Wednesday, March 31, 2010

Europe unlikely to join any new yuan offensive

An employee packs bundles of Renminbi banknotes at a branch of Bank of China in Hefei, Anhui province February 8, 2010. REUTERS/Stringer

PARIS (Reuters) - If Washington picks a fight with China over the weakness of the state-managed currency, it will do so without European reinforcement, not least because the euro has weakened in tandem with Greece's debt crisis.


Preparation of a U.S. Treasury report that could potentially brand China a "currency manipulator" is rekindling tensions with Beijing prior to mid-April publication and raises questions as to how broad international support will be if things turned uglier.

The saber-rattling is growing in volume since U.S. lawmakers said they were crafting proposals to allow import duties to be slapped on Chinese goods on the grounds that American jobs are being lost and Beijing must now budge.

Despite the fact that governments in Europe also believe the yuan is undervalued, giving China an unfair edge in global trade competition, there appears to be little appetite here to up the ante simply because tempers are fraying in Congress, potentially weakening the U.S. diplomatic push.

Additionally, negotiations on an aid plan for Greece not only eclipsed most other policy issues in recent months but also exposed strains among euro zone governments that will hardly sharpen desire to renegotiate their position on China so soon.

"The view here (in Europe) is that this is a red flag to the Chinese. They sense it's not going to be very productive," said an official involved in preparation of a meeting of G20 finance ministers that will bring all sides together later this month.

German Economy Minister Rainer Bruederle signaled last week that Berlin understood nothing would happen overnight. He told export executives Berlin wanted to see a fully flexible Chinese foreign exchange rate "one day" but that he realized the shift would be difficult for China.

Likewise, EU trade commissioner Karel De Gucht highlighted the contrast with the United States when he said in comments to the Financial Times newspaper: "At this moment, it is less of a political issue in Europe."

China and the United States have been at odds in 2010 over many other issues such as Google's (GOOG.O) decision to defy Chinese Internet censorship, Tibet, U.S. weapons sales to Taiwan, and sanctions against Iran over its nuclear program.

For many industrialists, the focus is often on more concrete issues of export access to China markets than the less tangible benefits a stronger yuan should confer in terms of the relative price competitiveness of euro zone firms on world markets.


While important, the diplomatic subtleties of how hard China can be cajoled into yuan appreciation is one of many considerations and the list of other motives has if anything lengthened, strengthening the case for further soft-peddling from Europe's perspective, officials and economic analysts say.

The most obvious is that the Greek debt crisis has produced a positive by-product to the extent that the euro exchange rate has weakened in tandem, providing some relief in theory even if it may prove temporary.

That, as French Finance Minister Christine Lagarde has said, can only be considered welcome news by euro zone exporters.

"Given the 15 percent fall we've seen in the value of the euro since July 2008 against the yuan as well as the pressing domestic issues facing the region at present, it is hardly surprising that Eurozone politicians have little appetite to tackle Chinese currency policy issues at present," said Simon Derrick, currency analyst at Bank of New York Mellon.

The euro has shed about eight percent versus the yuan since this year alone, primarily because it has retreated by roughly similar amount against the dollar, to which the yuan is pegged right now.

More strikingly, for much of the decade before the downturn and collapse in global trade in 2008, exports from the euro zone to China appear to have risen more or less continuously in spite of the yuan's increasing weakness vis a vis the euro.

Another development the Europeans should worry about is that a broad Asian exchange rate appreciation could in fact trigger a further bout of dollar weakness versus the euro, Brendan Brown, chief economist at Mitsubishi (UFJ) Securities, said.

"It is better to keep quiet and hope that the Chinese get away with only small currency changes," said Brown. "European exporters are doing very well anyway."

China revalued the yuan by 2.1 percent against the dollar in July 2005 and then let it climb nearly another 19 percent before calling a halt in mid-2008 to help exporters weather the global financial crisis.

Europe if anything had more cause for complaint during that period because the reform did not lead to a yuan rise versus the euro. Indeed the euro rose roughly 10 percent versus the yuan in that period.

But in 2009, when the industrialized world was struggling to pull out of recession, China offered Europe a helping hand. Euro zone exports to China grew four percent while exports to Britain and the United States fell close to 20 percent, according to data collated by EU statistics office Eurostat.

That, combined with the desire to avoid public sparring and play for yuan appreciation in the longer term, may explain why European Central Bank President Jean-Claude Trichet and other senior euro zone officials had little to show from their last visit to China to discuss the matter back in November.

Trichet is more likely worried that China's currency policy is not sustainable in the long-term if Beijing is serious about efforts to achieve a more balanced global economy and to discuss the necessary adjustments in the G20 forum.

There too, there is no mood to rush at China over the issue.

Canadian finance minister Jim Flaherty, whose country hosts a G20 summit later this year, said this week "there's no point in sweeping important issues under the rug."

But in private, G20 officials, including from Canada, have cautioned against expecting any kind of currency pronouncements before June or maybe even November, when another G20 summit is scheduled in South Korea.

And even if it proves to be a blip, China is tipped to post a trade deficit in March that would be the first since April 2004, which Beijing could at the very least exploit as proof that caution is needed when calling for yuan change.

"Although the timing of the (trade deficit) announcement may be political, the trend toward a sustained trade deficit is very real," Albert Edwards of Societe Generale banks global strategy team said in a note.

(Editing by Toby Chopra)

Feds Investigate Death Threats to IRS Employees After Health Bill Approval

The health care law has sparked protests on radical anti-tax and anti-government Web sites and within their private, password-protected e-mail lists and message boards.

The federal government is investigating dozens of death threats to IRS employees that have been posted online since the House passed the health care bill, has learned.

The health care law has sparked protests on radical anti-tax and anti-government Web sites and within their private, password-protected e-mail lists and message boards. Some writers have labeled March 21 -- the day the House passed the bill – "Bloody Sunday," and they see it as a call to violent action against IRS workers.

In the days following the House vote, animosity toward the IRS intensified, and many heated online protests included specific discussions about the best way to go about killing tax agents.

Hundreds of comments were posted in response to an incendiary story on, the radical far-right Web site owned by radio host Alex Jones. The story, entitled, "The Cost Of Defying Obamacare: $2,250 a Month And IRS Goons Pointing Guns At Your Family," focused on the “increasing militarization of the IRS” and its expansion of powers under the new health care law.

One commenter wrote: "If they actually try to do this, there is going to be a whole lot of thugs start vanishing. This is the last line in the sand. Those fools have just signed their death warrants!!!"

"theres gonna be alot of IRS agents needing healthcare if they try to terrorize us Americans," another comment read. Yet another wrote, "Come and take them…….they will have to hire so many IRS agents because…well when 10 a day get killed….you do the math."

A federal probe has been launched into the comments. "We are actively investigating all threats made against IRS employees," J. Russell George, treasury inspector general for tax administration, said in a statement to Tuesday morning.

Threats to IRS agents have increased steadily in recent years; more than 1,200 threat and assault cases between 2001 and 2008 were investigated.

In February, a small plane pilot named Joseph Stack published an anti-tax manifesto before he crashed his aircraft into a building in Austin, Texas, that housed an IRS office. Stack, who died in the attack along with an IRS worker, became a hero to many in the anti-tax and anti-government extremist movements; the inspector general launched investigations into at least 70 online comments made in support of Stack’s attack.

Now the agency’s expanded role under the health care law has sparked a new wave of animosity toward its employees, which experts say has contributed to an unprecedentedly volatile atmosphere.

"The anger and resentment within the anti-tax movement towards the new health care is overwhelming," said insurance analyst J.J. MacNab, who's testified before Congress about the anti-tax movement. "Combine this legislation with the census arriving in everyone’s mailboxes and the fact that we're heading into tax season, and this could be a really problematic month ahead."

The IRS is now working to beef up security across the country. It will be spending over $100 million in 2010 alone on office security, IRS Deputy Commissioner for Services and Enforcement Steven Miller told Congress earlier this month.

There are 755 IRS facilities in the U.S. — and 64 percent of the facilities have no security presence, according to recent congressional testimony by Colleen Kelley, the president of the National Treasury Employees Union. Union member have expressed concerns about the lack of security, she said, citing walk-in centers with no security other than a lock on the door.

One day after the House passed the health care bill, contract postings appeared on government employment Web sites requesting bids for round-the-clock armed guard security services for a half dozen facilities — including storage facilities and IRS grounds with child care centers. The IRS posted a request for quotes for 60 Remington Model 12 gauge pump-action shotguns for the Criminal Investigation Division, which was first reported on the Drudge Report last month.

According to an IRS office memorandum outlining policy for the use of armed guards during the current tax season, the inspector general will provide armed escorts under the following conditions in April:

- "When an IRS employee has contact with a taxpayer who is the subject of an open TIGTA-OI assault or threat investigation; or

"When an IRS employee has contact with a taxpayer who has been designated as a Potentially Dangerous Taxpayer (PDT) by the IRS Office of Employee Protection."

The IRS’s office of criminal investigations will provide armed escort assistance in other situations, the memo said.

But this has served only to further rile anti-tax extremists, who view themselves as patriots and pledge to confront any armed IRS agent with guns of their own.

"WE, I repeat, WE, are armed to the teeth. They need those pumps just to feel safe," one commenter wrote.

"POINT OF ORDER: I dont shoot BACK; I shoot FIRST……….BUY MORE AMMO," said another.

In a particularly heinous reply that was praised by dozens of other commenters, someone suggested – in graphic terms – that tax opponents should rape an attractive agent before killing her. "Or vice versa…don’t have a problem with that either."

Other online discussions delved into specific tactics—what weapons, what bullets, what bait—to employ in the killing of IRS agents.

Someone calling himself, "rEvolutionary" wrote, "I think it would take a different kind of bait. Humans are as predictable as any animal. What kind of bait would draw an IRS pirate..?"


While these threats are being investigated, experts doubt there is much that law enforcement can do to predict if any of these commenters actually plan on taking action. The only thing certain is that the online community of anti-government extremists is growing, and it is increasingly being viewed by law enforcement as a threat.

"I've never seen anything like this before," said MacNab. “The health care bill could very well be the tipping point."

Police: Insurance Agent Pulls Gun On Client

Police in Essex said an insurance agent forced his client into a car at gunpoint and demanded that he drive him to his bank to withdraw money.But the Essex police chief said officers didn’t have to look far for their suspect -- independent insurance agent Mark Rose left behind a business card that had his photo on it.Rose declined to comment because the investigation is ongoing.The police chief said Rose had been to James Dukshier's home before to sell him a policy. This time, police said Rose brandished a gun and forced the man to drive him to Shenandoah about six miles away.According to the Chief Michael Anderson, Rose stayed in the car while Dukshier went inside the bank and alerted employees he was being kidnapped. The police were called, but Rose had taken off, hitching a ride back to his own vehicle.
Michael Anderson
The bank president said the pair first pulled up to the drive-through outside of town. The teller noticed it was an unusual transaction request, and advised the two to go to the downtown bank.Police called Rose and he agreed to meet with Anderson, at which point he confessed, the Anderson said.Dukshier said he wasn't hurt, just shaken up. He also said he's nervous about people coming into his home.

Sex Abuse Lawsuit Alleges Racketeering by Diocese in Connecticut

A Connecticut woman has filed a racketeering lawsuit accusing the Roman Catholic Diocese of Norwich of conspiring to cover up sexual abuse of children by priests.

The woman is known only as Jane Doe in the lawsuit pending in U.S. District Court in Hartford. She alleges she was sexually abused by the late Rev. Thomas W. Shea in 1976 when she was 13 and he was assigned to St. Joseph's Church in New London.

The lawsuit claims the alleged cover-up conspiracy involved diocese officials transferring Shea and several other priests to other parishes numerous times after they were accused of sexual abuse.

The woman's lawyer, Robert Reardon, said he believes the lawsuit is the first racketeering case brought against the Catholic Church in Connecticut. Similar lawsuits have been filed around the country, but nearly all have failed, in attempts to get around time limits for taking legal action.

"We tried to demonstrate through a number of different instances, and through a course of certain conduct, how this conspiracy went,'' Reardon said. "Whenever there was a complaint, the priest would be transferred."

Norwich diocese spokesman Michael Strammiello released a written statement Tuesday in response to questions from The Hartford Courant.

"We cannot comment on active litigation and risk jeopardizing the proceedings,'' he wrote. "Allegations of abuse from the past are always difficult for everyone involved. The church and our diocese have come a long way in preventing and assuring that these issues will not be part of our present or future.''

Abuse complaints were first filed against Shea in the 1950s and he was transferred numerous times after being accused until he was placed on leave in 1983, according to the lawsuit and published reports.

The lawsuit says the diocese and current and former diocese officials should be held accountable under the Racketeer Influenced and Corrupt Organizations Act. It accuses the defendants of concealing priests' criminal conduct, obstructing justice, bribing victims to keep criminal conduct secret and other crimes.

Racketeering carries up to 20 years in prison and a fine of up to $25,000 per count.

The lawsuit was first filed in New London Superior Court on Nov. 18, but was transferred recently to federal court at the request of the defendants.

The diocese and its insurance company have paid nearly $5 million to alleged victims of sexual abuse, according to the church.

Information from: The Hartford Courant

Militia Chief's Mistrust Festered, Friends Say

Portrait Emerges of Man Who Despised Authority; Undercover Agent Played a Role in Probe

The leader of a Michigan militia group charged this week with conspiring to kill law-enforcement officers was described Tuesday as a private, family-oriented man who nurtured a festering mistrust of governmental authority, according to people close to the family.

"On the inside of this man's brain, something evil lurks, and until you get to know him, you don't know it," said Andrea Harsh, who was engaged to David Brian Stone Sr. until the couple broke up last year.

She described Mr. Stone, a trim 45-year-old man who wears his whitish hair cropped short over spectacles and a bushy gray mustache, as having a "bubbly personality." But he became consumed by the Hutaree, she said, a southeastern Michigan militia group that described its members as "Christian warriors."

European Pressphoto Agency

Photo of Thomas Piatek after his arrest.

In an indictment Monday, federal authorities named Mr. Stone as leader of the Hutaree and accused him and eight members with plotting to spark an uprising against the U.S. government by killing police. Along with Mr. Stone, seven other men and one woman from Michigan, Ohio and Indiana are in being held without bond on weapons and sedition charges.

The indictment said Hutaree had practiced attacks and other military maneuvers for more than a year, and had planned to kill a law-enforcement officer, then use homemade bombs to attack officers who attended the funeral.

An undercover agent played a role in the investigation that led to Monday's indictments. Grand jury testimony by a law enforcement officer referred to an "undercover FBI agent" who worked on the case. The FBI declined to comment, but infiltration is a common tactic for law-enforcement officials targeting domestic militia groups.

Those charged in the case included Mr. Stone's current wife, Tina Mae Stone, 44; as well as two sons, David Brian Stone Jr., 19; and Joshua Matthew Stone 21. Attorneys for Ms. Stone, David Jr. and Joshua declined to comment Tuesday; the senior Mr. Stone had no attorney as of late Tuesday.

The Hutaree appears based at Mr. Stone's home, a pair of dilapidated house trailers near the intersection of dirt roads in rural Clayton, Michigan—population 303—about 85 miles southwest of Detroit. The yard this week held three cars, a dog house, debris and a gun leaning on an old washing machine.

Family members and acquaintances said Mr. Stone doesn't curse, smoke or drink alcohol and was a strict disciplinarian with his sons, whom he home-schooled from a young age. While he rarely attended church, he studied the Bible nightly, memorizing long passages, said Ms. Harsh, his ex-fiance. Several scripture passages appear on the Hutaree Web site.

On his page on the MySpace social-networking site, Mr. Stone, using the alias of "(RD) Merzonik," listed his interests as "GOD, Guns and Girls." He said he liked action and science-fiction movies and writes, "only dead people are true heroes ... so I guess I don't have any." He listed his hometown as, "Wasteland, America," and 73 MySpace friends include several state and county militias.

Mr. Stone is listed as a 1982 graduate of Sand Creek High School on an alumni Web site. Donna Stone, his ex-wife, said she met Mr. Stone in the mid-1990s when she worked at a deli counter and he was a customer. She said he was charming and funny.

But Mr. Stone increasingly displayed a stubborn streak, as well as an affinity for guns. Ms. Stone, 44, said she left him after about a decade together. "When he went from handguns to big guns, I said, 'Enough,' " she said.

Court documents reveal an undercover FBI agent was part of the investigation of a Michigan-based Christian militia group that allegedly plotted to spark an uprising against the government by killing police officers. Plus, in a major push against the health overhaul, the U.S. Chamber of Commerce plans to spend $50 million to sway election outcomes; and the News Hub discusses how a six-year high in the number of stocks hitting 52-week highs is not necessarily a bad sign for stocks.

Ms. Harsh, 40, said she began dating Mr. Stone in 2008 after meeting him at a plastics recycling factory where they worked. Mr. Stone showed her a Hutaree business card when they met, but otherwise said little about the group while they dated for several months.

After they moved in together, Ms. Harsh said, he spent hours on the computer, building the group's Web site and searching online for weapons. "His life was pretty much consumed by the Hutaree," she said.

Mr. Stone despised authority, Ms. Harsh said, particularly "anyone with a badge." She said his temper finally drove her away last year. Mr. Stone remarried a few months later.

Ron Gaydosh, 62, said he had known Mr. Stone for more than 15 years, and frequently invited the Stones over for barbecues. He described Mr. Stone as a "good guy," with "all-around good kids," and said the family enjoyed hunting and fishing.

He said Mr. Stone was easily upset by talk of the government. "Some of the things that upset Dave also upset me," said Mr. Gaydosh, who belongs to another militia group with no ties to Hutaree. They frequently discussed survivalist techniques and poked fun at government officials, he said, but "there was never any violence planned."

Mr. Gaydosh said Mr. Stone didn't like law enforcement officials driving by and shining lights at Mr. Stone's house, adding that he always referred to police as "feds." Mr. Stone also didn't like neighbors complaining about his target shooting, Mr. Gaydosh said.

Associated Press

Trailers on property belonging to David Brian Stone, the leader of Midwest Christian militia Hutaree.

It's not clear whether Mr. Stone had money troubles. Ms. Harsh said he was working at Demlow Products, an auto-industry supplier in Clayton; a person who answered the phone at the company declined to comment. Mr. Stone and his ex-wife, Donna Stone, filed for Chapter 7 bankruptcy protection in 1999.

Over the past couple of years, Mr. Stone attracted more Hutaree members, Ms. Harsh said: "His goal was to have all of the states have at least one group of Hutaree."

But he scared off some potential recruits. Jon Killman said he visited Mr. Stone and his sons in December because he was interested in joining a militia to practice survival skills.

He said Mr. Stone was a gracious host and offered him coffee. But soon Mr. Killman "got a bad vibe" as the Stones started joking about police officers who'd been shot in a coffee shop in Washington state.

Associated Press

Donna Stone said her ex-husband, David Brian Stone Sr., was stubborn.

The family's dining room table was strewn with shotgun shells, Mr. Killman recalled. The elder Mr. Stone said the shells would be filled with gunpowder and tied to trip wires to simulate landmines.

At first "they just seemed like a down-to-earth hillbilly family," he said. "After 20 minutes into the meeting, I realized these guys are not dealing with a full deck."

Matt Savino, commander of the Lenawee Volunteer Michigan Militia near Mr. Stone's home, said in recent months Mr. Stone became "paranoid" and began asking other militia groups to join in military exercises.

Mr. Stone began talking more about how "the federal government was coming down on them" and the need to be on the offensive and retain the element of surprise, Mr. Savino said.

Ms. Harsh said Mr. Stone "always thought he could hide from the government. He thought he was invincible."

—James Oberman
contributed to this article.

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Health Reform Law to Spawn More Tax Men?

Ask critics of the Democrats' health care overhaul about the law's impact, and among the "horrors" they may describe is an army of Internal Revenue Service agents with "dangerously expanded authority."

Treasury officials claim that there have been about 900 threats in recent years.

Republicans on the House Ways and Means Committee warn that as many as 16,500 new IRS auditors and investigators -- or 17 percent of the agency's current work force -- could be needed to administer and enforce new health insurance rules under the law.

That could mean more audits, confiscated refunds and incursions into details of individuals' health insurance plans -- all at a cost of up to $10 billion over 10 years, they said in a report published last week.

"When most people think of health care reform, they think of more doctor exams, not more IRS exams," said Rep. Kevin Brady, R-Texas, ranking member on the House Joint Economic Committee. "Isn't the federal government already intruding enough into our lives?"

The Patient Protection and Affordable Care Act authorizes the IRS, the agency that collects taxes and enforces internal revenue laws in the U.S., to collect penalties imposed on individuals for not having health insurance, and on companies for not offering it when the mandates take effect in 2014.

But IRS Commissioner Douglas Shulman said taxpayers have nothing to fear.

"I think there have been some misconceptions out there," Shulman told a House committee last week, insisting the new law will not fundamentally alter the relationship between the agency and taxpayers.

Shulman said the new health care law puts the onus on taxpayers to report their insurance coverage on tax forms much as they report income and interest earnings.

"All that will happen with the IRS is similar to a current 1099, where a bank sends the IRS a statement that says 'here's the interest' someone owes, and they send it to the taxpayer," he said. "We expect to get a simple form that ... says this person has acceptable health coverage."

He said the Department of Health and Human Services will set guidelines for what constitutes "acceptable" health coverage.

But just how the mandate will be enforced if a taxpayer doesn't report coverage -- or reports unacceptable coverage -- is unclear. Details of how the provision will work, and IRS's role in how it will work, are still being determined.


Top Eco-Fascist Calls For End Of Freedom To Fight “Global Warming”

Population reduction enthusiast says “a few people with authority” should run the planet

A renowned environmentalist, known for his advocacy of population reduction as a means of offsetting climate change, has called for “a more authoritative world” where freedom comes second to tackling what he sees as the devastating effects of global warming.

Futurist James Lovelock, tells the London Guardian that he believes “It may be necessary to put democracy on hold for a while,” in order to save humanity.

“We need a more authoritative world.” Lovelock states.

“We’ve become a sort of cheeky, egalitarian world where everyone can have their say. It’s all very well, but there are certain circumstances – a war is a typical example – where you can’t do that.” the 90 year old proponent of the Gaia hypothesis adds.

“You’ve got to have a few people with authority who you trust who are running it. And they should be very accountable too, of course.”

“But it can’t happen in a modern democracy. This is one of the problems. What’s the alternative to democracy? There isn’t one. But even the best democracies agree that when a major war approaches, democracy must be put on hold for the time being. I have a feeling that climate change may be an issue as severe as a war. It may be necessary to put democracy on hold for a while.” Lovelock concludes.

Which “people with authority” could Lovelock have in mind for this tyrannical takeover in the name of mother Earth? Certainly not the disgraced UN affiliated climate scientists, whose involvement in several recent scandals even Lovelock admits is reprehensible:

“Fudging the data in any way whatsoever is quite literally a sin against the holy ghost of science. I’m not religious, but I put it that way because I feel so strongly. It’s the one thing you do not ever do. You’ve got to have standards.” he states in the interview.

Lovelock also has little faith in renewable energies, carbon trading or cap and tax schemes, which he previously told the New Scientist are “verging on a gigantic scam”:

Carbon trading, with its huge government subsidies, is just what finance and industry wanted. It’s not going to do a damn thing about climate change, but it’ll make a lot of money for a lot of people and postpone the moment of reckoning. I am not against renewable energy, but to spoil all the decent countryside in the UK with wind farms is driving me mad. It’s absolutely unnecessary, and it takes 2500 square kilometres to produce a gigawatt – that’s an awful lot of countryside.

Lovelock repeats this sentiment in his latest interview with the Guardian, noting:

I don’t know enough about carbon trading, but I suspect that it is basically a scam. The whole thing is not very sensible. We have this crazy idea that we are setting an example to the world. What we’re doing is trying to make money out of the world by selling them renewable gadgetry and green ideas. It might be worthy from the national interest, but it is moonshine if you think what the Chinese and Indians are doing [in terms of emissions].

So, perhaps Lovelock would point to his friends at The Optimum Population Trust, a notorious UK-based public policy group that campaigns for a gradual decline in the global human population to what it sees as a “sustainable” level.

Lovelock became a patron of the thinktank in 2009. In a statement released by the trust to mark the appointment, Lovelock called on the environmental movement as a whole to “recognise the truth and speak out” on the link between rising human numbers and global warming.

Lovelock said: “Those who fail to see that population growth and climate change are two sides of the same coin are either ignorant or hiding from the truth. These two huge environmental problems are inseparable and to discuss one while ignoring the other is irrational.”

He added: “How can we possibly decrease carbon emissions and land use while the number of emitters and the space they occupy remorselessly increases? When will the environmentalists who claim to be green recognise the truth and speak out?”

So, essentially Dr Lovelock advocates the destruction of freedom in order that an overriding authoritative global power can oversee the radical stemming of the planet’s human population – nice.

Roger Martin, chair of OPT, said of Lovelock’s appointment: “We desperately need to remember that future population growth is not a ‘fact’ to be passively accepted but something over which we have control, and that limiting it could therefore play a major role in curbing emissions. Tragically, the green movement has chosen to forget this. With the help of eminent individuals such as James Lovelock, we will do our best to remind them.”

The OPT also has as patrons controversial primatologist and environmentalist Jane Goodall, who thinks that caging chimps and other apes is better for them than letting them live free in the wild; Professor Aubrey Manning, president of the UK’s Wildlife Trusts; and Sir Crispin Tickell, the ex-diplomat credited with the “greening” of former Prime Minister Margaret Thatcher.

The OPT also boasts as a patron BBC darling wildlife broadcaster and film-maker Sir David Attenborough, who has called for a one child policy like that of Communist China to be implemented in Britain. The proposal is one of the OPT’s main initiatives.

The think tank is also home to Jonathon Porritt, former chair of the UK Sustainable Development Commission, one of Prime Minister Gordon Brown’s leading green advisers, who has stated that Britain’s population must be cut in half from around 60 million to 30 million if it is to build a sustainable society.

We have exhaustively exposed the nonsense behind the idea that the Earth’s current population levels are exceeding sustainable levels and are contributing to devastating climate change, however, Lovelock and his ilk at the OPT remain in positions of influence.

Lovelock is also an ardent advocate of geoengineering the planet in the name of controlling the climate. In 2007 Lovelock proposed laying vast swathes of pipes under the world’s oceans in order to pump water from the bottom of the seas – rich in nutrients, but mostly dead – to the top. The idea being that the action would encourage algae to breed, absorb more carbon and release more dimethyl sulphide into the atmosphere, a chemical known to seed sunlight reflecting clouds.

Effectively, Lovelock wants to try and block out the sun, the source of all life on this planet – nice.

Lovelock is also a member of The Royal Society of Edinburgh, an organization that has thrown its full weight behind the global warming movement, lending its absolute support for legislation aimed at reducing carbon emissions by 80%, a process that will devastate the global economy and living standards.

This organization has been even more vehement than national governments in its advocacy of the man-made cause of global warming, calling for such drastic CO2 cuts to be made in the short term, not even by the usual target date of 2050.

“In his most recent book The Vanishing Face of Gaia, Lovelock concludes that the damage caused by overpopulation, species decline and carbon emissions is already so great that modern civilisation is finished.” notes James Delingpole at the London Telegraph.

“Before the end of this century, he argues, rising sea levels and overheating will have rendered whole swathes of our planet uninhabitable and such few survivors as there are will have to make do as best they can.” Delingpole adds.

Lovelock, The Royal Society and the OPT may sound like crazy nutcases, but unfortunately for us, they are extremely influential within the environmental movement. They are also far from alone in their thinking.

Mass sterilization, one child policies and a“Planetary Regime” with the power of life and death were all core concepts put forth by John P. Holdren, the man now in control of science policy in the United States, in his co-authored 1977 book, Ecoscience.

Holdren and his colleagues are now at the forefront of efforts to combat “climate change” through similarly insane programs focused around geoengineering the planet. As we reported in April 2009, Holdren advocates “Large-scale geoengineering projects designed to cool the Earth,” such as “shooting pollution particles into the upper atmosphere to reflect the sun’s rays,” which many have pointed out is already occurring via the spraying of chemtrails.

Is Holdren another one off mad kook that has somehow wormed his way into a position of great influence? Not according to leading NASA scientist Dr. James Hansen, who fully endorses Holdren’s view that industrial civilization should be destroyed to save the planet.

The same talking points raised by the OPT and James Lovelock have been re-iterated again and again by public policy groups and environmentalists, as well as the most influential scientists in the US government.

While you and I may think the notions of sterilization and depopulation could never be accepted by the public, those very concepts are now being embraced and popularized as the way forward for humanity.

Linking environmental policy to depopulation agendas opens the door to eugenics and it is no surprise that through that door have come pouring hordes of elitist filth just begging to be on the front line of the extermination policy.

While they peddle their insane proposals, backed by rampant fearmongering over climate change on behalf of our governments and the mainstream media, it is we who are charged with saving the planet and our place on it by exposing their nefarious agenda of mass depopulation before it is too late.

Sell-off in US Treasuries raises sovereign debt fears

Investors are braced for a further sell-off in US Treasuries after dramatic moves last week raised fears that the surfeit of US government debt is starting to saturate bond markets.

The yield on 10-year Treasuries – the benchmark price of global capital – surged 30 basis points in just two days last week to over 3.9pc, the highest level since the Lehman crisis. Alan Greenspan, ex-head of the US Federal Reserve, said the abrupt move may be "the canary in the coal mine", a warning to Washington that it can no longer borrow with impunity. He said there is a "huge overhang of federal debt, which we have never seen before".

David Rosenberg at Gluskin Sheff said Treasury yields have ratcheted up 90 basis points since December in a "destabilising fashion", for the wrong reasons. Growth has not been strong enough to revive fears of inflation. Commodity prices peaked in January and US home sales have fallen for the last three months, pointing to a double-dip in the housing market.

Mr Rosenberg said the yield spike recalls the move in the spring of 2007 just as the credit system started to unravel. "The question is how the equity market is going to handle this back-up in rates," he said.

The trigger for last week's sell-off was poor demand at Treasury auctions, linked to the passage of the Obama health care reform. Critics say it will add $1 trillion (£670bn) to America's debt over the next decade, a claim disputed fiercely by Democrats.

It is unclear whether China is selling US Treasuries after cutting its holdings for three months in a row, or what its motive may be. There are concerns that Beijing may be sending a coded message before the US Treasury rules next month on whether China is a "currency manipulator", though experts say China is clearly still buying dollar assets because it is holding down the yuan against the greenback. Some investors may be selling Treasuries as a precaution against a trade spat.

Looming over everything is the worry that markets will not be able to absorb the glut of US debt as the Fed winds down its policy of bond purchases, starting with an exit from mortgage-backed securities. It currently holds a quarter of the $5 trillion of the MBS market.

The rise in US bond yields has set off mayhem in the 10-year US swaps markets. Spreads turned negative last week, touching the lowest level in 20 years. The effect was to drive credit costs for high-grade companies such as Berkshire Hathaway below that of the US government. This may have been a technical aberration.

Hillary slams Canada, leaves Arctic summit

US Secretary of State Hillary Clinton slammed Canada Monday for not inviting Sweden, Finland, and Iceland for the Arctic summit held near Ottawa and made an early exit from the gathering.

Attended by foreign ministers of Canada, Denmark, Russia, the US and Norway, the summit was organized to discuss the future of the resource-rich Arctic region which contains one fourth of the world's oil and gas reserves as well as unfathomed mineral wealth.

As global warming leads to melting of Arctic ice, a virtual scramble has broken among coastal countries - Canada, Russia, the US, Norway, Sweden, Greenland, Finland, Iceland and Denmark - for control of its oil and gas, minerals and fresh water.

Upset over Canada's decision not to invite Sweden, Finland and Iceland, Hillary Clinton didn't attend the closing news conference and left.

'Significant international discussions on Arctic issues should include those who have legitimate interests in the region. We need all hands on deck because there is a huge amount to do, and not much time to do it.

'What happens in the Arctic will have broad consequences for the earth and its climate. The melting of sea ice, glaciers and permafrost will affect people and ecosystems around the world,'' Clinton said.

A report prepared by 40 experts from member countries of the Arctic council fears militarization of the Arctic region as different nations fortify their claims to its resources.

All Arctic nations have to submit their claims by 2013 to the UN which will then decide by 2020 which nation controls what parts of the Arctic bed.

But the expert report said the agreement might be far away, warning 'This is a world in which many international players anxiously move to outwit competitors and secure tomorrow's resources today. Political tensions are high and brinksmanship is the name of the game.'

To safeguard its future interests, Canada has decided to station eight naval ships and build a navy and an army base in its Arctic region. The Americans have already held military exercises in Alaska and the Russians too are flexing their military muscle.

State Debt Woes Grow Too Big to Camouflage

California, New York and other states are showing many of the same signs of debt overload that recently took Greece to the brink — budgets that will not balance, accounting that masks debt, the use of derivatives to plug holes, and armies of retired public workers who are counting on benefits that are proving harder and harder to pay.

And states are responding in sometimes desperate ways, raising concerns that they, too, could face a debt crisis.

New Hampshire was recently ordered by its State Supreme Court to put back $110 million that it took from a medical malpractice insurance pool to balance its budget. Colorado tried, so far unsuccessfully, to grab a $500 million surplus from Pinnacol Assurance, a state workers’ compensation insurer that was privatized in 2002. It wanted the money for its university system and seems likely to get a lesser amount, perhaps $200 million.

Connecticut has tried to issue its own accounting rules. Hawaii has inaugurated a four-day school week. California accelerated its corporate income tax this year, making companies pay 70 percent of their 2010 taxes by June 15. And many states have balanced their budgets with federal health care dollars that Congress has not yet appropriated.

Some economists fear the states have a potentially bigger problem than their recession-induced budget woes. If investors become reluctant to buy the states’ debt, the result could be a credit squeeze, not entirely different from the financial strains in Europe, where markets were reluctant to refinance billions in Greek debt.

“If we ran into a situation where one state got into trouble, they’d be bailed out six ways from Tuesday,” said Kenneth S. Rogoff, an economics professor at Harvard and a former research director of the International Monetary Fund. “But if we have a situation where there’s slow growth, and a bunch of cities and states are on the edge, like in Europe, we will have trouble.”

California’s stated debt — the value of all its bonds outstanding — looks manageable, at just 8 percent of its total economy. But California has big unstated debts, too. If the fair value of the shortfall in California’s big pension fund is counted, for instance, the state’s debt burden more than quadruples, to 37 percent of its economic output, according to one calculation.

The state’s economy will also be weighed down by the ballooning federal debt, though California does not have to worry about those payments as much as its taxpaying citizens and businesses do.

Unstated debts pose a bigger problem to states with smaller economies. If Rhode Island were a country, the fair value of its pension debt would push it outside the maximum permitted by the euro zone, which tries to limit government debt to 60 percent of gross domestic product, according to Andrew Biggs, an economist with the American Enterprise Institute who has been analyzing state debt. Alaska would not qualify either.

State officials say a Greece-style financial crisis is a complete nonissue for them, and the bond markets so far seem to agree. All 50 states have investment-grade credit ratings, with California the lowest, and even California is still considered “average,” according to Moody’s Investors Service. The last state that defaulted on its bonds, Arkansas, did so during the Great Depression.

Goldman Sachs, in a research report last week, acknowledged the pension issue but concluded the states were very unlikely to default on their debt and noted the states had 30 years to close pension shortfalls.

Even though about $5 billion of municipal bonds are in default today, the vast majority were issued by small local authorities in boom-and-bust locations like Florida, said Matt Fabian, managing director of Municipal Market Advisors, an independent consulting firm. The issuers raised money to pay for projects like sewer connections and new roads in subdivisions that collapsed in the subprime mortgage disaster.

The states, he said, are different. They learned a lesson from New York City, which got into trouble in the 1970s by financing its operations with short-term debt that had to be rolled over again and again. When investors suddenly lost confidence, New York was left empty-handed. To keep that from happening again, Mr. Fabian said, most states require short-term debt to be fully repaid the same year it is issued.

Some states have taken even more forceful measures to build creditor confidence. New York State has a trustee that intercepts tax revenues and makes some bond payments before the state can get to the money. California has a “continuous appropriation” for debt payments, so bondholders know they will get their interest even when the budget is hamstrung.

The states can also take refuge in America’s federalist system. Thus, if California were to get into hot water, it could seek assistance in Washington, and probably come away with some funds. Already, the federal government is spending hundreds of millions helping the states issue their bonds.

Professor Rogoff, who has spent most of his career studying global debt crises, has combed through several centuries’ worth of records with a fellow economist, Carmen M. Reinhart of the University of Maryland, looking for signs that a country was about to default.

One finding was that countries “can default on stunningly small amounts of debt,” he said, perhaps just one-fourth of what stopped Greece in its tracks. “The fact that the states’ debts aren’t as big as Greece’s doesn’t mean it can’t happen.”

Also, officials and their lenders often refused to admit they had a debt problem until too late.

US healthcare reform is boon for India outsourcing companies

Mumbai – With 22 pen strokes, President Obama signed into existence not just a historic healthcare reform law but also monumental piles of paperwork: New member registration forms. More claims. Ever-expanding databases. And on top of that, pressure to cut costs.

The bulge in administrative work may look like a nightmare to American insurance firms and government employees. But to outsourcing executives here in India, it’s heaven-sent. A number of Indian companies are already anticipating an increase in workload thanks to Obama's healthcare law.

The addition of 32 million insured Americans is “very significant” for Indian outsourcers, says Ananda Mukerji, chief executive officer of Firstsource Solutions in Mumbai. Companies like his will see “increased opportunities” as US health insurers and hospitals scramble to reorganize to comply with the new law, he wrote in an email to the Monitor.

This extra work will include processing new enrollments, organizing bigger member databases, processing more claims, providing more support services, and managing more revenue, he says.

In particular, outsourcers can expect to benefit from insurers’ need to minimize administrative costs, Mr. Mukerji says, citing a recent Deloitte Center for Health Solutions study showing that up to 41 percent of the cost of a health plan is administrative.

The US healthcare reform offers a "natural extension" of the back-office outsourcing that Indian companies already specialize in, says Tu Packard, a senior economist with Moody's

Outsourcing comes to America But some services in the US healthcare industry cannot be outsourced beyond America's borders due to regulations. That’s one reason major Indian outsourcing firms have set up shop in the United States. In a twist, America's outsourcers are now outsourcing back to America.

In 2008, Bangalore-based Wipro opened a development center in Atlanta that employs 500 people, mostly Americans, and runs a call center for a US healthcare client. Tata Consultancy Services has set up a similar campus with 300 employees near Cincinnati. Infosys is planning a subsidiary in Dallas that will hire locals and seek US government contracts.

Wipro, one of the world's biggest information technology firms with nearly 100,000 employees worldwide, says the new healthcare law dovetails with two of its focus areas: servicing governments and servicing the healthcare industry. "The healthcare reform should translate to more demand," says Rajiv Shah, Wipro's senior vice president for healthcare.

Wipro plans to double its workforce at the Atlanta office by 2013 and open campuses in other cities, says Suraj Prakash, a vice president at the company. “There will be enough work to be done in the US.”

Loudoun County schools facing $19.3 million budget shortfall

The Loudoun County School Board faces an uphill climb as it seeks to restore nearly $20 million in funding stripped from its proposed operating budget this month.

On March 16, the Loudoun County Board of Supervisors identified about $30 million in school spending that it decided should be eliminated from the schools' operating budget.

Among the targeted items was $20 million in unspent funds from the previous year that the school system had wanted to carry over into the new budget. Supervisors also voted to slash $5.5 million that the school system had set aside to pay for a 1 percent pay raise for school employees.

In a budget work session Monday, supervisors voted to reinstate about $4.6 million in funds, taking into account updated figures related to a last-minute increase in state education aid.

Even with the new funds, the school system estimates that it has been left with a $19.3 million gap, or about 2.5 percent of its $765 million proposed operating budget. The school system had been seeking a $25 million increase in local tax funding from the county, which school officials said is necessary to accommodate enrollment growth.

School Board Chairman John Stevens (Potomac) said he was meeting with supervisors to try to persuade them to change their minds and restore the money. Otherwise, Stevens said, the school system might have to cut as many as 270 full-time positions, or 3 percent of its workforce, to make up the gap.

Stevens said the School Board is likely to draw from a list of cuts suggested by school staff members in January. Positions on the list include athletic directors, reading assistants, teaching assistants, middle school deans and substitutes. He said students might also lose field trips and be asked to pay larger fees to participate in sports.


Some county supervisors said in interviews last week that they were unlikely to change their votes.

"The majority of the board members feel there is room to cut in the budget without impacting the classroom," Supervisor Andrea McGimsey (D-Potomac) said.

The county's total proposed budget this year is $1.5 billion, including costs for the school system. County officials started this year's budget process with a projected $191 million shortfall because of declining property values.

County and school officials had also feared losing $34 million in state revenue. Under a proposal from outgoing governor Timothy M. Kaine (D), the state would have stopped a scheduled adjustment of the local composite index, the complex formula used to determine the cost of education in each locality and how much should be covered by local government.

Lobbying efforts by School Board members and a letter-writing campaign asking Richmond lawmakers to reverse its course succeeded. Instead of losing money, Loudoun is set to receive about $21 million in additional state aid related to the adjustment.

The county got another revenue boost when state lawmakers made a decision to allow the county to postpone contributions to the Virginia Retirement System for teachers and administrators, which yielded $29 million in unexpected funds. But in a series of votes over the past two weeks, county supervisors chose to keep the revenue in the county budget rather than passing it on to the schools, angering defenders of the school system.

Defending their moves, supervisors said they wanted to use the revenue to avoid deep cuts in county services, such as public safety and libraries. They also said they want to use the added revenue to hold down property tax rates, particularly when many Loudoun homeowners are losing jobs or bracing for foreclosure.

Supervisor Kelly Burk (D-Leesburg), who voted against the biggest school budget cuts, said there aren't enough votes to restore the funding.

"It's not worth bringing it back up again if you don't have the votes to change it," Burk said.

Stevens said he has met with supervisors Sally R. Kurtz (D-Catoctin) and Stevens Miller (D-Dulles) to try to build support for giving the school system more money.

"Right now, I haven't been given any information that would lead me to conclude that the best thing for Loudoun County would be to spend another $25 million on top of what we already allocated to the schools," Miller said.

For local officials, state budget was scripted by Stephen King

For county and municipal officials as well as board of education members reviewing the proposed state budget for fiscal year 2011 must be like flipping through a Stephen King mega-novel, each page bringing new horrors as they struggle to absorb the billion dollar plus cuts in state aid proposed by Gov. Christie.

Layoffs of teachers, police officers, and hundreds of other public employees, sharp cutbacks in school activities and municipal services, and increases in property taxes have become widespread as local officials scramble to cope with the loss of unprecedented amounts of state funding.

While the critical reaction from legislative Democrats and public employee union leaders was expected, rumblings of discontent have surfaced from Republicans as well, most notably Warren County State Sen. Michael Doherty.

Doherty possesses impeccable conservative credentials, but has voiced his concern that the state aid cuts were too much, too fast for municipalities and boards of education to deal with.

Particularly worrisome to Doherty and many of his Republican colleagues is the loss of more than a billion dollars in school aid funds, primarily in suburban districts represented by Republicans.

The proposed reductions in local aid have become the flash point as school districts came to the stunning realization that they stand to lose between 20 and 100 per cent of their funding.

While they welcome the pledge by the Governor to provide new or expanded authority to cut and control costs, most of the changes have yet to be enacted and the impact of others may not be fully felt for another year.

For municipalities and school boards, the difficulties they face are immediate.

They have or soon will feel the wrath of their constituents as they announce layoffs of police officers, firefighters, and teachers and pile the cutbacks in personnel and services atop triple digit dollar increases in property tax bills.

Christie has steadfastly maintained that the aid cuts are necessary because the state no longer has the financial resources to continue to spend as it has in the past and that the reductions will eventually result in a far more stable and responsible fiscal environment for government at all levels.

His recently called for public school teachers to accept a freeze on salaries, forego scheduled increases provided by contracts currently in force, and re-open contracts to identify givebacks and other cost-cutting steps.

Public employee unions and the leadership of the 200,000-member New Jersey Education Association know neither the Governor nor local governments can unilaterally impose a wage freeze or refuse to comply with contractual obligations. They have dismissed the Governor’s suggestion as one more skirmish in his running political battle with public employees.

The Governor’s view that the lack of discipline and responsibility in state budget operations produced the current distortion in the ratio of spending to revenues is both legitimate and accurate. Even his most outspoken critics concede his point.

He must, though, be experiencing some level of concern over Doherty’s comments, for example, as an indication that others feel much the same way.

Seeking legislative support for budget cutting is generally accepted. Asking Republicans in this case to vote against the best interests of their constituents, however, will meet with considerably greater resistance.

Democrats have already ratcheted up the pressure to reinstate the state income tax surcharge on incomes in excess of $400,000 and allocate all or some of the one billion dollars it generates to restoring state aid to local school districts. Senate President Steve Sweeney was unequivocal in his comments that the Legislature would not approve a budget without the surcharge, setting up a bitter and protracted confrontation and the possibility of another shutdown of state government by failing to produce a budget by the June 30 deadline.

Democrats argue that the years’ worth of relief the tax surcharge revenue provides to school districts will allow sufficient time to see them through this year and take full advantage of state-mandated cost cutting measures in 2011. The argument is bound to have some appeal, even to Republicans who are feeling the pressure from officials and taxpayers in their districts who will hold them accountable for property tax increases.

Christie has adamantly opposed the revival of the surcharge, calling it a tax increase that will further harm an economy in distress. He has also criticized it, with some justification, as an example of the kind of action which merely postpones facing up to problems and allows them to fester.

The Legislature has until the end of June to arrive at a consensus on the budget, three months guaranteed to be one of the most politically charged in recent memory.

Local officials may want to put aside the Stephen King novel they’ve been handed in favor of something a little more pleasant. Hopefully, it won’t turn out to be Hamlet; everyone dies in the end.
Carl Golden served as press secretary to Govs. Kean and Whitman and is a senior contributing analyst with the William J. Hughes Center for Public Policy at Stockton College.

Budget consultant predicts crisis in state general revenue

James R. Moody, a state fiscal consultant, is the featured speaker at the annual Fulton Area Development Corporation banquet Thursday evening. Moody talked about the tough economic times Missouri may suffer through during the 2012 fiscal year. (Joshua Vince/FULTON SUN photo)

The general revenue fiscal crisis facing Missouri's state government will grow much worse and more state employees in Cole and Callaway counties will lose their jobs this year, predicts James R. Moody, a Jefferson City state fiscal consultant and previous state budget director.

Moody was the featured speaker at Thursday night's annual banquet of the Fulton Area Development Corporation.

Moody said the drop in Missouri's general revenue tax collection receipts have been falling rapidly and will continue to do so.

Moody predicted "massive cuts in state funds and state job losses in Central Missouri -- and that's going to come in the next six months."

The enormity of the state fiscal crisis, Moody said, has been masked by the injection of federal stabilization money poured into the states during the last year.

If the federal government does not come through with another stabilization aid package for the states, "fiscal 2012 will be an absolute disaster," Moody said.

"The date of reckoning for the general revenue state budget has just been pushed out 12 to 18 months by using federal stabilization dollars to balance the state budget," Moody said.

Moody said during the 26-year period between 1975 and 2001 Missouri's government gained revenue each year.

But during the nine years from 2002 to 2010 the state has had four years with decreases in state revenue.

Rather than state general revenue taxes improving this summer, Moody said the situation is likely to grow worse. He said in the last fiscal year, Missouri's state general revenue tax collections fell 7 percent. This fiscal year, general revenue tax collections are already down another 12 percent in the first eight months.

Moody said the slight recovery in the stock market should not confuse people into thinking that economic recovery is just around the corner. He said firms making money now are accomplishing most of it by improving their bottom line through cutting costs and personnel rather than through improving top line sales and expansion, which is more indicative of economic activity.

"Look for unemployment to stay high for the next year," Moody said.

The state's general revenue estimate, Moody said, "has been falling like a rock." After revenue falling 7 percent in fiscal 2009, the revenue estimate for 2010 made in July of 2009 was a drop of 1 percent. But in October of 2009, the estimate was revised to a decrease of 4 percent. In January of 2010 the loss estimate was increased to 6.4 percent. And this month the estimate of the revenue loss has climbed to 9.6 percent.

This year the state's income tax withholdings are down 7.4 percent, reflecting the decline in the economy. People who pay estimated taxes for the year are down 30.1 percent for the first eight months of the year and sales taxes are down 7.2 percent for the first eight months of this year.

In 2006 the state had a surplus and spent $190 million less than general revenue collections of $7.33 billion. But for the 2010 fiscal year general revenue expenses already are $1.88 billion more than the $6.7 billion collected.

When general revenue went up so many consecutive years, budget planners began to expect growth to continue, even with cuts in revenue sources. One of the biggest changes that now cripples state revenue was the adoption in 1997 of a reduction in the state sales tax for groceries.

During a recession, people reduce purchases of optional or luxury items, but they still continue buying food. Sales tax collections would not drop as much if grocery items were taxed fully. Moody said other changes also weakened tax collections. The current economic downturn has been worsened because of the tax cuts provided earlier, he said.

Moody ticked off these recurring losses in annual state general revenue collections through previous tax rate reductions and exemptions from income and sales taxes:

* In 1998, about $68 million was lost when the dependent deduction was raised on the state income tax.

* In 1999 about $155 million was lost when the personal income tax exemption was increased.

* In 2007, about $127 million was lost when the state reduced income taxation of pensions.

* In 1980, about $190 million was lost when prescription drugs were exempted from sales tax collections. That same year another $192 million was lost through a reduction in sales taxes on domestic utilities.

* In 1997 about $210 million was lost when the sales tax on groceries was reduced.

* In 1998 about $70 million was lost through a reduction in the manufacturing sales tax.

* From 2005 to 2009 about $110 million was lost through a reduction in the motor vehicle sales tax.

Moody said 90 percent of the state's general revenue comes from income and sales taxes. The state income tax generates 66 percent of state general revenue and the sales tax accounts for 24 percent.

Rick Gohring, FADC board president, said Moody's assessment and prediction for the near term was frightening to him but he said people need to recognize the issue before they can deal with it.

Gohring said the broad-based group realizes the best chance for economic development in the Fulton area during an economic downturn will come not from new start-up companies but from existing local businesses that expand.

"We want to know what existing businesses need to grow, what are your challenges, where do you see competitive advantages, and how can the FADC facilitate your efforts to be successful," Gohring said.

Gohring said the FADC is seeking state certification for the industrial site at the Callaway Electric. The group also wants to identify and help market other available properties, boost Internet access in the county as well as work with appropriate authorities to offer attractive incentives for new development.

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Senate budget could siphon $44M of room tax from counties

The state Senate Ways and Means Committee yesterday produced its draft of the state budget, avoiding a broad-based tax increase but scooping hotel-room taxes from the counties to help close the state's $1.2 billion deficit.

The Senate's version comes in slightly higher than Gov. Linda Lingle's $10 billion supplemental budget request for the fiscal year that starts in July. But senators would trim $14 million from the $4.9 billion in general-fund spending over which lawmakers and the governor have the most control.

State Sen. Donna Mercado Kim, D-14th (Hālawa, Moanalua, Kamehameha Heights), the committee's chairwoman, opted against a 1 percentage point increase in the general excise tax that two other Senate committees advanced to help with the deficit.

Mercado Kim instead chose to take about half of the hotel room taxes that go to counties, transfer money from special funds and raise the barrel tax on petroleum products to generate new revenue to pair with spending cuts and balance the budget.

"The threat to our economy is too great," Mercado Kim said of a GET hike. "We cannot enact a policy today that would threaten businesses, especially small businesses that would lay off the very people we are trying to help."

Lingle and the state House also offered budget drafts that did not rely on a GET hike to lower the deficit, so if the full Senate follows Mercado Kim's recommendation, it would be unlikely that the broad-based tax increase would happen this session. A GET bill is still alive and pending in the House from last session, however, so it could theoretically be revived if lawmakers need it as an option.

State Sen. Rosalyn Baker, D-5th (W. Maui, S. Maui), said she expects lawmakers to hear from more people who support a GET increase once they see some of the revenue-generating ideas and cuts to state programs being considered as the alternative.

"There's a famous saying: it's never over until the fat lady sings," she said, arguing that a GET increase would be more equitable.

Mercado Kim decided to cap the share of the transient accommodations tax — commonly known as the hotel-room tax — that goes to counties at $50 million a year. The House's budget draft set the cap at $94 million a year, the amount counties receive today, so counties stand to lose $44 million a year under the Senate version.

Lingle had proposed taking all of the hotel-room tax revenue for the deficit.

"We needed it to balance our budget," Mercado Kim said afterward, adding that counties would still get about half of the money under her approach.

counties oppose

County mayors, in a joint statement, strongly opposed the Senate's decision. "Taking even half will put a significant financial burden on the counties and our taxpayers," the mayors said. "While we appreciate the severity of the state's financial condition and the difficult decisions that need to be made, we believe taking the counties' share of the TAT is not an answer.

"That being said, of the two proposals now alive at the Legislature, we obviously prefer the House position."

Big Island Mayor Billy Kenoi said the state and counties will not be able to solve budget shortfalls by "working at cross purposes with one another."

"It makes no sense for the Senate to grab the counties' money and make the state budget situation better, while making the counties budget situation worse. We represent exactly the same people," Kenoi said in a statement.

The Senate's draft also differs from the House on how to finance a reduction in teacher furloughs next school year. Mercado Kim would take $32.5 million from the state's hurricane relief fund and $33.5 million from the general fund to reduce 12 of 17 furlough days next school year. Senators expect teachers to make up the additional five furlough days through adjustments to planning days.

The House draft, by comparison, set aside $50 million in general-fund money to reduce teacher furloughs next school year.

Separate bills are moving that would tap the hurricane relief fund and rainy day fund as options for teacher furloughs. The state Board of Education and the Hawaii State Teachers Association have reached an agreement to end furloughs, but Lingle has a competing proposal and has said she would not release the money for the school board's and teachers' deal, so there is a stalemate.

The Senate also chose to preserve money in the state Department of Education's weighted student formula — which bases school spending on student need — rather than follow the House and make cuts that could increase class size.

The Senate, however, made a series of cuts to non-core functions at the department to free up general-fund money to reduce teacher furloughs.

The Senate draft also contains a $7.5 million reduction to the University of Hawai'i, compared with $10 million by the House.

different tactic

Mercado Kim would transfer $45 million from a variety of special funds and generate $22 million by raising the barrel tax to help with the deficit.

Her committee also wants to save money by closing one of the modules at Hālawa Correctional Facility, which could mean about 246 additional prisoners would be sent to the Mainland, where incarceration is cheaper.

The House draft of the budget was $41.2 million less than the governor's overall budget request, and $60.7 million less in general-fund spending. The Senate did not restore as many state positions as the House — targeting jobs in priority areas such as agriculture inspectors and security at Hawai'i State Hospital — and did not slash purchase of service contracts at the Department of Education and Department of Human Services.

The Senate Ways and Means Committee's draft now goes to the full Senate for a vote. House and Senate negotiators will then meet in conference committee on a final draft to send to Lingle.