Alan Simpson and Erskine Bowles -- the bipartisan pair that brought us a multi-trillion-dollar deficit reduction plan that was never enacted -- are out today with a new plan.
It targets Medicare and Medicaid for cuts, and curbs a number of tax breaks. It would reduce the deficit by about $2.4 trillion -- about halfway between what Democrats and Republicans want.
This proposal is their fourth effort in three years to drum up support for a deal to shrink America's debt. So, is there any reason the dynamic deficit reduction duo's plans could get traction now?
Economist Gary Shilling says the political gridlock of today may actually make the new Bowles-Simpson plan more alluring. With “neither side willing to budge” in the Whitehouse or Capitol Hill, Shilling says Bowles and Simpson may be able to play something of the knight-in-shining-armor role, “stepping in and offering a compromise that both sides will look at seriously.”
Mark Zandi, chief economist for Moody's Analytics, doubts that Simpson and Bowles will have any impact on the immediate issues we're facing, such as the looming across-the-board budget cuts known as the sequester, set to hit in March.
“I think that's a train that's already left the station,” Zandi says of the sequester. But Zandi does think the new Simpson-Bowles plan could have an impact on future deficit negotiations.
“There's a lot more work to be done, and they could have a big role to play.”
Since the banking crisis hit hard in 2008, Georgia has seen more than 80 banks go under. That’s more than any other state. Most have been small, community banks whose assets were tied to the housing market. But did those banks have to fail?
A new report from the University of West Georgia says in many cases, the answer is no. The reason so many did, the report finds, is because of an accounting rule called “mark-to-market,” which regulators put in place after the collapse of Enron.
Here’s how it works. Say you buy a house for $100,000. The economy tanks, and the value falls to $50,000. You keep paying on the hundred grand, but the bank must report on its books $50,000 -- the diminished fair market value of the asset.
“As the bottom fell out of the real estate market, with that rule in place, that has destroyed in an artificial way a lot of capital in banks,” says Danny Jett of the Georgia think tank Main Street Solutions.
The non-profit funded the University of West Georgia study looking at the effect of the mark-to-market rule on small banks.
“Context matters,” says Dr. Joey Smith of the University of West Georgia’s Richards College of Business. He found the mark-to-market rule doesn’t always paint an accurate picture of a bank’s solvency.
“You have to take into consideration what’s happening around the bank, and other banks, because it’s one big relationship,” he says.
The study’s findings show that in the recent crisis, banks had to unload loans that were bad on paper, although they may have been paid as agreed upon. And that created a snowball effect.
The rule was revised in 2009, but Smith says if mark-to-market isn’t revisited, we’re likely to see more community banks collapse in a future crisis.
Olympic and Paralympic sprinter Oscar Pistorius has been charged with premeditated murder in the death of his girlfriend, Reeva Steenkamp. Pistorius says he "had no intention to kill my girlfriend."