The Collapse of the U.S. Economy

New $100 Billion Safety Net for Unemployed in Works

December 1, 2009

AP - As unemployment spikes, the cost of compassion is going up too.

By as much as $100 billion.

That's the potential price of a push by Democrats in Congress to continue providing extra help to the jobless beyond the core 26-week unemployment insurance package provided under permanent law.

The jaw-dropping numbers combine the approximately $85 billion cost of continuing emergency benefits through 2010 for the long-term unemployed -- jobless more than six months -- plus an estimated $15 billion to continue subsidies to help pay health insurance premiums.

Even before the last new round of extended benefits in November, the cost of unemployment compensation was estimated by the White House to exceed $140 billion for fiscal 2010, which began in October. Just two years ago -- when the unemployment rate was 4.8 percent in contrast to the current 10.2 percent -- the cost of unemployment benefits was only $43 billion.

Extending unemployment benefits again is an obvious solution to Democrats preaching compassion for the long-term jobless, as well as to economists who say cutting off the flow of money could harm the economy.

"This is the most effective way to get money into the economy. It's given to people who are simply out of money," said Rep. Jim McDermott, D-Wash., a key supporter. "They're spending it. They're not socking it away in a mattress somewhere."

Several temporary benefit extensions dating from mid-2008 are set to expire Dec. 31. In January alone, an estimated 1 million people will lose benefits as their extended coverage runs out. By March, 3 million people will have lost benefits averaging about $315 a week.

Also expiring is a program subsidizing 65 percent of insurance premiums for unemployed people who sign up for a continuation of health benefits formerly provided by their employer under the so-called COBRA program. The nine months of COBRA subsidies and the additional weeks of unemployment benefits were both core pieces of February's economic stimulus plan.

The COBRA health insurance subsidies expire Dec. 1 for those who signed onto the program when it first started last winter, though people who get fired before Jan. 1 are eligible for the full nine-month subsidy. People on unemployment would be able to finish out their present "tier" of benefits but would be ineligible for any of the recently passed additional coverage.

The benefits extension is under discussion among top Democratic leaders. While there's no agreement on a specific plan, there's a lot of sentiment behind a full-year extension, congressional aides say. The staggering cost, however, could preclude passing it.

With the budget deficit spiraling out of control, deficit hawks are certain to balk at the measure's price tag. And the White House, which is signaling that it is going to focus next year on trying to rein in the deficit, is not endorsing a full-year extension of benefits. Budget office spokesman Tom Gavin would only say the administration supports some extension beyond Dec. 31.

"We're past the point where anything can be deficit financed without some plan to pay for it," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. "It has to come with offsets."

Many economists say increasing or extending unemployment payments is among the most efficient ways to jump-start the economy. It's easy to do and the people getting the benefits typically spend the money quickly. With the economy in a fragile recovery, cutting off benefits could be harmful.

"It would significantly raise the risk of falling back into recession next year," said Mark Zandi, chief economist at Moody's Economy.com.

Not all economists agree, however, especially if the benefits are financed by adding to the nation's $12 trillion debt. There's also evidence that unemployment insurance actually raises the jobless rate slightly because some people don't look for work as diligently as they do when they're on it.

"The longer you extend unemployment benefits, the longer you extend average job searches," said Ken Mayland, president of ClearView Economics. "It makes it more comfortable for people to be unemployed."

While most Republicans supported a recent bill adding 14 to 20 weeks of extra benefits for those who had exhausted payments lasting as long as a year and a half, many are likely to resist the upcoming measure.

"Calling more government spending and more debt a 'jobs package' is laughable, and the Democrats' frantic push for more of the same is yet another acknowledgment that their trillion-dollar stimulus isn't working," said Minority Leader John Boehner, R-Ohio.

The startling price tag of extending the benefits is due to two factors: the sharp spike in the jobless numbers and several layers of additional weeks of benefits that have been approved by Congress since June 2008.

The core benefit is 26 weeks, with up to 20 additional weeks in states with high unemployment. States collectively are already projected to run a $57 billion deficit in the core program in 2010. The federal government is already obligated to lend them the money to cover that gap.

Additional tiers of benefits were added in 2008. February's stimulus measure not only renewed those benefits but added $25 a week to every unemployment check.

Primary Collapse of the U.S. Economy Will Occur in 2010

December 2, 2009

Neithercorp Press - For the past couple years we have been covering every nuance of the economic collapse and in almost every instance we have come to the conclusion that 2010 would be the year that the U.S. would see an incredible downturn, possibly resulting in the inflationary disintegration of the Dollar, and a major stock market revolt which would destroy any remaining illusion Americans still have that a recovery is in progress:

http://neithercorp.us/npress/?p=74
http://neithercorp.us/npress/?p=167

We are now on the edge of winter 2009, and recent events across the globe indicate more and more that our predictions for 2010 were correct. Let’s examine some of those events and their implications now…

Bad Signs On The Homefront

The situation in American employment, credit, currency, and real estate has only become worse since the federal stimulus plan was instituted. “Official” unemployment has soared to 10.2% while REAL unemployment according to the U-6 measurement is around 18%.

Real Estate continues to be incredibly weak, and mortgage payment delinquencies and bankruptcy have grown unabated.

Over 125 banks across the country have been closed in 2009. You can see the FDIC’s closed bank list here.

The FDIC has announced that it has officially run out of funds, and is now in the red for $8.2 billion (that they admit to, the real amount could be much more). The FDIC is now pulling funds directly from the Treasury to cover future bank losses. This puts even more of a strain on the already crumbling dollar.

American’s buying habits are perhaps the biggest indicator that something is very wrong. Polls indicate the 93% of U.S. consumers will most likely spend much less this Christmas season then they did the last, and many of them will not be using credit cards:

The U.S. economy has been fueled by easy credit for decades. The fact that Americans have dumped credit in favor of cash means they will be spending FAR less this holiday season than any MSM economist wants to admit to. I believe the seasonal retail numbers for 2009 will be startling to many who are not aware of the true condition of the economy, and who have blindly believed the Federal Reserve’s announcements that the recession is “over.”

We have predicted for at least the past two years that the primary collapse of the U.S. economy would occur in 2010. We stand by that prediction. Our hopes remain that this prediction will be proven incorrect, and that all will be well, however we have no illusions according to the current data that this will be so. Neither Corporation encourages all of our readers to examine the conditions and information for themselves, and we request that all those who find our conclusions to be correct should make preparations to protect your savings and the well being of your families.

A climactic economic event is on the horizon, and the train is already in motion. We may not be able stop the event from taking shape, but together we can determine its outcome. All those who value truth, liberty, and an honorable society, should be ready not only to save themselves, but to save each other, and to save their country. The time for readiness grows short.

Family Health Insurance to Rise Sharply without COBRA Subsidy

November 30, 2009

McClatchy Newspapers — A new study estimates that the end of a hefty government subsidy could force millions of laid-off workers to pay more than 80 percent of their monthly unemployment checks to keep their job-based family health insurance coverage intact.

An estimated 7 million jobless workers and their dependents are thought to have received the temporary subsidy, which pays 65 percent of their health insurance premiums under a law known as COBRA, the Consolidated Omnibus Budget Reconciliation Act.

However, the nine-month subsidy expired Monday for those who first began receiving it in March through the American Recovery and Reinvestment Act.

Estimates vary, but COBRA subsidies pay an average of $722 per month toward the average national cost of family coverage, which runs about $1,111 per month, according to Families USA, a liberal consumer health advocacy group.

Without the subsidy, however, COBRA family coverage would eat up a whopping 83.4 percent of the $1,333 average monthly national unemployment insurance benefit, according to a Families USA report issued Tuesday.

In nine states, the full COBRA family premium exceeds the average monthly state unemployment benefit, the study found. The situation is worst in Mississippi, where the average unsubsidized COBRA premium of $1,027 for family coverage is 22.4 percent more than the average monthly unemployment benefit of $839, which is the lowest in the nation. The other states in which the average COBRA family premiums top the average monthly unemployment benefit are Alabama, Alaska, Arizona, Delaware, Florida, Louisiana, South Carolina and Tennessee.

Congressional Democrats are pushing to include some type of COBRA subsidy extension in a major jobs bill that's being crafted. Rep. Joe Sestak, D-Pa., and Sen. Sherrod Brown, D-Ohio, have introduced stand-alone legislation to extend the subsidies in the House of Representatives and the Senate, but it's unclear how soon any new funding can be secured.

In the meantime, many jobless Americans may be left with the difficult choice of paying higher rates at a time of dire financial struggle, going without coverage, or looking for cheaper coverage through government programs or the private market.

"For millions of laid-off workers and their families, the federal COBRA subsidies have been a health-coverage lifeline. It is essential, therefore, that new jobs legislation extends those subsidies," said Ron Pollack, the executive director of Families USA.

In general, COBRA allows certain workers who lose their jobs — unless they were fired for gross misconduct — to continue their health insurance with their former employers for up to 18 months. Before the subsidy was offered, only about 9 percent of people who were eligible took advantage because it was so expensive.

A study by Hewitt Associates found that the number of those who took advantage of the cheaper COBRA insurance has doubled since the subsidy became available in March.

In Milford, Ohio, Tim Wolffrum's monthly COBRA premium for individual coverage will go from $146 to $417 per month when his subsidy expires Dec. 31. That's in line with the Families USA estimate that COBRA premiums average $396 for individuals, while the average subsidized premium is $139.

Wolffrum, 58, said he'd like to see the subsidy extended, but that strong Republican opposition to the health care overhaul and government spending in general makes it unlikely. The Joint Committee on Taxation estimated that the current subsidy would cost nearly $25 billion and cover about 7 million people this year...

U.S. Bankruptcies Rise 33 Percent in Q3, Most Since 2005

November 25, 2009

Reuters - U.S. bankruptcy filings rose 33 percent in the third quarter to the highest number since 2005, government data show, as rising unemployment and tight credit made it more difficult for consumers and businesses to stay current on their debts.

"With unemployment surpassing 10 percent and credit to businesses remaining tight, consumers and businesses are increasingly turning to the financial relief of bankruptcy," said Samuel Gerdano, executive director of the nonpartisan American Bankruptcy Institute, in a statement.

There were 388,485 filings in the July-to-September period, up from 292,291 a year earlier and up 2 percent from the second quarter's 381,073, according to data released Wednesday by the Administrative Office of the U.S. Courts.

Consumer filings rose 33 percent to 373,308 from 280,787 a year earlier, while business filings increased 32 percent to 15,177 from 11,504...

Among the larger businesses to file this year have been automakers General Motors Corp and Chrysler LLC, mall owner General Growth Properties Inc (GGWPQ.PK), telecommunications company Nortel Networks Corp (NRTLQ.PK), and after the end of the third quarter, finance company CIT Group Inc (CITGQ.PK) on Nov. 1.

Filings in the third quarter were the most in a three-month period since the record 667,431 in the fourth quarter of 2005. Most of those came in the first two weeks of that quarter, prior to a U.S. Bankruptcy Code overhaul that was backed by credit card companies and designed to curb perceived abuses. Some politicians have called for a rollback of some of the changes, which they say have added to consumer hardships.

In the third quarter, about 71 percent of bankruptcy filings came under Chapter 7 of the code, 28 percent under Chapter 13, and most of the rest under Chapter 11. Chapter 7 is often used by consumers seeking a fresh start on their financial lives. Chapter 13 lets people discharge some debts. Businesses often use Chapters 7 and 11. Farmers use another part of the code, Chapter 12...