Finance & Business World

President Obama on Thursday pulled back the curtain on his first detailed vision of the federal budget, revealing an ambitious plan to reform health care and shift tax burdens while vowing to slash the deficit over the long run.

Obama has said repeatedly that his first fiscal plan would have a two-pronged mission: to reduce the $1 trillion-plus deficit he inherited to $533 billion by 2013 and make big investments in the future.

The administration estimates that the deficit for fiscal year 2009 will reach $1.75 trillion, or 12.3% of U.S. gross domestic product. That’s a record in dollar terms and is the highest as a share of GDP since World War II.

"We will each and every one of us have to compromise on certain things we care about, but which we simply cannot afford right now. That’s a sacrifice we’re going to have to make," Obama said. "What I won’t do is sacrifice investments that will make America stronger, more competitive and more prosperous in the 21st century."

The White House is calling for $3.6 trillion in spending in 2010, when it estimates that $2.4 trillion in revenue will be collected.

All estimates in the budget request are based on a set of economic assumptions made by Christina Romer, who heads the White House Council of Economic Advisers. She assumed real GDP would fall 1.2% this year — with a significant drop in the first quarter. But she expects GDP growth of 3.2%, 4.0% and 4.6% over the next three years.

Romer believes unemployment will hit 8.1% this year and be only slightly less (7.9%) in 2010. But then she expects it to fall to 5% by 2014.

Obama’s outline also reveals how much more money he and his economic team are setting aside to stabilize the financial system. Their estimate: $250 billion, which they believe would be the net cost of investing up to $750 billion in troubled assets. That would be on top of the $700 billion already authorized by Congress under the Troubled Asset Relief Program.

The document the White House delivered to Congress on Thursday is only a broad-stroke preview of the president’s formal 2010 fiscal budget request, which is expected out in April. Lawmakers will spend the next several months debating and amending final legislation.

The Obama outline touches on the full scope of the federal government’s spending and revenue collection efforts. Among the highlights, his budget request would:

Create a $634 billion health care reserve fund: The purpose of the fund would be "dedicated [to] financing reforms to our health care system," according to the budget outline. Among the fund’s goals would be to aim for universality of coverage and reduce the growth in insurance premiums.

It would be paid for in two ways. The first, expected to raise $318 billion over 10 years, would limit how much of a deduction high-income taxpayers may take. Instead of reducing their tax liability by their top income tax rate, they wouldn’t be allowed to reduce their bill by any more than 28%, which is below the top two tax rates. So for every $100 in deductions they take, they would reduce their tax liability by $28.

The second way Obama proposes to pay for the fund is to achieve health care savings by, among other things, reducing payments to private insurance companies offering Medicare and reducing prescription drug prices. The administration estimates these efforts could save $316 billion over 10 years.

The budget outline also notes the $634 billion fund is "not sufficient to fully fund comprehensive reform" but is a first step in the process.

"Our fiscal future is going to be determined by how health care costs grow," said Peter Orszag, director of the White House Office of Management and Budget.

Let tax cuts expire for high-income earners: To help reduce the deficit, the president’s budget would allow the 2001 and 2003 tax cuts to expire for joint filers making more than $250,000 and single filers making more than $200,000 a year no fax pay day loan.

The tax increase would go into effect in 2011.

Specifically, the top two income tax rates would revert to 36% and 39.6%. Limits on how much high-income filers can claim in exemptions and deductions would be reinstated. And the capital gains tax rate would return to 20%, up from 15% currently. The dividend tax rate would also be 20%, but that’s still less than high-income filers paid when dividends used to be taxed at ordinary income tax rates.

The White House estimates letting the cuts expire could raise $637 billion over 10 years, although Obama’s desire to extend those same cuts for lower and middle income families is estimated to increase the deficit by more than $900 billion during the same period.

The impact of this change combined with the change on itemized deductions on high-income filers means wealthier tax filers will be putting significantly more Benjamins into the system.

According to estimates from Deloitte Tax, a married couple with 2 children under age 17 and income of $500,000 a year would owe approximately $11,300 more than under current law if all of the tax provisions in Obama’s budget request outline were enacted.

Make permanent a number of tax breaks from stimulus: The president’s budget seeks to make permanent the Making Work Pay credit worth up to $400 per worker ($800 per working family). It also seeks to make permanent the expansion of the child tax credit and the newly enlarged college credit now called the American Opportunity Tax Credit.

Assume middle class are protected from Alternative Minimum Tax: Every year lawmakers pass a "patch" to protect the middle class from having to pay the Alternative Minimum Tax. But the cost of that patch was not included in presidential budgets before. It is accounted for in Obama’s budget.

Tax carried interest as income: Obama wants to tax the portion of profits paid to managers of hedge funds and private equity funds as ordinary income rather than as an investment gain, thereby subjecting it to much higher tax rates than the 15% capital gains rate. The provision is estimated to raise $24 billion over 10 years.

Change several corporate tax measures: In addition to the carried interest provision, the budget request includes roughly $306 billion worth of other revenue raisers that would come from closing corporate tax loopholes and changing some corporate tax and accounting rules.

One of those is a vaguely worded line item called "international enforcement, reform deferral and other tax reform policies." It is estimated to raise $210 billion in revenue over 10 years. It’s not clear from the outline what changes are planned. Budget experts say a likely candidate for that category would be a change to a current policy that lets U.S.-based companies defer paying tax on the profits its foreign subsidiaries make until the money is brought back to the United States.

Reduces subsidies to big farms: The budget strengthens limits on direct payments to farms with sales over $500,000. The provision is estimated to raise $10 billion over 10 years.

Commit more money for renewable energy efforts: Obama’s budget will call on Congress to create a cap-and-trade program in which companies would have to pay for permission to emit greenhouse gases. Revenue from the program is intended to pay for a $150 billion renewable energy fund among other things.

The new cap-and-trade program would pay in large part for making the Making Work Pay credit permanent, which the White House estimates will cost $537 billion over 10 years. 

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General Motors Corp on Thursday reported a fourth-quarter adjusted loss per share of $9.65.

Highlights:

* Q4 loss per share $15.71

* Q4 revenue $30.8 billion versus $46.8 billion

* Ends Q4 with $14 billion in cash

* Reuters Estimates Q4 earnings per share view $-7.40, revenue view $30,626.73

million

* Says pension plans underfunded by $12 payday loan with savings account.4 billion

* Sees receiving “going concern” opinion from auditors for 2008

* Says 2008 net loss $30.9 billion

* Says 2008 automotive cash burn $19.2 billion

* Says December-end cash liquidity included $4 billion in loans from U.S.

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Energy and Infrastructure Minister George Smitherman says a major cultural shift across Ontario’s power-system agencies is needed if the province is to become a North American leader in renewable-energy development.

Smitherman said his goal is to get organizations such as Hydro One to be more proactive when it comes to accommodating green-energy projects on the grid. He plans to issue a "strong directive" to such agencies in the coming weeks to drive that message home.

"We don’t need to spend any more time dithering," he told reporters on Monday.

It won’t be easy, most industry players say.

Graeme Millen, project co-ordinator for Ottawa-based CH-Four BioGas Inc., a designer and installer of biogas energy systems, said Smitherman must use a heavy hand if he expects provincially owned Hydro One to change its ways.

"We’ve gotten the runaround every single time we’ve dealt with Hydro One," Millen said.

"The company has clearly demonstrated it lacks interest when it comes to supporting (green-energy) projects."

Millen cites one of his company’s clients, DeBruin Farms, which wants to connect a 499-kilowatt-hour anaerobic digester system to the grid. The system, which turns livestock manure and other farm-based biomass into methane gas that can be used for generating heat and electricity, is expected to cost about $800,000.

DeBruin applied to Hydro One for a grid "connection impact assessment." After several months the utility wrote back with a connection estimate exceeding $1 million, excluding the $95,000 charge for doing the estimate.

Millen said a similar project in New Brunswick received a cost estimate free and was quoted only $30,000 for the actual grid connection short term personal loans.

"The outrageous quotes offered by Hydro One and the incredible detriment they put on Ontario’s biogas industry can neither be technically nor politically justified," Millen wrote in a letter last week to Premier Dalton McGuinty.

"If you wish to see renewable energy in the province of Ontario, you cannot expect project proponents to accept (such) estimates, nor can you expect them to spend time, money and energy in never-ending battles over costs and timelines with Hydro One."

Millen wants to see some kind of arbitration board set up that can handle disputes with Hydro One in a timely fashion. He said it’s nearly impossible to find out the reasoning behind the utility’s cost estimates.

"There is zero transparency."

MacMurray Whale, an alternative energy analyst with Cormark Securites in Toronto, said that kind of foot-dragging from a utility can scare away investment and undermine otherwise progressive government policies.

"Hydro One is clearly making it difficult for these small projects to connect, and they’re using every excuse in the book," said Whale, adding that the Green Energy Act might give the government more power to align policy with action.

"The bill puts the government in the position where it can apply this pressure, allowing it to take the steps to force various utilities to get things done."

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Ameren’s 840,000 natural gas customers in Illinois will see heating prices decline further next month because of a continued weakening in energy demand.

Retail prices for natural gas, which makes up about two-thirds of customers’ bills, will go down 17 percent or 19 percent depending on the utility, St. Louis-based Ameren said. The price for Cilco and CIPS customers will drop to 64 cents a therm from 77 cents. AmerenIP prices will fall to 68 cents from 84 cents.

Natural gas demand has eroded, especially among industrial customers, as the recession lingers. Retail gas prices charged by Ameren’s Illinois utilities have fallen as much as 55 percent since their peak last fall bad credit personal loan lenders.

"We also recognize that the extremely cold temperatures that occurred in December and January meant that our customers used more natural gas this year than a year ago," said Scott Glaeser, Ameren’s vice president of gas supply.

Ameren utilities buy gas from producers across the country. Retail prices are adjusted monthly depending on changes in the wholesale market.

jtomich@post-dispatch.com | 314-340-8320

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Japan will provide as much as $1.5 billion of financial support to Indonesia to guarantee that nation’s first sale of yen-denominated bonds and fund an emergency loan program.

The debt, known as samurai bonds, will be guaranteed by the state-owned Japan Bank for International Cooperation, according to a statement released after Shinsuke Suematsu, Japan’s parliamentary secretary for finance, met with Indonesian Finance Minister Sri Mulyani Indrawati yesterday in Phuket, Thailand.

The economic downturn in advanced nations in the wake of the worst financial crisis since the Great Depression is spreading to emerging economies. Indonesia’s economy expanded at the slowest pace in more than two years last quarter as the global recession crimped demand and reduced prices of the nation’s palm oil, rubber and electronics exports.

“Further diversification of financing sources is welcome,” said Helmi Arman, an economist at PT Bank Danamon Indonesia in Jakarta. “This would help stem concern over rupiah bond supply this year”

Japan is also ready to take part in a so-called joint contingent loan facility for Indonesia through JBIC, the statement said lowest fee payday loans. Indonesia is discussing creating the facility with the World Bank and Asian Development Bank as well as other nations, according to the statement.

The two nations also agreed to increase the size of an existing bilateral swap agreement, formed under the Chiang Mai Initiative, to $12 billion from $6 billion, the statement said.

Japan’s support will “contribute to the stability of the Indonesian economy” and complement the nation’s foreign reserves, Mulyani said in the statement.

Earlier this month, Japan said that JBIC would extend loans to financial institutions in developing countries, particularly in the Asian region, to help companies obtain access to trade finance. Japan also agreed this month to give the International Monetary Fund access to an extra $100 billion, boosting that lender’s ability to ease financial strains in developing countries.

Samurai bonds are yen-denominated bonds sold in Japan by overseas borrowers.

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The American Recovery and Reinvestment Act could add or save approximately 396,000 jobs in California, according to statistics released by the White House on Tuesday.

The stimulus bill is an effort to create jobs, jump-start growth and transform the U.S. economy to compete in the 21st century. The White House said the compromise package of $789 billion could over the next two years create 3.5 million jobs, 90 percent of which would be in the private sector.

California lost 257,400 jobs from December 2007 to January 2009, according to the state Employment Development Department payday loans with no fax. About 1.73 million Californians are jobless.

California would receive the biggest boost from the stimulus bill, followed by Texas with 269,000 jobs, New York with 215,000, Florida with 206,000 and Illinois with 148,000.

Alaska, North Dakota, Vermont and Wyoming tied at the bottom of the list with an estimated 8,000 jobs each.

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If Timothy Geithner can’t get his taxes right, what hope is there for the rest of us?

I’m poking fun at the failure of the new Treasury secretary, later corrected, to pay past self-employment taxes. But I am dead serious about how the growing complexity of our tax code forces millions of Americans to pay for help.

Last year, about 60 percent of federal income tax returns were filed by paid preparers. I expect the number will increase this year given the multitude of tax law changes, many temporary, that Congress passed as part of energy, housing, pension protection and economic recovery bills, among others.

Although I understand tax laws well enough to do my own return, I still want help from tax-preparation software that saves me hours of drudgery and guarantees all the math computations are correct. Quality software choices include Intuit’s TurboTax, (www.turbotax.com), H&R Block’s TaxCut (www.taxcut.com), CCH’s CompleteTax (www.completetax.com) and 2nd Story Sofware’s TaxACT (www.taxact.com).
I use TurboTax Home and Business, which handles quickly and accurately all tax aspects of my at-home writing business, including calculating home-office deductions, self-employment taxes and maximum allowable contributions to my self-employed 401(k) plan. Software generally comes in different versions, depending on how simple or complicated your return is, and the simplest versions — including that of TurboTax — are sometimes free.

Your choice if you use software, whether Web-based or desktop-based, may well boil down to personal taste. I like TurboTax’s plain-English "interviews," the questions the software asks you for the information it needs to fill out your return (among the relevant questions for many people this year: "Did you lose a job or your home to foreclosure?" and similar situations that could entitle you to tax relief). It’s easy to work on your return, stop and come back where you left off.

You can, if you want, see the tax forms being filled out as you answer a question payday loan lender. You also have access to an online "Live Community" of tax experts and experienced TurboTax users who can answer your questions.

If you’re not comfortable with computers or simply prefer live human help — even if it’s just to double check a return prepared by using software — I recommend you go with experience and know-how.

"Unless you are tracking tax developments every day, chances are you’re not aware of all the changes that have taken effect," said Mildred Carter, senior federal tax analyst for tax publisher CCH, a Wolters Kluwer business.

Therefore, it’s a good idea to check whether a preparer belongs to an organization that promotes continuing education, such as your state’s Board of Accountancy or Institute of CPAs, or the National Association of Enrolled Agents (www.naea.org). Seek also recommendations from friends and business acquaintances.

To avoid surprises, discuss ahead of time how you will be billed (such as by the hour or type of return). You can save time — and money — by being prepared.

"New clients should bring their prior-year tax return. It is information that we need," said Robert M. Moore, Jr., a certified public accountant in Suffolk, Va.

When meeting with your tax preparer, also bring original tax documents and forms, such as W-2s and 1099s, Moore advises. If you sold securities or other property, know the dates you bought and sold them and for how much.

If you bought, sold or refinanced a property, bring the closing statement. If you have depreciable property, have the depreciation schedule available. And be on time for your meeting — your preparer is probably quite busy this time of year.

AskHumberto@aol.com

2008, TRIBUNE MEDIA SERVICES INC.

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Online dating services and job search engines have much in common. Both throw a lot of promise into cyberspace. Rarely do those dreams actually comes true.

That being the case, Randall Hansen has good news for job seekers who love to hate monster.com, careerbuilder.com and the like. Within a decade, he predicts, the job sites will be gone, as obsolete as a typewritten r

KV Pharmaceutical Co., plagued by product recalls and the subject of several federal investigations, announced this morning that it is eliminating 700 jobs as part of a cost-cutting measure aimed at resuming drug production.

Two weeks ago, the Brentwood-based drug maker announced it was suspending the manufacture and shipment of all products it makes, while recalling voluntarily most of its drugs.

The company didn’t give details for the shutdown, only saying that it might have failed to comply with manufacturing standards established by the Food and Drug Administration.

Although numerous employees began contacting the Post-Dispatch last week about the layoffs, the company did not return phone calls. The information was confirmed Monday when KV issued a statement.
Trading in its stock on the New York Stock Exchange had been suspended on Friday afternoon pending the release of news. Trading resumed Monday morning.

The job reduction includes a combination of terminations and layoffs, KV said. The company expects to recall some employees when production and shipment of approved products resume.

"KV Pharmaceutical plans to emerge from these challenges on a solid foundation of a smaller, more focused organization and the return to providing excellent products to our customers," David Van Vliet, interim chief executive officer and president, said in a statement today.

Vliet was hired in early December after the board fired then Chief Executive and Chairman Marc S. Hermelin.

KV had about 1,590 employees as of March 31, 2008. Information was not immediately available as to a current count or as to how many are located in St. Louis. However, according to information filed with regulators last year, all of its manufacturing facilities are located in the St. Louis area.

The company didn’t say when they expected to restart manufacturing operations. KV workers, who told the Post-Dispatch that they were laid off last week, said they were informed that the company hoped to resume manufacturing within six months saving account payday loan.

The U.S. Food and Drug Administration began an inspection of KV in December 2008. According to recent regulatory filings, these inspection activities are continuing and, in addition, the FDA’s Office of Criminal Investigations is in discussions with the company. No further details were given.

KV said it is cooperating with the FDA and has taken steps to resolve its problems. For example, it is working with Lachman Consulting to review its manufacturing and packaging processes. However, the FDA could still take legal action, which might include criminal prosecution, against KV, the company warned.

KV also said it is also providing information to the Securities and Exchange Commission and the U.S. Attorney for the Eastern District of Missouri.

In addition to regulatory probes, KV is a defendant in private class action litigation including cases alleging it violated of the federal securities laws. It is also being sued by former employees and consumers who used the company’s drugs.

As a result of recalls and suspensions, KV said last month that it might not be not be in compliance with one or more covenants included in a $320 million credit agreement with its lenders.

In addition to its problems, last month the company said that its new drug application for Gestiva would not be approved by the FDA until further data was obtained.

Last year KV agreed to acquire rights to Gestiva, a drug to prevent preterm births from Hologic Inc. for $82 million in cash.

At the time, it said it expected Gestiva to add to its earnings per share in the first 12 months following its launch. Now the company does not anticipate that it will generate revenues from sales of Gestiva during this fiscal year, which ends on March 31.

gappleson@post-dispatch.com | 314-340-8331

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WASHINGTON–Recession-battered employers in the United States eliminated 598,000 jobs in January, the most since the end of 1974, catapulting the unemployment rate to 7.6 per cent. The grim figures were further proof the country’s job climate is deteriorating at an alarming clip with no end in sight.

The labour department report released yesterday showed the terrible toll the drawn-out recession is having on workers and companies. It also puts even more pressure on Congress and President Barack Obama’s administration to revive the economy through a stimulus package that tops $900 billion (U.S.) and a revamped financial bailout plan, both of which are nearing completion.

The economy has lost 3.6 million jobs since the recession began in December 2007, with about half occurring in the past three months.

"These numbers demand action. It is inexcusable and irresponsible to get bogged down in distraction and delay while millions of Americans are being put out of work. It is time for Congress to act," Obama said bluntly. "That’s 3.6 million Americans who need our help.”

The latest net total of job losses was far worse than the 524,000 economists expected. Job reductions in November and December also were deeper than previously reported.

The unemployment rate bolted to 7.6 per cent in January, the highest since September 1992. The increase in the jobless rate from 7.2 per cent in December also was worse than the 7.5 per cent rate economists expected.

Vanishing jobs and evaporating wealth from tanking home values, retirement funds and other investments have forced consumers to retrench and required companies to pull back. It’s a vicious cycle as the economy’s problems feed on each other, perpetuating a downward spiral.

"Companies are in survival mode and are really cutting to the bone," said economist Ken Mayland, president of Clearview Economics cash advance to savings account. "They are cutting and cutting hard now out of fear of an uncertain future.”

If discouraged workers and others are factored in, the jobless rate would have been 13.9 per cent in January, the highest on record.

But on Wall Street, investors pushed up stock prices on hopes the dismal jobs report would get Congress to move quickly on the economic revival package. The Dow Jones industrials gained more than 217 points yesterday and broader stock indicators also rose.

Factories slashed 207,000 jobs in January, the largest one-month drop since October 1982, partly reflecting heavy losses at auto and parts plants. Construction companies got rid of 111,000 jobs. Professional and business services chopped 121,000 positions. Retailers eliminated 45,000 jobs. Leisure and hospitality axed 28,000 jobs.

Those cuts swamped employment gains in education and health services, as well as in the government.

Employers are slashing payrolls and turning to other ways to cut costs – including trimming workers’ hours, freezing wages or cutting pay – to cope with shrinking appetites from customers in the U.S. and overseas, who are struggling with their own economic woes.

The number of unemployed workers climbed to 11.6 million. Job hunters also are facing longer searches for work.

The average time it took for an unemployed person to find a job rose to 19.8 weeks in January, compared with 17.5 weeks a year ago, underscoring the increasing difficulty the jobless are having in finding a new position.

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