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Entries in U.S. Government (5)

Wednesday
Sep212011

Federal Regulations: Are American Businesses Unduly Burdened?

Jupiterimages/Thinkstock(WASHINGTON) -- Whether it’s in a Republican jobs agenda, a presidential executive order or a think tank report, some government regulations have been targeted as unnecessary burdens.  And at a time when job creation is the number one goal of most lawmakers, decreasing businesses’ regulatory burden is one way politicians -- particularly Republicans -- are looking to inspire private businesses to create more jobs.

But despite cries that American businesses are over-regulated and over-burdened, the United States still ranks as one of the best countries to start a business.  Worldwide, only Singapore, Hong Kong, New Zealand, and the United Kingdom have a more business friendly environment, according to the 2010 International Finance Corporation and World Bank “Doing Business” report.

“When you see how the U.S. performs, it still is in the top five economies, so it is kind of difficult to do better than the U.S.,” said Jean Michel Lobet, a private sector development specialist at the World Bank who works on the Doing Business report.  An updated version of the report will be released in mid-October.

Lobet said regulations in this country are “adequate,” “relatively streamlined” and provide the “right balance.”  Compared to other countries, the rules around starting a business are simple enough that it takes on average just six days to create a business in America.  In Canada and China, the United States’ two largest trading partners in July, it takes five and 38 days, respectively.

Despite overall good rankings worldwide, regulations still pack a costly punch for American businesses, although the exact price tag for federal regulations is highly disputed.

One area where the United States has “a lot of room to improve” is in construction permits, Lobet said.  The report found that 19 procedures are necessary to build a warehouse and they take 40 days to complete, pushing the U.S. down to number 27 in the world rankings.

According to a Small Business Administration report, all federal regulations combined cost American businesses about $1.75 trillion in 2008, or $8,000 per employee.  More than $5,000 of those costs per employee stem from economic regulations, while more than $1,500 come from environmental rules, the report notes.  These findings have been disputed because some economists claim they are based on incomplete and out-of-date data.

“Regulations are costly.  That’s always true.  And that makes it more difficult to hire people and to conduct your business,” said Paul Schultz, the director of the Center for the Study of Financial Regulation at Notre Dame University’s Mendoza School of Business.

During Obama’s first two years in office, 555 new “significant” regulations, or ones that have a cost or benefit of at least $100 million in a year, have been enacted, according to the Office of Management and Budget.  Over the eight years that former president George W. Bush was in office, about 2,380 regulations were enacted, an average of 595 every two years.

Copyright 2011 ABC News Radio

Tuesday
Sep202011

Outrageous Tax Credits, from Snooki to Solyndra

Photos.com/Thinkstock(WASHINGTON) -- In a time of pinched public budgets, should governments still be giving tax credits to companies?  Recent examples of economic development money gone awry range from the egregious to the silly.

In California, solar panel maker Solyndra went bust after having soaked up $528 million in federal development aid.  In New Jersey, angry taxpayers are protesting the so-called Snooki-subsidy -- a $420,000 tax break given by the state's Economic Development Authority to producers of the TV show Jersey Shore, which some residents say depicts the state's citizenry in an unflattering light.

In Washington, poultry farmers get tax-free chicken-bedding.  Georgia gives a tax break to people who patronize companies that refurbish corporate jets.  Michigan subsidizes restaurant meals eaten by restaurant employees.

Still, other breaks apply to corporate relocations: One company is paid millions to stay put, while another is paid millions to move.

In every case, the rationale is the same: Public money is being used to promote what development authorities believe is public good -- job creation or job retention; the nurture of a promising new industry or the protection of one old and ailing.

Economic development spending by states and cities totals $70 billion a year, according to Kenneth Thomas, associate professor of political science at the University of Missouri at St. Louis.  The biggest chunk of that, he says -- some $46.8 billion -- goes for incentives effecting the location of private investment: ensuring, for example, that the company filming the Jersey Shore films it on the Jersey shore.

Thomas says there's little evidence that this spending results in net job creation.  What more typically results, he and other experts say, is a re-shuffling of existing jobs.  At a time when governments are cutting programs and collectively laying off hundreds of thousands of workers, he asks if now might not be the time to re-think economic development.

Greg LeRoy, executive director of Good Jobs First, an organization that rides herd on economic development, says if he were given a choice between no development and spending the way it is now, he'd opt for none.

"The better course of action would be not to provide any credits," he says.  "It's not that credits cannot have their place," it's that most turn out to be nothing more than "windfalls" to corporations that would have done the same thing they're being incentivized to do, without incentives.  When credits are given, he says, they always should include clawback provisions, so that if the beneficiary fails to provide the hoped-for jobs or otherwise fails to live up to his end of the deal, the state or city isn't left holding the bag.

Copyright 2011 ABC News Radio

Tuesday
Jul122011

What US Government Default Might Mean for You

Stephen Chernin/Getty Images(WASHINGTON) -- In almost any other year, Aug. 2 would be just another midsummer day.  But, as most Americans have probably heard by now, this Aug. 2 is the deadline for Congress to raise the nation's $14.29 trillion debt ceiling to prevent the U.S. government from defaulting on its obligations.

But what does that really mean?  What's likely to happen next month if Washington lawmakers, who've made little headway toward a deal, fail to strike an agreement to raise the debt limit?

The Obama administration says it would mean financial apocalypse.

"The credit-rating agencies around the world have said if Congress doesn't act by the 2nd, they will downgrade our credit [for] the first time in history," Treasury Secretary Tim Geithner said Sunday on NBC's Meet the Press.  "And if that happens, you're going to see catastrophic damage across the American economy and across the global economy."

Republicans, on the other hand, say that's a bunch of nonsense.  With the fight for the GOP presidential nomination heating up, some of the top candidates have urged their colleagues on Capitol Hill not to raise the debt limit, despite the administration's dire warnings.

So who should Americans believe?  Could Aug. 2 be the beginning of an economic apocalypse or can it be ignored in an effort to combat the country's soaring deficits?

JD Foster, an economist at the right-leaning Heritage Foundation, said a failure to raise the debt limit by Aug. 2 would result in consequences for the government, but that talk of financial Armageddon is overblown.  If the debt limit is not raised come Aug. 2, the government will have to pay its bills solely using incoming cash flows.

"What we know at that point is we don't have the borrowing capacity or the revenues to make payments on all the bills and promises that Congress has legislated and the president has signed, so we'd be short on cash," Foster said.

"As Geithner put it, we would then be in default on our obligations.  That's an important expression because when Congress passes a law that the president signs, saying you're going to spend something, you have a legal obligation to make good on that spending promise.  It doesn't mean, however, that on Aug. 2 we will default on our publicly held debt.  That's a different issue."

In other words, if the debt limit is not raised, the U.S. government would no longer have the cash to cover its expenses.  That could mean no Social Security payments, no benefits for veterans, no pay for members of the military and other government workers, or the shutdown of federal programs.  It could also mean not paying bondholders, but that would be an unprecedented default, a scenario seen as highly unlikely.

Copyright 2011 ABC News Radio

Wednesday
May042011

US Government Suing Deutsche Bank for Mortgage Fraud

Sean Gallup/Getty Images(NEW YORK) -- The U.S. government filed a lawsuit against Deutsche Bank on Tuesday, accusing the German-based bank of mortgage fraud.

According to the lawsuit, the bank repeatedly misrepresented the quality of its home loans in order to collect money from a government mortgage insurance program.

"This lawsuit sends them and other lenders the message that they cannot get away with lies and recklessness," said U.S. Attorney Preet Bharara, who filed the civil lawsuit in federal court in Manhattan.  "They cannot casually assign the prospect of being caught to the cost of doing business."

The federal government now wants Deutsche Bank to pay back the money it had to pay in insurance claims when homeowners fell behind on their mortgage payments.  The total amount in damages could surpass $1 billion.´╗┐

Copyright 2011 ABC News Radio

Monday
Apr182011

U.S. Government Planning Quick Sale of GM Stake

Bill Pugliano/Getty Images(NEW YORK) -- The U.S. government is planning to sell a substantial portion of its remaining stake in General Motors Co. this summer, reports The Wall Street Journal.

The Obama administration wishes to cut ties with the company, hoping to sidestep what could prove to be a controversial sale during the 2012 election year, according to sources familiar with the matter.

U.S. taxpayers are likely to take a hit, WSJ says, on the $50 billion rescue of the auto manufacturer due to the impending sale.

GM closed Monday at $29.97 a share, but in order to break even, the U.S. Treasury will need to sell off its remaining stake -- about 500 million shares -- for $53 each.

The Journal says rising fuel costs, management turnover and industry disruptions have caused trouble for shares.

Copyright 2011 ABC News Radio´╗┐







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