The top stories on government finance, accounting and transparency
New York Post
Washington has no need to fund New York’s wasteful ways
Op-ed by E.J. McMahon, includes “… Congress shouldn’t feel compelled to subsidize what any state or local government ‘normally’ does. … Second, require states and large cities to produce budgets that are balanced on the basis of Generally Accepted Accounting Principles, the same condition New York state imposed on Gotham after the fiscal crisis of the 1970s. GAAP budgeting isn’t in itself a guarantee of good results. …” (Note: “GAAP budgeting” is also in need of reform, and New York City provides a good example of why.)
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Forbes
Illinois pension bailout request reaction roundup – and why it’s a non-starter
By Elizabeth Bauer, concludes “… Frankly, I find the idea that states whose budget holes now are the result of profligate spending in the past, should get ‘extra’ money by the federal government to fill those holes, dismaying. It feels depressingly unfair to states which have been responsible with their finances. But there may be little choice in the matter, for fear of causing even more harm if those states can’t cut checks for workers expecting them.” (Note: if it’s a non-starter, why is there “little choice in the matter?”)
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NPR Illinois
Who is watching over coronavirus bailout spending?
By Lourdes Garcia-Navarro, interview of Bharat Ramamurti includes “GARCIA-NAVARRO: … this is an unprecedented amount of money to monitor. Quite simply, can you? RAMAMURTI: Yes, I think we can, and I think we have an obligation to the public to do so. A big chunk of the bill is allocated to the Treasury Department and the Federal Reserve to use to stabilize the economy by lending to medium-size and big businesses. And the Fed and the Treasury have a lot of discretion in deciding how to use that money. ... the law is clear that we are able to call government officials to testify before us. …”
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STATE AND LOCAL
KTLA 5 News (California)
‘This is the worst it’s every been’: LA mayor announces city worker furloughs
By Brian Day and Carlos Saucedo, inludes “Los Angeles Mayor Eric Garcetti announced plans to furlough thousands of city workers for 26 days out of the next fiscal year as one of several measures to help balance the budget … Garcetti called on the federal government to loosen regulations to allow federal funds be used to repay more of the city’s COVID-19 related expenses. ‘Help bail out America’s cities just as you bailed out the banks,’ he said.”
Mish Talk
Illinois is insolvent: State requests a pension bailout from Congress
By Mike Shedlock, includes “… Trump could easily have passed national bankruptcy reform in his first Congressional term but he failed to do so. Now Democrats would likely block it. Two Things -- Bankruptcy Reform, Pension Reform. Illinois needs both, and both are up to the state, not the federal government.”
Wirepoints Illinois News
Bond market trades Illinois like it’s already junk
By Ted Dabrowski and John Klingner, from April 16, includes “Financial markets react to news – good and bad – far faster than the credit rating agencies do. If that holds true today, then expect Illinois to be junk rated soon. The bond markets are already pricing Illinois bonds at interest rates that amount to junk-level yields.” (Note: I’m reminded of a quote “The role of rating agencies is to go out into the battlefield after the battle is over, and to shoot the wounded.” Note also that bailouts can bolster bondholders, at the expense of other parties.)
FEDERAL / NATIONAL
Fortune
Who will pay for the coronavirus bailout? If you’re under 50 and working, you will
By Shawn Tully, includes “… The U.S. was facing a dire fiscal future before the crisis struck, but the economic lockdown, and the gigantic new spending enacted to combat it, brings the day of reckoning far closer. By borrowing multiple trillions at a pace never before seen, the U.S. is endangering the sterling credit that makes Treasuries and the dollar the safest of havens for global investors. … Says Brian Riedl … ‘If the U.S. government keeps spending like the Europeans, the American middle-class will be taxed like Europeans.’ …”
Harvard Magazine
The federal fisc
By Karen Dynan and Douglas Elmendorf, includes “… We conclude that significant reductions in federal budget deficits ultimately should, and will, rely much more on revenue increases than on spending cuts. Raising revenue in a way that is both equitable and not very harmful for economic growth is a challenge, but a solvable one … Thus, with interest rates especially low, the optimal amount of federal debt is now much higher than in previous decades—so there is less urgency today to putting federal debt on a sustainable path than we and many other economists have argued in the past.”
Economic Policy Journal
Why the current call to suspend the payroll tax is just a shell game
By Robert Wenzel, includes “Steve Forbes and Arthur Laffer are out with an op-ed in The Wall Street Journal calling for a suspension of the payroll tax … I am all for tax cuts but without an equal amount in government spending, this is just shifting a government burden rather than eliminating it. …”
The Wall Street Journal
Fannie, Freddie may soon buy home loans in forbearance to help mortgage firms
By Andrew Ackerman, includes “The Federal Housing Finance Agency is weighing whether to allow Fannie Mae and Freddie Mac, the government-controlled mortgage-finance giants, to buy home loans that recently entered forbearance, meaning borrowers have stopped making payments …”
FROM THE VAULTS
Fordham Law School Vimeo Channel
Federal Accounting Standards Advisory Board hearing with Joseph Marren ‘79
Presentation by Joseph Marren, forty minutes, includes “… Today, there have been no downside implications for the legislative and executive branches for fraudulent financial reporting. … FASAB’s rules are also unconstitutional. Financial statements need to consolidate all entities that are funded with public money. Period, stop. That includes the Federal Reserve, Fannie Mae and Freddie Mac -- and any other big-ass institution that we can think of.”
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