Having ushered in a promising new administration, we have immediately seen that drastic changes are going to take place in this country.  Indeed, even Obama’s first day in office brought about changes that were rather profound in nature.  The question that most people are considering is whether or not these changes are going to work, and what impact they will have on our futures if they do work . . . or if they don’t.  Many people are even saying that whether the changes work or not is not as important as the fact that what we have done in the past has obviously not been doing much good.  So, it seems that change is welcome, if only because we’ve got to try something.   And by all accounts, if there is going to be change, Obama is the man for the job. 

 

Examining his initial moves, it becomes apparent that this new administration is going to significantly curtail unnecessary spending.  Whether you agree with his specific policies or not, it could be argued that just about anyone would admit we do need to cut spending.  Starting at the top, Obama froze the pay of his staff.  This is an exemplary move that is seemingly designed to instill the desire for corporations and large businesses to do the same.  There is a general conception in the country right now that the bonuses and pay scales of even middle-level executives are ridiculously exorbitant.  The money that goes to fund excessive lifestyles could be used to reinvest in the business; to make it more efficient, and to return more money to investors and the public domain.  If this is done, then the economy overall receives a boost: not just a few handfuls of top executives who are already multi-millionaires.

 

Signing an Executive Order to close the American military installation at Guantanamo Bay, Cuba, appears to be a foreign policy move- and for the most part, it is.  What many people do not realize, however, is that the installation, known affectionately as “GITMO” by military officials, is costing American taxpayers millions of dollars each year.  Obama’s administration views that as wasteful in the light of the fact that very little useable information or resources have been gained by operating this military detention center.  In theory, closing the base puts money back in United State’s coffers. 

 

For most individuals, Obama’s economic stimulus package emerges as something that might actually help them; at least in the short-term.  Tax breaks for individuals and businesses, and a check in the mail could probably be well-used by all.  Assistance on such a personal level, regardless of its eventual results, may cause one to think about other forms of assistance.  For instance, there is federal housing assistance available, as well as federal mortgage programs.  With all the bankruptcies occurring across the country, perhaps change could be brought to that institution as well?  Even some of our closest neighbors, like Nassau and Suffolk counties in New York, are experiencing a wave of bankruptcies.  That means abandoned and dark homes and shuttered businesses.  Perhaps the administration would like to offer some assistance in this area so as to not allow the decline of industries that places like Maine, California, Rhode Island, and New York depend upon.  If you think there could be changes made to bankruptcy legislation, then grab a pen and a piece of paper.  It’s your senator’s job to inform Obama, and it’s your job to advise your senator.

 

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We now have a full year ahead of us.  This means that we have 12 months to create a more realistic plan for our immediate and long-term future.  We must learn from the mistakes we have made in the past.  Americans in general are operating at 130% debt to income ratio.  Is that realistic?  We spent $700 billion on fast food in the 6 years leading up to this nationwide financial debacle.  Does that make sense?  We transferred the use of crops from food to fuel.  Is that a wise idea?  We are quickly exhausting our natural resources.  What will we do when they are gone?  This type of unrealistic thinking has not only gotten us into trouble, but is also keeping us in and deepening these dire straits we are experiencing. 

 

There are thousands of Americans experiencing severe financial distress.  We can see how we got to this stage; however, even our most intelligent minds cannot seem to see a rational way out of it.  For example, let’s consider for a moment Obama’s new stimulus plan.  His plan, of course, rests heavily on top of the first bailout plan of $700 billion.  We can, at least initially, use this as an example of how we have started to show some limited foresight.  With Bush’s bailout, we accomplished very little, although we have only spent about half of the money so far.  The credit situation has certainly not been alleviated.  So, seizing on that information, and wanting to make a splash with a strong move as he comes into office, Obama wrote policy into his stimulus package that seeks to correct the economy by adding more jobs.  One could argue that he is simply following Roosevelt’s lead by instituting changes similar to The New Deal.  And by well he should, as our country grew exponentially after the changes brought about by the Depression. 

 

The creation of jobs by improving our infrastructure is a wise move.  Seeking alternate means of energy makes sense.  Both of these policies have been quite delayed, but at least there is now hope they will actually occur.  However, the third part of Obama’s plan makes no sense at all.  Saying so is probably not what the general American public would want to hear.  Nevertheless, tax cuts for individuals and businesses are probably not going to have tangible effects other than increasing Obama’s popularity.  For most Americans, a few hundred dollar tax cut is not going to mean anything except that another bill gets paid.  In order for the money to be used to boost the economy, we need consumers to use the money on consumables- televisions, automobiles, snow-blowers, and virtually anything sold at the retail level.  Try asking someone in Nassau County who is considering Chapter 7 Bankruptcy to spend their money on a new flat screen T.V.  This is laughable.  People are going to use the money to pay the bills they are already or nearly behind on.  It is going to go to mortgage payments, utility payments, loans, other bills, and possibly groceries and gasoline.  If Americans use the money for these items, as they have in the past when given stimulus checks, then the purpose of providing those funds in the first place are null and void. 

 

But above all else, let us not forget who is going to pay for all of this- the same people getting the “stimulus” checks.  We’ll all be made to suffer when taxes increase in order to fund these congressional bills.  Talk about robbing Peter to pay Paul.  Is the fleecing of America beginning all over again?    

 

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With the Holidays fast approaching, many people are facing the distasteful choice of either cutting back on what they give to their friends and families, or spending beyond their means and either going into debt or forgoing necessary payments (such as mortgage payments, bills, etc). A rash of irresponsible spending, while giving a quick superficial bump to the national economic numbers, would result in disaster in the coming months as it would likely lead directly to an increase in home foreclosures and chapter 13 bankruptcy in Long Island. Luckily for most of the country (excepting retailers), the Commerce Department reported a 1.8 percent drop in sales last month. This seems to be evidence that people are cutting back on spending, but it could have other causes.

 

The drop in monthly retail spending was the fifth consecutive one, and the longest extended period of falling sales since the Federal Government began keeping track of such numbers. This drop may have been due to consumers re-prioritizing how they spend their money, but it is more likely a result of less disposable income being available. The economy shed over 50,000 jobs last month, bringing the number of unemployed in our country nearer to six million than it has ever been.

 

While this news is clearly negative, it becomes even worse if two other facts are considered in conjunction with it. First, the government assumes that due to a constantly expanding workforce, 150,000 jobs must be created per month just to keep pace. A loss of 50,000 jobs, therefore, translates to a month in which 200,000 people are unable to find work. Second, people who are employed part time, underemployed, or who are employed for less than a living wage are not counted in these numbers. Many such people cannot keep up with bills and living expenses, let alone spend extra money for gifts, dinners, and other economic boosters. As the economy worsens, many workers will find their positions redefined, relegating them to the ranks of the working poor. These losses will not show up in unemployment figures, however, and so will be another unmeasured strain on the economy at large.

 

A weakening economy is an entity that fast becomes like a self-fulfilling prophecy. As jobs are lost discretionary spending decreases, which in turn strains retailers who then must cut more jobs, which further exacerbates the problem. With the prospect of the loss of the “big three” automakers looming, it is easy to see how fast things could get exponentially worse. While some may think it is their patriotic duty to go out and “shop ‘til they drop,” it is far wiser to ensure that you meet your major financial obligations before spending on luxuries. The number of people facing the prospect of unemployment, a decrease in wages or available hours to work, or other financial disaster is fast increasing, and no-one is immune. If you are in such a position as this and feeling increasingly desperate, then you should visit a local bankruptcy attorney to discuss your options. You may be able to improve your financial position and consequently your quality of life. 

 

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          There has been a great deal of discussion over the past weeks of the changes that are coming to Washington and how they are going to affect the economy. Whether you are among those that believe that the incoming administration is going to accelerate our economic decline, or the apparent majority that believes we are turning the corner toward brighter days, the one point that everyone can agree on is that things are going to be different once Obama takes the oath of office in January. Rarely has an incoming president faced such an uphill climb toward economic health. Not since the Great Depression has the welfare of the country at large been in such peril during a transition between presidents, and that brings with it obvious challenges. Decisive action needs to be taken, and all indications are that Obama will act accordingly as soon as he takes office.

          Whether or not you agree with his ideology, his decisions are going to affect you. Millions of Americans are currently unemployed, facing bankruptcy, or are the apparent victims of skyrocketing foreclosure rates. As a result, the next administration will not only have to attempt to stop the hemorrhaging of jobs that is currently taking place, but also to create jobs to replace the ones already lost as well as the jobs needed to sustain a workforce that is growing at current rates.

          One very feasible idea would be for the Federal government to allocate funding for infrastructure improvement. After the Minneapolis bridge collapse it became painfully obvious that as a country we have been delinquent in the upkeep of our roads and bridges. As further example of this, just drive anywhere in Long Island and you will see a road that needs repaving, a sidewalk that is crumbling or a bridge that ought to be revamped. Funding a workforce to fix these problems would have a double impact- it would not only solve an ongoing problem, but would do so in a way that would directly stimulate the economy by creating jobs.

          Many people are also advocating for an economic stimulus package similar to the bailout that was handed to the major banks and investment firms in the immediate aftermath of the subprime fueled collapse. It is not unlikely that legislation will emerge that will be designed to help individuals who are facing economic hardship, such as foreclosure. There has already been extensive talk and innuendo of a package that could emerge from the legislature to come to the aid of people who are in danger of losing their homes. Whether or not such a bill emerges, it is important to have an educated advocate, such as an attorney who is experienced in dealing with foreclosure, on your side.

          While many people are hopeful that the Obama administration will bring a reprieve from the current economic turbulence, chances are that we still have a long way to go before the economy regains its prior stature. The most important thing that we can all do to make sure that things do not get worse is to continue to educate ourselves and be aware of the impact our personal decisions have on our family, our community, and our country as a whole. Make sure that you have the facts necessary to make sound decisions, and ask for help if you need it. If we all do our part, the coming economic transition will be much smoother. 

 

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                Recently, economic news from both Wall Street and Washington has become increasingly more dismaying. Officials are desperately working to quell fears that America is heading toward financial disaster. Some of the language that has been chosen by these officials, however, has been indicative of the opposite conclusion. For instance, one term that has been bandied about rather freely regarding the subprime mortgage crisis is “perfect storm.” Since the release of the hit movie of the same name, this term has been overused to hyperbolically describe nearly everything that has gone wrong. However, the term might still be useful in deconstructing the metaphor in order to predict where we possibly could be headed.

                The term “perfect storm” refers to a set of conditions that occur simultaneously in order to create the worst possible outcome. It originally was used to describe the Halloween Nor’easter that hit Atlantic Canada in 1991. The storm was the result of an unlucky confluence of weather events that, while individually would have been rather benign, resulted in the second most costly hurricane of that year. Like many powerful coastal storms, there was immediate damage and loss of life, and, while the storm was raging, widespread fear and panic occurred. People could only hunker down and wait for the storm to pass, all the while hoping for the best.

           After the storm, the people who were spared during the initial onslaught emerged to face the destruction that was left in the storm’s wake. The effects of the storm were widespread, and the building process was extremely costly and time consuming.  Bearing this in mind, reflect for a moment on Hurricane Katrina. It made landfall on New Orleans and the Gulf Coast in August of 2005 and caused incredible damage not only to the infrastructure of the region, but also to the inhabitants. Widespread disease and looting occurred even after meteorological calm returned to the region. The consequences of this storm were so appalling that some residents who were stranded in the aftermath expressed that they wished they had fallen victim to the fury of the actual storm itself. Even today, more than three years later, conditions in New Orleans are inexcusable: crime, poverty, and unemployment are rampant. While a storm can be terrifying as it is battering us, it is often the rubble left in its wake that is the hardest to cope with.             What does all of this have to do with our current financial situation? Assuming that the subprime mortgage crisis was (or is) in fact a “perfect storm”, it means that after the visible bank closures and the initial wave of bankruptcies and foreclosures, we still have a long way to go. The aftermath of this financial hurricane will not be contained to the banks that owned the risky (and now valueless) mortgages, nor to the people that invested heavily in an inflated stock market. Every one of us will be forced to deal with the destructive wake of this financial crisis.            Even in relatively affluent areas the situation is grim. Unemployment, bankruptcy, and foreclosures in Suffolk County have risen immensely from October 2007 to October 2008, and this trend throughout the country is either comparable or far worse. The initial shock to the economy will reverberate for years. The preliminary losses will, due to basic economic principles, continue to multiply. Furthermore, a lack of credit from banks stifles job creation, which slows spending, which in turn causes businesses to cut back. This downward spiral is self-perpetuating, and needs to be actively broken. We can all contribute to this by making wise decisions regarding our financial situations and especially our credit. If you do not fully understand what you ought to do to help not only yourself, but also the economy at large, consult an attorney who is experienced in matters relating to credit, bankruptcy, or foreclosure. It cannot eliminate the fact that the initial storm occurred, but it can help staunch the bleeding and speed the rebuilding process of our storm-damaged economy.    –

 

 

Unemployment Statistics Not Encouraging

               The Bureau of Labor Statistics recently released their unemployment figures for the past month, and to anyone but the unrealistically optimistic or the completely oblivious, the news was not comforting. While unemployment rates alone do not strictly define the health of an economy, they are an important matrix. An ailing economy does not tend to spur job growth, and a suffering economy can quickly purge huge numbers of jobs and, as a direct consequence, leave a wake of unemployed workers and their resulting bankruptcies from inner city Los Angeles to the affluent suburbs in Suffolk County, Long Island. As the relative health of our economy directly affects employment, so too do employment statistics serve to help measure or diagnose an economy as a whole.                   The statistics released recently cannot help but be a sobering reminder of the state we are in. In the last week, new applications for unemployment insurance or jobless benefits leaped to a high not seen in sixteen years. Not since July of 1992 have new claims increased so dramatically in one week, and that was when the country was on its way out of a tough and relatively protracted recession. The fact that we are seeing similar numbers now, at what is presumably the beginning of our troubles, is disheartening.                   While week-to-week statistical spikes make for dramatic news bulletins and headlines, they are not always as accurate a measure as numbers gathered over a longer time span. Unfortunately, the four-week average for new jobless benefit claims rose 506,500: a twenty-five year high. Additionally, the number of unemployed workers who continued to claim benefits was over four million, a number unmatched since 1982, when the United States was in the depths of arguably the worst recession since the Great Depression. Making matters worse (or at least more uncomfortable) is the fact that every president since Kennedy has redefined unemployment to boost their economic growth figures. Factor in the folks who have been purged through redefinition of “unemployed,” and the rates could be twice as high.                   Throw into the mix the fact that the “Big Three” automakers are teetering on the brink of collapse (which, depending on who you ask, could result in up to 50 million more lost jobs), and the picture becomes even more grim. While lawmakers debate the merits of a “bailout” of these companies, the people who work for the automakers are bracing for the worst. They are cutting spending as if they are already unemployed, and this decreased influx of cash cascades throughout the entire economy. This in turn creates a situation where more jobs are cut, (and none are created) so that companies can keep their proverbial heads above water.                   The resulting economic picture is dismaying, to say the least, and unfortunately we have not seen the worst of it. As people continue to struggle and the unemployment rate rises, so too will bankruptcy rates rise. Businesses will continue to fail at faster rates, and more people will become part of the growing pool of the statistically unemployed. The odds of having to take drastic financial measures are increasing, and it is important to make educated decisions and not act desperately when confronted with seemingly intractable financial stress. If you are in a situation (as millions of others in our country currently are) where you are debating declaring bankruptcy or a similar measure, be sure to first contact a knowledgeable bankruptcy attorney such as those found in Nassau County, who can guide you through these tempestuous financial waters.   –