Source: Daniel C. Vock, Stateline.org, February 15, 2008
Michigan just suspended a state loan program for 8,500 students, and the Port Authority of New York and New Jersey is facing a four-fold jump in interest rates on one of its loans. Both are signs of a new bond-market crisis that is threatening to hurt other cities and states if left unchecked.
Hopes are riding high that famed investor Warren Buffett, the administration of New York Gov. Eliot Spitzer (D), Congress or federal agencies will avert even bigger troubles.
If not, cities and states that issue tax-exempt bonds to raise money for such projects as road and bridge work or rely on investors to raise student-loan money could confront a series of new problems stemming from the subprime mortgage meltdown.
Source: Brian W. Cashell, Congressional Research Service, Order Code RS22793, January 23, 2008
A recession is one of several discrete phases in the overall business cycle. The term may often be used loosely to describe an economy that is slowing down or characterized by weakness in at least one major sector like the housing market. When used by economists, “recession” means a significant decline in overall economic activity that lasts more than a few months. The National Bureau of Economic Research (NBER) business cycle dating committee is the generally recognized arbiter of the dates of the beginnings and ends of recessions. As with all statistics, it takes some time to compile the data, which means they are only available after the events they describe. Moreover, because it takes time to discern changes in trends given the usual month-to-month volatility in economic indicators, and because the data are subject to revision, it takes some time before the dating committee can agree that a recession began at a certain date. It can be a year or more after the fact that the dating committee announces the date of the beginning of a recession.
Source: Nicholas Johnson, Center on Budget and Policy Priorities, February 13, 2008
The federal “economic stimulus” package enacted today not only cuts federal taxes, but also threatens to reduce many states’ corporate and personal income tax revenue this year and next year.
The potential revenue loss comes at a particularly problematic time for states, because about half the states are already facing budget shortfalls for the current year, the upcoming year, or both; more states will be in trouble if the economic downturn worsens. Some states are already enacting cuts in K-12 education, higher education, health care and human services, among other areas in order to balance their budgets.
Source: American Association of State Highway and Transportation Officials (AASHTO), Press release, January 30, 2008
State transportation departments could award and begin more than 3,000 highway projects totaling approximately $18 billion within 30-90 days from enactment of federal economic stimulus legislation, according to a survey by the American Association of State Highway and Transportation Officials.
The survey, conducted this week at the request of Congressional committees who are at work on the stimulus effort, drew responses from 47 of AASHTO’s members, including the District of Columbia. The state-by-state response is attached.
Press release includes chart.
Source: Economic Report of the President, February 2008
The Economic Report of the President – “Today, the White House released the Economic Report of the President, an annual report to Congress on the Nation’s economic progress. The report released today reviews the state of the U.S. economy, the outlook for the next several years, and a wide variety of economic issues that underlie many of the Administration’s economic policies.”
• Fact Sheet
• Economic Report of the President: 2008 Report Spreadsheet Tables
• Previous Economic Reports of the President: Download entire reports and statistical tables
Source: James H. Carr, National Community Reinvestment Coalition, Testimony before United States House of Representatives Subcommittee on Commercial and Administrative Law, January 29, 2008
Regional economic downturns, speculation on skyrocketing home prices and rampant unfair and deceptive mortgage lending practices have combined to create the perfect foreclosure storm in America. According to the FDIC, there is roughly $1.3 trillion of outstanding subprime mortgage debt (Poirer, 2007). In 2006 alone, more than $600 billion of subprime mortgages were originated (Inside Mortgage Finance, 2006). RealtyTrac data shows roughly 450,000 homes experienced foreclosure in the third quarter of 2007, up a full 100 percent from the same period one year ago (Yoon, 2007). And, although foreclosures are most heavily concentrated in 12 to 20 states, foreclosures are up in 45 of 50 states. Federal Reserve Board Chairman Ben Bernanke reported that 21 percent of subprime adjustable-rate mortgages were ninety-days delinquent or more as of January 2008 and according to the Center for Responsible Lending (Center for Responsible Lending) fully one in five subprime loans are expected to fail (Bernanke, 2008; Center for Responsible Lending, 2007). That rate of foreclosure is estimated to translate into more than two million families losing their homes to foreclosure over the next year to 18 months (Center for Responsible Lending, 2007). Estimates of the full economic costs of the foreclosure crisis vary greatly. The projections share, however, a common theme: the prospect of significant financial costs that extent beyond the housing market.
Source: U.S House of Representatives, Joint Economic Committee (Republicans), January 2008
This paper investigates the value of employment data as real-time recession indicators. Among popular monthly labor measures, the unemployment rate is the most useful as an indicator of recession, whereas two top measures of employment growth -payroll jobs and civilian employment -have little value. Two other series, the labor force participation rate and the employment-population ratio, also provide little or no value in anticipating a recession. The best pre-recession employment indicator is actually weekly claims for unemployment insurance (UI). The paper reviews a new technique for predicting recessions, and develops an employment recession probability index. The index indicates a 35.5 percent chance that the U.S. economy is in recession, sharply up from 10 percent last month.
Source: Algernon Austin, Economic Policy Institute, EPI Issue Brief #241, January 18, 2008
Recessions hurt. And they hurt the poor and socially marginalized populations the most. As we face the prospect of the second recession of the decade and consider the merits of various stimulus packages, it is useful to examine what a recession would mean for black America.
The late 1990s produced a full employment economy and significant absolute and relative economic gains for blacks. This Issue Brief contrasts the benefits of a national full-employment economy with the harm caused by the 2001 recession and the weak job growth that followed.
Source: Elaine Maag, David Merriman, Urban Institute, January 30, 2008
Every state except Vermont operates under some sort of balanced budget requirement. That means that to serve the increased need of distressed populations during recessions, states must either increase revenue or reallocate resources dedicated to other programs. Similarly, when revenue declines, states must raise taxes or reallocate resources. This report examines the extent to which rainy day and general fund savings were a significant factor in helping states cope with fiscal stress during and after the 2001 recession, a possible explanation for the lower than expected legislated tax increases and social welfare cuts.
Source: Eileen Appelbaum, Dean Baker And John Schmitt, Center for Economic and Policy Research/Center for Women and Work, January 2008
From press release:
An aggressive stimulus package is needed immediately to address the current weakness of the US economy, according to the latest report from the Center for Economic and Policy Research and the Center for Women and Work at Rutgers University.
The Need For An Economic Stimulus Package, by economists Eileen Appelbaum, Dean Baker and John Schmitt, stresses the necessity for an immediate stimulus package equal to 1% of GDP to counteract the negative effects of the collapse of the housing bubble.
Several economic indicators point to a softening of the US economy. From the recent 0.3 percentage point rise in unemployment (a jump rarely seen outside of a recession), to a decline in consumption, the US economy is clearly in a down turn, if not entering a recession, spurred by the collapse of the housing market and the loss of trillions of dollars of wealth.