Hidden Debt Bombs
When anyone talks about U.S. debt, they typically refer to two numbers.
The first is the debt held by the public. That's money owed to those who have bought U.S. Treasurys, most notably big bond mutual funds and foreign governments. Debt held by the public today is roughly $8 trillion and rising.
The second number is the money the federal government owes to government trust funds, such as those for Medicare and Social Security. The government has used revenue collected for those programs to cover other outlays. Currently, the debt to the trust funds is approaching $5 trillion.
The two combined is the total gross debt that's accounted for. But deficit hawks also worry about what's not on the books.
Here is just a sampling of the unseen or underplayed obligations that could worsen the debt outlook:
Losses from Fannie Mae and Freddie Mac
Mortgage giants Fannie Mae and Freddie Mac are private companies that for years had the implicit backing of the federal government. That backing assured investors that if anything went seriously south for the companies Uncle Sam likely -- although not absolutely -- would step in.
Well, things did go south, and now both are run by the federal government.
While the implicit guarantee has become explicit for Fannie and Freddie, its treatment in the budget is up in the air.
"Our budget doesn't have Fannie Mae and Freddie Mac on it, even though it's owned lock, stock and barrel by the American taxpayer," said Rudolph Penner, a former director of the Congressional Budget Office (CBO) during a conference held by the Peterson-Pew Commission on Budget Reform.
Last year, the CBO did start to account for both companies as if they were federal agencies on the budget. But the White House Budget Office only includes some potential costs because the future of the two companies is still under consideration. Last week, a Republican congressman introduced a bill that would require the two agencies be put on the budget.
It's still not clear what the companies' total hit to the federal budget will be. Amherst Securities, a broker-dealer in residential mortgage-backed securities, estimated that the total loss on the mortgages backed by the companies could reach $448 billion, with a portion of that covered by reserves or assumed by outside parties. The CBO estimated the net costs to the government could top $370 billion by 2020.
These are just estimates. But what's clear is that Fannie and Freddie are not cheap dependents.
That's why some argue that lawmakers should assess the potential costs of implicit government guarantees well before things go to pot. -CNN Money
States May Ban Credit Checks
It's hard enough to find a job in this economy, and now some people are facing another hurdle: Potential employers are holding their credit histories against them.
Sixty percent of employers recently surveyed by the Society for Human Resources Management said they run credit checks on at least some job applicants, compared with 42 percent in a somewhat similar survey in 2006.
Employers say such checks give them valuable information about an applicant's honesty and sense of responsibility. But lawmakers in at least 16 states from South Carolina to Oregon have proposed outlawing most credit checks, saying the practice traps people in debt because their past financial problems prevent them from finding work.
Under federal law, prospective employers must get written permission from applicants to run a credit check on them. But consumer advocates say most job applicants do not feel they are in a position to say no.
Most of the bills being proposed this year resemble laws in Hawaii and Washington that prevent employers from using credit reports when hiring for most positions. The laws contain exceptions in cases where such information could be relevant to the job - for example, if the person is applying to work in a bank or an accounts-payable office.
On a national level, Rep. Steve Cohen, D-Tenn., introduced a similar bill last summer in Congress, where it is still bottled up in committee. –Sun News
When anyone talks about U.S. debt, they typically refer to two numbers.
The first is the debt held by the public. That's money owed to those who have bought U.S. Treasurys, most notably big bond mutual funds and foreign governments. Debt held by the public today is roughly $8 trillion and rising.
The second number is the money the federal government owes to government trust funds, such as those for Medicare and Social Security. The government has used revenue collected for those programs to cover other outlays. Currently, the debt to the trust funds is approaching $5 trillion.
The two combined is the total gross debt that's accounted for. But deficit hawks also worry about what's not on the books.
Here is just a sampling of the unseen or underplayed obligations that could worsen the debt outlook:
Losses from Fannie Mae and Freddie Mac
Mortgage giants Fannie Mae and Freddie Mac are private companies that for years had the implicit backing of the federal government. That backing assured investors that if anything went seriously south for the companies Uncle Sam likely -- although not absolutely -- would step in.
Well, things did go south, and now both are run by the federal government.
While the implicit guarantee has become explicit for Fannie and Freddie, its treatment in the budget is up in the air.
"Our budget doesn't have Fannie Mae and Freddie Mac on it, even though it's owned lock, stock and barrel by the American taxpayer," said Rudolph Penner, a former director of the Congressional Budget Office (CBO) during a conference held by the Peterson-Pew Commission on Budget Reform.
Last year, the CBO did start to account for both companies as if they were federal agencies on the budget. But the White House Budget Office only includes some potential costs because the future of the two companies is still under consideration. Last week, a Republican congressman introduced a bill that would require the two agencies be put on the budget.
It's still not clear what the companies' total hit to the federal budget will be. Amherst Securities, a broker-dealer in residential mortgage-backed securities, estimated that the total loss on the mortgages backed by the companies could reach $448 billion, with a portion of that covered by reserves or assumed by outside parties. The CBO estimated the net costs to the government could top $370 billion by 2020.
These are just estimates. But what's clear is that Fannie and Freddie are not cheap dependents.
That's why some argue that lawmakers should assess the potential costs of implicit government guarantees well before things go to pot. -CNN Money
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States May Ban Credit Checks
It's hard enough to find a job in this economy, and now some people are facing another hurdle: Potential employers are holding their credit histories against them.
Sixty percent of employers recently surveyed by the Society for Human Resources Management said they run credit checks on at least some job applicants, compared with 42 percent in a somewhat similar survey in 2006.
Employers say such checks give them valuable information about an applicant's honesty and sense of responsibility. But lawmakers in at least 16 states from South Carolina to Oregon have proposed outlawing most credit checks, saying the practice traps people in debt because their past financial problems prevent them from finding work.
Under federal law, prospective employers must get written permission from applicants to run a credit check on them. But consumer advocates say most job applicants do not feel they are in a position to say no.
Most of the bills being proposed this year resemble laws in Hawaii and Washington that prevent employers from using credit reports when hiring for most positions. The laws contain exceptions in cases where such information could be relevant to the job - for example, if the person is applying to work in a bank or an accounts-payable office.
On a national level, Rep. Steve Cohen, D-Tenn., introduced a similar bill last summer in Congress, where it is still bottled up in committee. –Sun News
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