiving an all-expenses paid spa vacation.
It doesn't look like the names/videos of the semi-finalists are public yet, but FNBO says the finalists will be announced in October.