You may have not realized it, but we've all been part of a great lab experiment. What happens when our central bankers keep buying loads of bonds to stimulate the economy?
But we're entering a new phase of this experiment. How does the Fed extricate the economy, now that some parts of it seem addicted to the stimulus? With the guardians of stimulus and interest rates at the Federal Reserve meeting this week, economist Phillip Swagel of the School of Public Policy at the University of Maryland says the Fed's bond-buying program might not be over yet, it's likely the beginning of the end.
"I'll be looking for whether they taper. I don't expect them to announce the end of their bond purchases just yet," Swagel says. "Everyone understands that the economy has picked up. The real question is whether they think it's sustainable, and how much more progress they think they can make on the labor market if they continue the bond purchases just a little bit longer."
While the government reported strong job growth in November, Swagel says it's not necessarily an indicator that brighter days are here for the economy.
"The labor market has definitely improved," he says. "A seven percent unemployment rate and [200,000] or 250,000 jobs per month are good, but by the standards of a normal recovery, they're still not very good. And, the long term unemployment situation is still extremely difficult. And, I think the Fed will want to do more to fix that situation."
HOST: The Italian Prime Minister called it his country's "true nightmare". The German Chancellor says it threatens the future of Europe. They were talking about youth unemployment - a much bigger problem in Europe than in the U.S. Throughout this week, Marketplace is putting the spotlight on Europe's jobless generation. Our European correspondent Stephen Beard reports.
BEARD: The numbers are appalling. The rates of youth unemployment in some European countries have reached horrific levels: 60 percent in Greece, 74 percent in parts of southern Spain. And ,of course, these are not just statistics; they are real people.
GEORGIA CISKA: "I am a young person, I have to work. I want to work. And I can't."
BEARD: 28-year-old Georgia Ciska from Athens has a university degree and speaks three languages but she cannot find a job - any job …even waiting at tables.
BEARD: You applied for hundreds of jobs would you say?
CISKA: "Yes hundreds."
BEARD: And what response did you get?
CISKA: "No response at all."
BEARD: Like Georgia lives with her parents and is totally dependent on them. 22 year old Jon Kolliarakis is a qualified insurance broker , also unemployed, also living at home and feeling guilty.
JON KOLLIARAKIS: "I feel I am not contributing to my family and thius is bad for me, very bad."
BEARD: Jon feels he wasted his time getting an education. That feeling is widespread. In Italy 24 year old Christina Lupo worked hard for her degree and her masters. Now she's wondering why she bothered.
CHRISTINA LUPO: "It's better that a person starts to work, early at 18 , in a restaurant and don't study because person that study …it's really difficult to find a job."
BEARD: In recent months European governments have committed to spend $10 billion combatting youth joblessness. In Athens Georgia Ciska is not reassured. So bruised is she by her long spell without work , she doesn't feel she'll ever get a secure, well paid job.
CISKA: "I think it will be like that forever in Greece, for my generation at least."
Japanese Prime Minister Shinzo Abe came to power a year ago. His party's policy of so-called "Abenomics" involves three “arrows” of economic reform: easy money from the central banks, government stimulus spending, and structural reforms aimed at boosting Japanese industry and competitiveness.
So far, 'Abenomics' has worked by getting a lot of money into the Japanese economy. The Nikki stock index is up about 58 percent compared to last year. But the BBC's Linda Yueh in Tokyo says there's more to the story than that.
"While I certainly think the first two arrows -- cheap money, which is the first arrow, and government spending to replace private spending, which is the second arrow -- can have a very immediate short term effect, what I'm slightly unsure about is what's going to happen when they finally fire the third arrow. So, I don't know if you can hear around me, but I'm in Shibuya, which is a big shopping district, and it looks as if it's really busy. Lots and lots of people going about. But the truth is, Japan is an aging economy with a shrinking population. There just aren't enough people who have been buying as before. And that make 'Abenomics' -- the third arrow -- extremely difficult to achieve quickly."
For more on the three arrows of Abenomics and how the Japanese economy is reacting, click the audio player above to listen to the story.
Today is expected to be the U.S. Postal Service’s busiest mailing day. So if you’re heading out to stand on line at the Post Office, expect to be joined by about 6 million of your friends and neighbors.
Zy Richardson is a public relations representative for the U.S. Postal Service. To hear her talk, you and your 6 million friends are gonna have very tired arms from carrying all that stuff. “We are projecting about 607 million pieces of mail to be processed just on today alone,” she says.
She says a decade ago, post offices braced for 670 million letters and packages on this busiest day. So while total volume is down at the Post Office -- first class mail has declined -- the headline is the rise of packages.
Mark Schoeman is president of the Colography Group, a market research firm. He expects package shipments will go up 10 percent this holiday season, over last year.
“We’re estimating that the volume for the holiday season is gonna be around the 2.1 billion pieces,” he says, referring to packages sent through the postal service and private carriers.
Schoeman also says shipment weights are lighter than in the past. Perhaps we’re purchasing more featherweight trinkets online, like little cell phone cases.
So not everyone’s arms will be tired, after all.
Later this week Facebook joins an elite club. On Friday the social media giant will become part of the Standard & Poors 500 index. Yes, it’s one of the three stock indices we follow daily here at Marketplace. So what exactly does that mean?
In some ways, joining the index is a symbolic achievement. Facebook’s share price will now be reflected in one of the most widely-followed measures of the stock market.
“It means the company has arrived,” says Georgetown University finance professor James Angel. “It means that it’s one of the largest companies by market value in the United States.”
It also means more investors will buy the stock, he says. That’s because of mutual funds that try to match the returns of an index like S&P.
“Those index funds will now have a portion devoted to shares of Facebook,” says internet analyst Tom Forte with Telsey Advisory Group. “So if you think of it loosely in kind of a supply/demand framework, the demand for shares of Facebook has gone up.”
That’s why Facebook’s stock rose on the news, he says, and likely will again when it officially joins the index.
But back to symbolism, Forte says the debut also represents a coming of age of social networking stocks. There are now three big-time market players: Facebook, Twitter and LinkedIn.
Marketplace Money is about you and the choices you make everyday. How to not only get more money out of those choices, but more value.
This week in how we live money: How to save when you're your own boss or changing jobs, how to get your hard-earned savings out of limbo, and how to say, 'I do,' -- when it comes to finances, at least.
Marketplace Money listener Mark lives in Great Falls, Montana, is 66 years old and retired. And he's ready to make a change in his life. His wife of almost 40 years died three years ago. A little note here, Mark's wife handled all the finances, since she was good at that. "She was a saver, more than I am," Mark says.
He was part of the military as an aircraft mechanic. Mark retired early, at age 47, so his pension is not funded at the full amount. But he currently takes home about $44,000 a year.
Mark's starting to date again. And he hopes he might find luck twice, another wonderful woman to spend his life with. Mark's wondering what he should think in terms of talking money with the future Mrs. Mark.
"One lady was upset when I insisted on paying for dinner, because she wanted to go dutch," Mark says. "A lot of women today are feeling more independent."
Carmen says, "For a lot of couples ... to consider the fact that you both will probably earn money. And you want some sense of autonomy, especially when you're older, you're just used to having your own money. That's why it's a really good idea to have an account for shared expenses. So having that checking account which is your household account. And, then you can also have a household savings account, [if] you want to take a vacation every year."
To hear more advice for Mark, click the play button above.
When we grow up and create a new way of living In response to the bad habits of those around us, going against the grain can be exactly what we need to move forward. With that in mind, this blog caught our eye: "7 Ways To Eat Good On A Hood Budget."
It was authored by musician Khnum Ibomu, better known as Stic from the hip-hop group Dead Prez.
Stic and his wife Afeeya, a nutritionist, joined Marketplace Money to talk about how their family breaks bread without breaking the bank.
On if 'healthy' food is more expensive
KI: "A lot of people feel that it's tougher. It's more expensive because of our concept of what health food is. And we think it's all the packaged foods and the whole foods aisle, but really the most dense nutrient-wise foods are the cheapest. It's the produce aisle, so you know, lettuce, apples, carrots, things of that nature is the cheapest thing in the whole supermarket. So that's the first thing about health food being less expensive is, what is health food?"
On what they ate growing up
AI: 'I actually was very sick as a kid, and I became vegetarian at 15 due to health issues. I grew up ... my mother, she was a single mother, she worked 3 jobs so we were kind of on our own. So it was fast food, soda, twinkies you know. That was my main food. And just being sick all the time, I finally found a doctor who said it could be the foods that I was eating. And that is really what started my journey.
KI: 'Well when I grew up, soul food was the thing. We ate fish fries and the soul food fixin's. That's how I grew up. Until I read Malcom X's autobiography, I never thought [about] food as it relates to our health. And Malcolm would talk about the pork [and] its relationship to hypertension and high-blood pressure. And I started thinking [about] my family, my uncles, cousins and all the different health issues. And it made me say, "Wow, I didn't know." At that point I got radicalized. Our son, he's 12 now, he grew up vegan, he was born vegan, he's jumping off the walls and turning back flips. And he's aight"
On finding the time
AI: "I have to think ahead, make big meals ahead. I''ll make, like, a big pot of soup. That will be my lunch, our dinner, our son's lunch. Sometimes, it's about priorities. If I want to watch [TV show] "Scandal," can I do that and be making some food at the same time?
On affording healthier food
AI: "I just want to say something here. If you drink alcohol, if you smoke cigarettes, if you have more than basic cable, if your kids have video games, [if] you're on name brands, if you can afford to do these things, you can afford to eat healthier. Again, it goes back to priorities."
KI: "I really value feeling good. I really value having energy. So, when I have to make a choice between this or that, I'm always going to choose the organic source of nutrients. you know."
AI: "Farmer's market, that's one of the most inexpensive places to purchase food, because it's not marked up like a regular grocery store would be. And usually those foods are in season. So if you buy what's in season, that's usually cheaper as well. And once again, buying in bulk. Not so much packaged, pre-made foods, and not that you can't have that. That should just not be the main thing in your basket. And one of the cheapest ways to get food is to grow it yourself. It costs about a dollar for a whole pack of seeds. And you only need a few seeds to get a whole bunch of produce."
This final note today, in which James Bond is revealed to be not much more than a lush.
A group of doctors over in the UK sat down and read all 14 Bond novels, noting each and every martini...
Shaken, not stirred.
Over the course of the 88 days depicted in the books, Agent 007 had the equivalent of 5 vodka martinis a day...
Which, the doctors say...would've left him impotent and near death.
In a basement lounge at the University of Kentucky in Lexington, a few dozen students line up for fried chicken and an array of international sauces, from Indian curry to British pineapple chutney.
This is the Blanding III holiday party. About half the students in the dorm are the first in their families to go to college. They’ve chosen to live together, study together and tonight make gingerbread houses together in a friendly competition.
Cody Russell and Alejandra Sanchez lean over a ping-pong table, attempting to hang tiny frosting icicles on their gingerbread roof.
Cody is from Taylor County, Ky., in the rural heart of the state. He was raised by a single mom. She worked at the Fruit of the Loom factory -- before it closed. Then she worked at an auto plant making side mirrors. He says watching her sometimes work two jobs and struggle to pay the bills, he was determined to go to college.
But when he got here, "it was a complete culture shock," he says.
With its vast campus and almost 30,000 students, most freshmen would find UK daunting. The whole point of this dorm is to help them adjust. Students got to move in a few days early, so they bonded before classes even started. Older students who were also the first in their families to go to college serve as mentors.
"It makes this big university for a lot of us that came from small towns a little bit smaller, and a little bit more like home," Cody says.
The so-called First Generation Living Learning Community was created to address a crisis in Kentucky. The state has a smaller share of college graduates in the workforce than almost any other state.
At UK, only about 22 percent of first-generation students finish in four years. Just 46 percent graduate in six years.
"So we're not serving our mission to educate the commonwealth, if we're sending half of those students home with a broken dream," says Matthew Deffendall, director of First Generation Initiatives at the university.
Deffendall helped launch the program two years ago to keep more of those students coming back.
"As we know from student development theory, if they make a connection to campus, they'll want to stay," he says. "So we thought, why not create a community of other students who were going through the same thing?"
Students don't just live together. They have events and workshops focused on life skills, and special staff advisers. And they take classes together, like UK 101 -- a class on how to navigate college life.
The night after the holiday party, many of the students were in a communications class together presenting digital projects. Faculty lecturer Jami Warren says students in the program seem to catch on more quickly than her other students.
"I think a great deal of that probably comes from the fact that they’re not only taking this course together, but they’re also living together," she says. "So they do homework together, they have study sessions together."
In the first years of the program, 92 percent of students have come back for their second year, compared to just over 72 percent of all first-generation students on campus. Their grades are higher, too, says Deffendall.
"So they’re performing stronger, they’re being retained at a higher rate, and they’re forming connections," he says.
And they’re not just changing their own futures -- but that of their families.
Josh Johnson came from Pikeville in Eastern Kentucky, where college wasn’t in the cards for most of his fellow students.
"Most of them go straight in the workforce, or go into coal, because that’s the main industry where I’m from," he says. "I wanted to have a better life for myself and my children."
His example has rubbed off on his younger brother; Josh is helping him apply for college now.
But as programs like Kentucky's have cropped up on other campuses, some worry about isolating first-generation students. One benefit of college is mixing with more advantaged students, says Richard Kahlenberg with the Century Foundation, and those connections pay off in career opportunities later in life.
"To the extent that colleges are encouraging low-income and first-generation students to socialize separately and apart from others, I think that’s not doing those students any good," he says.
Those in Kentucky's program say they meet lots of other students. For one thing, after the first year most of them will live off campus or in other housing. Samantha La Mar from Erlanger, Ky., says having that home base has actually helped her branch out.
"Since I got here and was able to kind of open up and meet new people and I started to feel comfortable, I was like, ‘Hey, I met all these people that are like me, so maybe I can say "hi" to the girl sitting next to me in my English class, or maybe I can join a group,’" she says.
Or even lead one. She wants to be resident advisor in the dorm next year, to help other students make the transition.
Many people have regained equity in their homes lately, thanks to rising housing prices. But for others, the housing crisis isn’t over. Almost 15% of mortgaged homes are still underwater, to the tune of more than $400 billion, according to CoreLogic’s second quarter figures.
Now struggling homeowners who seek relief could face an unexpected tax bill.
Real estate broker Fernando Herboso thinks it’s unfair that a law called the Mortgage Forgiveness Debt Relief Act expires this month. He remembers how hard it was for underwater borrowers before the law passed. As the market declined, they started calling him, saying:
“Fernando, I’m having problems paying. I don’t know what to do.”
Soon, he was helping his clients with short sales in Maryland, Washington DC, and Virginia.
Let’s say a client owed $300,000 on her home, but could only sell it for $200,000.
Herboso would explain that in a short sale, “The bank then gives you an imaginary check for the other $100,000.”
In other words, the lender forgives that mortgage debt. But there’s a catch.
“Then the IRS sees that as an income,” Herboso would explain. “Someone just gave you a check for $100,000. And you have to pay taxes for it.”
In normal times, mortgage debt that’s forgiven through short sale, mortgage restructuring, or even foreclosure can be considered taxable income. But in late 2007, Congress recognized that people on the brink of losing their homes couldn’t pay a hefty tax. So it passed the temporary law exempting from taxation a lot of canceled mortgage debt on primary homes.
“Early on, when this was passed, you could argue it simply wasn’t a matter for individual households, it was a macroeconomic matter,” says Mark Calabria, who was senior staff at the Senate Committee on Banking, Housing and Urban Affairs when the act first passed.
“We’re at the point now where it’s not really a macroeconomic matter,” he says.
Calabria is now at the Cato Institute. He says that since the worst of the housing crisis is over, he’d lean towards letting let the law expire. He says we shouldn’t create the wrong incentives.
“If you’re underwriting somebody’s losses on the housing market, then you’re much more encouraging people to take risk in the housing market,” he says.
But David Stevens, president and CEO of the Mortgage Bankers Association, says parts of the country are still struggling.
“And the problem with this is this will now create, potentially, an impediment for a borrower who could be offered a debt forgiveness program,” he says.
They’d get debt relief on one hand, and a tax bill in the other.
Recent settlements with banks like JP Morgan Chase make more funds available to forgive mortgage debt. The question for Congress is whether taxing that help will force people to forgo it.
For those of you interested in the nuts and bolts of mortgage debt forgiveness, here’s more information:
- The Mortgage Forgiveness Debt Relief Act of 2007 has been extended twice already.
- If the measure expires on December 31, Congress could extend it retroactively.
- The IRS on mortgage debt forgiveness, including caps and exemptions for insolvency.
Samantha West works for Premier Health Plans Inc., selling health insurance over the phone. Her voice is friendly, just like your typical telemarketer looking to get you a quote for a decent health insurance policy.
The other thing: she might be a robot.
TIME Magazine reporter Denver Nicks writes that he started getting suspicious when she couldn't answer some relatively simple questions.
"It sounds like a real woman, but she repeats herself over and over again," Nicks says. "Michael [his bureau chief] starts asking her questions like, 'What is the vegetable in tomato soup?' to which she doesn't know the answer."
When asked, point-blank, if she was a robot, "West" vehemently denies, saying that she's a real person and complains of a bad connection.
Nicks says they did manage to get a hold of a live body eventually, but they denied any use of robots and promptly hung up. But we may never know the true motive behind the strategy, as Premier Health Plans Inc. -- and Samantha West's phone line -- disappeared the day after Nicks's story was published.
Yesterday Twitter announced a change to its blocking policy. Under the old system, when you blocked someone, you vanished from their feed and they vanished from yours. But under the new policy, someone who had been blocked would still see the tweets of the person who blocked them -- the blocker could still be followed. The changes upset a whole lot of users, who made their opinions known all over social media. The backlash was big enough to cause Twitter to reverse its decision and go back to the old policy.
Never before have people been able to give feedback to a business so quickly and in such volume. Sometimes that feedback is positive. But when it's negative, it puts companies on the spot in a very public way. "Maybe that feedback signals to the company, we've got to explain this better and educate our customers and make them understand why this is for the best," says Dr. Andrew Stephen, a professor at the Katz School of Business at the University of Pittsburgh.
In Twitter's case, it chose not to explain why it thought the new blocking policy was good for users. It just reversed the policy. Another example of this sort of reversal is when GAP unveiled its new logo. People hated it. They said so on the internet and poof! Gone was the new logo. Companies are now under pressure to respond to feedback as it comes in.
"I don't' know if that's always positive," says Stephen Walls, a senior lecturer at The McCombs School of Business at The University of Texas.
Fear over social media backlash can mean companies lose their ability to explain themselves. And it makes it difficult to do things like experiment with a new policy. "Certainly for companies it does create this amplification system, for better or for worse," says Walls.
It can mean free word of mouth advertising or a sudden crisis. This is the delicate balance that companies like Twitter have to maneuver, as they deal with issues of user security and privacy which added Wells, "is especially difficult since we're changing how we feel about that probably on a daily basis."
Unfortunately, even in the year 2013, there are still places in America where it’s newsworthy when someone hires a black woman. One of those places is Saturday Night Live. And it turns out, there are economic reasons for why the iconic sketch show has been so white and so male for so long, as conversations with a variety of black comics reveal.
The show has long faced criticism for its failings on diversity. It recently turned its problem into a joke, in an episode where guest host Kerry Washington had to play every black female role. An announcer apologized, promising producers will hire a black female cast member “unless of course, we fall in love with another white guy first.”
Now the show says it’ll add at least one black female cast member next year. Producers have been holding special auditions to find her. Over the years, executives have said they want to cast talented black females, but can’t find them.
“When they say there aren’t any women that they’ve seen, what’s really being said is we haven’t seen people that impressed us where we have normally been looking,” says comedian Chloe Hilliard.
The main places SNL producers look are the best-known improv comedy groups: UCB Theatre, Second City and The Groundlings. Many of SNL’s biggest stars got their starts on these stages. The groups on those stages can be as white or whiter than SNL casts are. The interplay of race and class helps explain why.
“With a lot of these places that have become sort of these comedy factories, it’s a pay to play scenario,” says comedian Cyrus McQueen.
Before young comics can perform at these influential stages, they typically have to pay for improv classes there. Even when they earn substantial stage time, performances rarely pay. That makes for a tilted playing field advantaging those who have sufficient funds (or sufficiently supportive parents) to pay for classes, perform for free and still be able to pay their bills. Many funny people of color get left out.
“As a young black person, when I first got out of college, I had to go get a job, a real job that would support me,” says comic Jina Johnson.
In the end, it seems the comedy scene doesn’t just favor white people. It favors rich white people, and will continue to, until producers in power look a little harder.
Mark Garrison: SNL turned its lack of black women into a joke, in a recent episode where guest host Kerry Washington had to play every black female role.
Clip: We agree this is not an ideal situation and look forward to rectifying it in the near future. Unless of course, we fall in love with another white guy first.
Producers say they wanna cast talented black females, but can’t find them. Comedian Chloe Hilliard says that’s not quite right.
Chloe Hilliard: When they say there aren’t any women that they’ve seen, what’s really being said is we haven’t seen people that impressed us where we have normally been looking.
The main places they look are the best-known improv comedy groups: UCB Theatre, Second City and the Groundlings. They’re as white or whiter than SNL. Part of the reason the stages SNL scouts aren’t diverse is economic.
Cyrus McQueen: With a lot of these places that have become sort of these comedy factories, it’s a pay to play scenario.
Comedian Cyrus McQueen points out that young comics have to pay for improv classes before they can get stage time. And even then, stage time usually doesn’t pay. That makes for a tilted playing field. Comic Jina Johnson says many funny people of color can’t afford to buy classes and then work for free.
Jina Johnson: As a young black person, when I first got out of college, I had to go get a job, a real job that would support me.
It seems the comedy scene doesn’t just favor white people. It favors rich white people, at least until powerful producers look a little harder. In New York, I'm Mark Garrison, for Marketplace.
Beyoncé’s eponymous album dropped at midnight, and one of the things that is remarkable about it is she didn’t give us a heads up. All of a sudden, it appeared in the iTunes Store. There was no multimillion dollar ad campaign. Top 40 stations didn’t get the chance to play a few singles to death before we could buy the album. And the thing is, none of that matters. Beyoncé is on top of the charts again.
“We wake up on Friday the Thirteenth, and we get a present,” says Stephanie Kellar, who teaches in the business and management program at the Berklee College of Music. “How fabulous is that?”
In this day and age, a surprise like this one is rare. Mikael Wood, who covers music for the Los Angeles Times, calls Queen B “a master of the nondisclosure agreement.”
“The one person you don’t want to cross is Beyoncé.”
You got that?
Wood says this album stands out when you compare it to releases by Katy Perry and Lady Gaga.
“These albums are the end point of a humungous multipronged campaign, with concerts and TV appearances., etc, etc.,” he explains.
Not so for “Beyoncé.” Wood says that, as great as this is for B, it is as great for iTunes – it is the only place to buy the album right now, and you can’t buy the songs a la carte.
So, is this upending anything? Should we expect a surprise album from another artist? John Rose, with the Boston Consulting Group, is skeptical. He used to be the head of strategy at EMI.
“To make something like that work, you have to have the kind of overarching followership and engagement that Beyoncé and only a handful of artists have,” he says.
Beyoncé announced this album on Instagram, where she has more than eight million followers. Beyoncé follows no one.
Today Bloomberg News is reporting that tech giant Google might be getting into the game of making chips. Not the kind that would go into your phone or personal computer, but the kind that help power the Google servers that store tons of our data. If the rumors are true, this could be a big a threat to the world's largest chip maker, Intel. Brian Womak reported the story for Bloomberg, and tells Marketplace Tech why.
The House of Representatives has passed a budget agreement aimed at avoiding another government shutdown. How will it affect the sequestration? The nitty-gritty details won’t be known until Jan. 18, but Stan Collender, budget columnist and former staffer on the House and Senate budget committees, says the deal should ease about half of the scheduled budget cuts.
This story about 55 tax breaks about to expire starts in an unlikely place: Barn 63 at the Belmont Race Track in Belmont, N.Y., at the stall of a pretty brown horse with a white star on her forehead.
Yes it’s Friday the 13th, but it might just be somebody’s lucky day today. The Mega Millions lottery jackpot is now at $400 million dollars. Of course if you do win, you won’t get anywhere near that.
The House of Representatives has passed a budget agreement aimed at avoiding another government shutdown. How will it affect the sequestration? The nitty-gritty details won’t be known until Jan. 18, but Stan Collender, budget columnist and former staffer on the House and Senate budget committees, says the deal should ease about half of the scheduled budget cuts.
Cuts scheduled for Medicare providers, however, will still happen. In fact, they’ll be extended all the way into 2022 and 2023.
“That’s one of the ways they paid for this -- they extended cuts into the out years,” he says.
Among the issues that didn’t get dealt with in the Congressional budget deal: unemployment benefits.
Normally, states fund unemployment insurance programs, with benefits running a few months. Since the Great Recession began, the federal government has funded extra weeks of benefits after state-funded payments expire.
Now, if nothing changes, an estimated 1.3 million people will get cut off on January first. Those are the people collecting extended benefits right now. But then there are the people whose regular benefits are scheduled to run out on, say, January second. And third. And… you get the idea. All year.
“The Department of Labor estimates that’s almost 5 million people,” says Chad Stone, chief economist for the Center on Budget and Policy Priorities. “And their families of course.”
The effects will also ripple out to the broader economy. People who get unemployment benefits spend them, and that creates more jobs. The Congressional Budget Office says extending benefits could create as many as 300,000 more jobs by the end of 2014.
Jon Gruber is an economist at MIT. He thinks that because of these ripple effects, ending benefits is a bad idea for the economy as a whole.
Just not bad enough to force Congress to act. And if there’s no action now, he says the pressure won’t be there later.
“In some sense, once we get past expiration,” he says, “the world doesn’t end, and it becomes harder and harder to make the argument for spending the extra money to extend the benefits.”
Ireland’s three year bailout program, run under the auspices of the International Monetary Fund, the European Union, and the European Central Bank, formally comes to an end on Sunday.
"For politicians, they're making great hay out of this to say that Ireland is moving on its way to standing on its own two feet, but for many people here in Ireland, it's still business as usual in terms of trying to make ends meet in a very difficult situation here, economically," says the BBC's Diarmaid Fleming from Dublin.
Fleming was around for Ireland's "Celtic Tiger" boom years, when real estate soared and jobs were so plentiful that people were came in droves from places like Poland to fill them. Things are starkly different today, Fleming says.
"Conditions are very, very tough for people here. There have been increases in taxes. People have very high mortgages. Anybody who bought property to live in during that time still has those mortgages to pay off. The cost of living is still high. Yet, there is uncertainty about employment and, in particular, because the banks are in difficulty, there isn't the flow of money to be loaned to businesses here to expand."
Yes it’s Friday the 13th, but it might just be somebody’s lucky day today.
The Mega Millions lottery jackpot is now at $400 million dollars. Of course if you do win, you won’t get anywhere near that.
Steven Matlock’s lucky day was in 2001. After playing the same lottery numbers for 15 years, he and four friends won $6 million.
“We had to pay an extraordinary amount in taxes, it was unbelievable,” he recalls. “When we started out it was about [$1.2 million] for each of us, and when all was said and done we ended up with just about half.”
Matlock took his winnings as a lump sum as opposed to having it drawn out over several years. If the winner of the Mega Millions lottery takes a lump sum, she or he will get $216 million (out of a total of $400 million). If they take incremental payments over 30 years, they’ll get close to the $400 million -- but again spread out over 30 years.
The winner will also do better by his or her taxes, says Janet Stanzak, president elect of the Financial Planning Association.
“If you take it all at once, the bulk of the money is all taxed at the highest bracket,” she says. “Whereas if you take some money each year, each year you get the benefit of those lower tax brackets.”
Every dollar you make after reaching $450,000 a year gets taxed at the highest tax bracket of 39.6 percent. Every dollar under that amount is taxed at lower rates. So if you take the lump sum, the bulk of your money is taxed at the highest rate. If you take annual payments, you get to pay less in taxes on $450,000 of every year’s income. It adds up.
Other pitfalls: unscrupulous investment brokers, a deluge of charities, and moocher friends. Stanzak says it’s critical to get a financial planner to help. “It’s like being dropped into the middle of New York City for the first time and being expected to know how to get to Washington, DC,” she says. "You need help."
But the real advice to hanging on to your money? “Sit on it!” says Matlock. “Sit on it for probably a good six months before you decide what you wanna do,” says Matlock. “Stay away from the impulse purchases.”
Buying a new home in a nice neighborhood or getting a luxurious car -- “all those things cross your mind,” he says. “We sat down and decided what we wanted to do and we realized it wasn’t gonna go as far as we thought, we had kids in college, we slowed down.”
They didn’t move, and while they did some extensive remodeling, they didn’t buy another home.
“You can move into a fancy neighborhood and not like your neighbors if they’re uppity or snooty. I had great neighbors and we stayed right here.”
Not all winners are as restrained. Stanzak says typically after 3 years, most lottery winners are back right where their started. “Their lottery winnings are typically gone.”