Eventually, the government will have to cut it’s budget. These cuts are coming, but when?
Budget cuts threaten 1 million at small U.S. firms: report
By Andrea Shalal-Esa WASHINGTON | Thu Sep 20, 2012 7:33pm EDT
(Reuters) – Small businesses in the United States could lose nearly 1 million jobs in 2013 if federal lawmakers do not avert $1.2 trillion in across-the-board budget cuts due to begin taking effect in January, a new study showed.
The Aerospace Industries Association released a new analysis on Thursday that showed that small businesses with fewer than 500 employees would likely lose 956,181 jobs – or 45 percent of the 2.14 million total job losses expected across the United States if the additional budget cuts take effect.
“Nearly half of all sequestration job losses would come from small businesses,” said George Mason University economist Stephen Fuller, who has studied the jobs impact of the budget cuts for the largest aerospace and defense industry group.
Top Pentagon officials testified on Thursday before the House Armed Services Committee about the impact of an additional $500 billion in budget cuts — on top of $486 billion already being implemented — on U.S. national security and procurement.
Mike McCord, principal deputy undersecretary of defense, told a separate hearing by the House Small Business Committee that while the Pentagon remained committed to ensuring that small businesses got their fair share of procurement dollars, the overall pie would clearly be smaller.
“Sequestration would reduce our overall budget, forcing us to reduce purchases from businesses both large and small,” McCord told the committee. “9.4 percent less money means we would in general buy 9.4 percent less of everything.”
Defense industry executives have been railing against the across-the-board cuts for more than a year, warning that they would force the Pentagon to break thousands of contracts, resulting in billions of dollars in potential termination fees and other contract adjustments.
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Proprietary OC Housing News home purchase analysis
2560 REYNOLDS Tustin, CA 92782
$859,000 …….. Asking Price
$370,000 ………. Purchase Price
10/15/1998 ………. Purchase Date
$489,000 ………. Gross Gain (Loss)
($29,600) ………… Commissions and Costs at 8%
============================================
$459,400 ………. Net Gain (Loss)
============================================
132.2% ………. Gross Percent Change
124.2% ………. Net Percent Change
6.1% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$859,000 …….. Asking Price
$171,800 ………… 20% Down Conventional
3.60% …………. Mortgage Interest Rate
30 ……………… Number of Years
$687,200 …….. Mortgage
$165,972 ………. Income Requirement
$3,124 ………… Monthly Mortgage Payment
$744 ………… Property Tax at 1.04%
$9 ………… Mello Roos & Special Taxes
$215 ………… Homeowners Insurance at 0.3%
$0 ………… Private Mortgage Insurance
$195 ………… Homeowners Association Fees
============================================
$4,288 ………. Monthly Cash Outlays
($702) ………. Tax Savings
($1,063) ………. Equity Hidden in Payment
$200 ………….. Lost Income to Down Payment
$127 ………….. Maintenance and Replacement Reserves
============================================
$2,851 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$10,090 ………… Furnishing and Move In at 1% + $1,500
$10,090 ………… Closing Costs at 1% + $1,500
$6,872 ………… Interest Points
$171,800 ………… Down Payment
============================================
$198,852 ………. Total Cash Costs
$43,700 ………. Emergency Cash Reserves
============================================
$242,552 ………. Total Savings Needed
The property above is available for sale on the MLS.
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Cost of Ownership Analysis
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Fed Cannot Ignore Harm Caused by Housing Bust: Bullard
The U.S. central bank would be courting disaster if it pursued a so-called nominal growth target that did not take into account the economic damage done by the housing crisis, a senior Federal Reserve official warned on Thursday.
James Bullard, president of the St. Louis Federal Reserve Bank, also argued that the only variable in the economy the Fed could control over the longer term was inflation, saying it did best when focusing solely on that goal.
Bullard, in a lecture at the University of Notre Dame in Indiana, said the pre-crisis housing bubble had driven U.S. growth to levels that were not realistic to try to recapture. He cited work by economists Carmen Reinhart and Kenneth Rogoff that argue recoveries after a severe financial crisis are much slower.
“Attempting to target nominal (gross domestic product) without adjustment for the Reinhart-Rogoff effect could be an unmitigated disaster,” Bullard said during his presentation.
Frustration with a slow decline in high U.S. unemployment has sparked calls by some economists for the Fed to target nominal GDP, which measures growth in output before adjustments for inflation. They argue this would help communicate a powerful commitment to do whatever it takes to restore growth to its pre-crisis levels.
The Fed last week announced an aggressive plan to buy $40 billion of mortgage-backed securities every month until it saw a substantial improvement in the outlook for the labor market.
Bullard, who is not a voting member of the Fed’s policy-setting committee, told Reuters in an interview on Tuesday that he did not agree with the action. He said he would have dissented had he had a vote, because he would have favored seeing clear evidence the economy was slipping and risked another recession before launching the plan.
U.S. unemployment was 8.1 percent last month and economic growth remains stuck around 2 percent, despite cuts in the Fed’s target overnight interest rate to near zero and massive bond purchases. The bond purchase caused the Fed’s balance sheet to balloon to $2.3 trillion, even before last week’s news.