Wednesday, December 30, 2009

Fox News dominates the ratings.

In the December 30, 2009 article "Fox News Channel establishes ratings dominance over rivals in 2009," Brett Michael Dykes reports that Fox broadcasts the ten most popular cable news programs:
Love 'em or loathe 'em, and there seems to be little in between, 2009 was a remarkable year for Fox News Channel. Despite being ensnared in seemingly weekly controversies involving accusations that its coverage of the Obama administration was laced with right-wing political bias, the year-end numbers are in, and they show Fox News establishing dominance over rivals CNN and MSNBC. In short, 2009 was the best year in the network's 13-year history.

According to Nielsen, the ten-most-watched cable news shows in 2009 were all Fox News programs. With conservative-leaning opinion shows like "The O'Reilly Factor," "Hannity," and "Glenn Beck" leading the way, Fox News' average daily prime time viewership rose 8 percent in the coveted 25-54 demographic from its 2008 level. Also, the network's straight news programs, "Special Report with Bret Baier," "The Fox Report with Shepard Smith," "Studio B with Shepard Smith," and "Your World with Neil Cavuto," all scored their best years ever in 2009. In fact, every single show on the network saw a double-digit increase in ratings from 2008 in the 25-54 demographic.

Meanwhile, CNN, which has been positioning itself lately as cable news' voice of objectivity, and MSNBC, which has recently moved a bit further to the left, struggled comparatively in 2009. For the first time in its history, CNN ranked third in the 25-54 cable news prime time demographic, down 9 percent from 2008, while MSNBC dropped 3 percent in the same category but gained the second-place slot. Additionally, CNN and MSNBC ranked 23rd and 24th among all cable networks in total prime time viewership, while Fox News finished third overall behind only USA Network and ESPN.

Fox News' apparent rout in the 2009 cable news ratings race defies the expectations of media watchdogs and critics like Media Matters' Eric Boehlert, who predicted a "very rough" road for the network after charging that it had become a "broadcast partner with the (Bush) White House." The thinking behind most predictions of Fox News' demise was that the country's ideological shift to the left would cause the network to shed viewers.

"The point is that Fox News years ago made an obvious decision to appeal almost exclusively to Republican viewers," Boehlert wrote. "The good news then for Fox News was that it succeeded. The bad news now for Fox News is that it succeeded."

While predictions of its demise fell short, Fox News did weather numerous public relations storms in 2009. The network garnered stinging criticism on everything from Glenn Beck calling President Obama a racist and relentlessly promoting gold as an investment while working as paid spokesperson for a company that sells gold, to Sean Hannity altering footage of a conservative rally, to President Obama charging that the network was "entirely devoted to attacking" his administration.

Beck particularly enjoyed a meteoric rise to prominence on the national stage in 2009, partially by establishing himself as a bit of a political organizer of the "Tea Party" movement. An increasingly polarizing figure, a recent Gallup poll placed Beck fourth among the most admired men by Americans, trailing only President Obama, former President George W. Bush and South African leader Nelson Mandela. Media Matters, however, recently bestowed Beck with the dubious distinction of being 2009's "Misinformer of the Year."

Irrespective of the broad spectrum of opinions about the channel and its on-air personalities, Fox News scored a ratings bonanza in 2009, a ratings bonanza that appears to prove that being the voice of the opposition is actually much better for business than a lot of people thought it would be.

Tuesday, December 29, 2009

Consumer confidence rises in December, but is still weak.

In the December 29, 2009 article "Consumer confidence rises in Dec, but still weak," Associated Press retail writer Anne D'Innocenzio reports:
NEW YORK – Americans are ending 2009 feeling better about the economy than when the year began, buoyed by optimism that job prospects will improve in the first half of 2010.

Consumer expectations for the job market reached their highest level in two years, but most people remain downbeat about their current prospects, according to a monthly survey released Tuesday. The survey also showed fewer people plan to buy automobiles and homes in the next six months compared with November.

"This doesn't mean that the economy isn't getting better, but it does raise doubts on how much actual improvement in the economy we've actually seen," said Mark Vitner, senior economist for Wells Fargo Securities in Charlotte, N.C.
If past recoveries from recession are a guide, the rebound of confidence will take many more months.

The Conference Board's Consumer Confidence Index rose in December for the second month in a row, to 52.9, from a revised 50.6 in November.

That's slightly higher than the 52.0 prediction of economists surveyed by Thomson Reuters, but still far short of the 90 that would signify a solid economy.

Economists watch the confidence numbers closely because consumer spending on goods and services accounts for about 70 percent of U.S. economic activity as measured by the federal government.

Without a marked turnaround in the job market, consumers will continue to "hunker down" and confidence will remain low, Vitner said.

The unemployment rate dipped in November to 10 percent, from a 26-year high of 10.2 percent in October. Some analysts worry it will start climbing again in coming months, perhaps rising as high as 10.5 percent next summer.

An uneven housing market is unlikely to help. The closely watched Case-Shiller home price index released Tuesday showed that a national index of home prices rose for the fifth month in a row in October, but only 11 of the 20 metro areas tracked showed gains.

The consumer confidence index hit a historic low of 25.3 in February after registering 37.4 in January and enjoyed a three-month climb from March through May, fueled by signs that the economy might be stabilizing.

Since June, it has bounced along anemically between 47 and 55 as rising unemployment has taken a toll.

The bright spot in December's confidence index was consumers' six-month outlook, which rose from 70.3 to 75.6, the highest level since December 2007. But the other main component, which measures shoppers' current assessment, fell to 18.8 from 21.2. That level remains at a 26-year low.

"Regarding income, however, consumers remain rather pessimistic about their short-term prospects, and this will likely continue to play a key role in spending decisions in early 2010," Lynn Franco, director of The Conference Board Consumer Research Center.

The survey revealed that the proportion of consumers anticipating an increase in their incomes declined from 10.9 percent to 10.3 percent.

The economy's health is riding on consumers. The overall economy as measured by the gross domestic product grew at an annual rate of 2.2 percent in the July-September quarter. That was the first positive performance for GDP after four consecutive quarters of decreases, and it marked the strongest sign to date that the recession that started in December 2007 has ended.

Economists expect GDP to show even stronger growth in the current October-December quarter, but the recovery could sputter in coming months if consumers, worried about jobs, decide to cut spending.

The problem is that it can take a long time for confidence to rebound. During the last recession in 2001, it took about two years for confidence to climb back to a healthier level of 90. The index peaked at 144.7.

In the early 1990s, it took three years for confidence to rebound to healthier levels because the economy was in a jobless recovery, similar to what's currently playing out.

The slight improvement in consumer sentiment could be seen in holiday shopping trends.

Shoppers spent a bit more than expected when adjusting for the extra selling day between Thanksgiving and Christmas this year, according to MasterCard Advisors' SpendingPulse, which track all forms of payment, including cash.

However, shoppers focused on practical items and bypassed gift cards, opting for discounted items instead.

Michelle Baran of Atlanta said the economy hit her hard because her boyfriend's pay was cut by 50 percent. The 43-year-old was at Atlanta's Lenox Square Mall on Tuesday returning clothes she had bought for herself.

"I feel like the economy is getting better," she said. "But the effects of the economy are still with me. I'm still being careful."

The Story of Stuff

So we are in this ridiculous situation where we go to work, maybe two jobs even, and we come home and we’re exhausted so we plop down on our new couch and watch TV and the commercials tell us “YOU SUCK” so gotta go to the mall to buy something to feel better, then we gotta go to work more to pay for the stuff we just bought so we come home and we’re more tired so you sit down and watch more T.V. and it tells you to go to the mall again and we’re on this crazy work-watch-spend treadmill and we could just stop.

- Annie Leonard, The Story of Stuff

Monday, December 28, 2009

GOP seizes on terror issue - and the post hoc ergo propter hoc fallacy of logic

In the December 28, 2009 Politico article "GOP seizes on terror issue," Glenn Thrush and Martin Kady II explain that Republicans want to make defense against terrorism a political issue. They warn that the attacks may backfire because of the Republicans' own spotty record.

Critics should be especially careful if they want to argue that the Christmas Day security screening failures are the fault of the Obama administration because it was in power when the lapses occurred. By that logic, the September 11, 2001 terrorist attacks should be blamed on President George W. Bush and his Republican administration. The point of emphasis is the fallacy of logic known as post hoc ergo propter hoc in which one assumes that because one event precedes another, the first event caused the second one. In this case, the (erroneous) reasoning is that because the Christmas Day attempted bombing occurred after Obama became President, then his ascendency to power must be the cause of the security failure. That is likely to be no more accurate than an assertion that Bush's ascendency in 2001 caused the 9/11 attacks.
Republicans have wasted no time in attacking Democrats on intelligence and screening failures leading up to the failed Christmas Day bombing of Flight 253 — a significant departure from the calibrated, less partisan responses that have followed other recent terrorist activity.

The strategy — coming as the Republican leadership seeks to exploit Democratic weaknesses heading into the 2010 midterms — is in many ways a natural for a party that views protecting the U.S. homeland as its ideological raison d’etre and electoral franchise.

President Obama’s GOP critics have been emboldened during the past 48 hours by the stumbling initial response of Homeland Security Secretary Janet Napolitano, who spent Monday retracting her Sunday claim that “the system worked” in the aftermath of Umar Farouk Abdulmuttalab’s near takedown of a jet ferrying nearly 300 people from Amsterdam to Detroit.

“In the past six weeks, you’ve had the Fort Hood attack, the D.C. Five and now the attempted attack on the plane in Detroit … and they all underscored the clear philosophical difference between the administration and us,” said Rep. Pete Hoekstra (R-Mich.), the ranking Republican on the House Intelligence Committee.

“I think Secretary Napolitano and the rest of the Obama administration view their role as law enforcement, first responders dealing with the aftermath of an attack,” Hoekstra told POLITICO. “And we believe in a forward-looking approach to stopping these attacks before they happen.”

Sen. Jim DeMint (R-S.C.) went even further, telling FOX News that the Christmas attack proved President Obama’s talk-to-your-enemies approach might actually be encouraging terrorists.

“[S]oft talk about engagement, closing Gitmo, these things are not going to appease the terrorists,” he said. “They’re going to keep coming after us, and we can’t have politics as usual in Washington, and I’m afraid that’s what we’ve got right now with airport security.”

Obama didn’t address his critics during a brief appearance in Hawaii on Monday, saying only that "the American people should be assured that we are doing everything in our power to keep you and your family safe and secure during this busy holiday season. … As Americans, we will never give into fear and division."

A White House spokesman says the administration wants to avoid making the national security and terrorism a partisan issue.

“The president doesn't think we should play politics with issues like these. He hasn't. His response has been fact-based and appropriate and will continue to be as such,” said deputy White House press secretary Bill Burton.

But other Democrats say the GOP’s yuletide political offensive could backfire on Republicans, putting the spotlight on the party’s own less-than-spotless record on homeland security.

Exhibit A: DeMint’s controversial “hold” on Obama’s choice to lead the Transportation Safety Administration, Erroll Southers, which has left the agency leaderless during a critical period of reappraisal and potential reorganization.

“Considering that this group has been playing politics with the TSA for months, their new-found concern about safety seems a bit contrived,” said Rep. Anthony Weiner (D-N.Y.), who acknowledged “legitimate beefs” about lapses leading up to the Christmas Day bombing attempt.

DeMint says he’s blocking Southers because the top cop at Los Angeles International Airport hasn’t vowed to block TSA unionization. And spokesman Wes Denton said the agency is better off headless than with big labor running the nation’s airports.

“This is an important debate because many Americans don't want someone running the TSA who stands ready to give union bosses the power to veto or delay future security measures at our airports,” Denton said.

DeMint isn’t the only Republican raising concerns that Abdulmuttalab was allowed to board the plane despite being placed on a list of potentially dangerous foreign nationals and that he managed to escape detection despite carrying a large amount of explosive powder sewn into his underwear.

Early Monday morning, the House Republican Conference blasted an e-mail offering up a half-dozen GOP lawmakers to discuss national security — and to criticize the Obama White House.

Rep. Peter King (R-N.Y.), the top Homeland Security Committee Republican, criticized the Obama administration for not going public more quickly to reassure Americans that the skies are safe.

Hoekstra, for his part, blamed the president for “downplaying” the threat of terrorism and slammed the White House for failing to provide detailed bipartisan briefings.

Democrats, on the other hand, say they have plenty of ammunition for a homeland security counterattack.

Over the summer, 108 House Republicans voted against the final conference report of the 2010 appropriation bill for the Department of Homeland Security, which included funding for explosives detection systems and other aviation security measures.

The no voters cited a procedural dispute over the appropriations process. They included Minority Leader John Boehner (R-Ohio), Hoekstra and a who’s who of big-name House Republicans: Reps. Mike Pence, Michelle Bachmann (R-Minn.), Marsha Blackburn (R-Tenn.), Darrell Issa (R-Calif.) and Joe Wilson (R-SC).

The conference bill included more than $4 billion for "screening operations," including $1.1 billion in funding for explosives detection systems, with $778 million intended for buying and installing the systems.

“It’s a base political calculation,” said one senior House Democratic aide. “It’s risky to play politics with something like this. The morning after [the attempted bombing], Republicans had already drawn a bright line on this.”

In June, both parties overwhelmingly backed Utah Republican Rep. Jason Chaffetz, who inserted an amendment into the House's massive Homeland Security appropriations bill barring the use of full-body image scans as "primary" screening tools at airports.

The amendment, which died in the Senate, passed the House on a bipartisan 310 to 118 vote, with conservative libertarians joining liberals, all decrying the scans as a major invasion of privacy.

It would also have given passengers the option of getting a pat-down — which might have also detected the Christmas bomb — while banning the storage and copying of the images, which show a virtual picture of a person's naked body.

The measure was little-noticed at the time, but it could have a big impact if the Obama administration follows through on its pledge to increase such imaging, which experts say could have detected the explosives hidden on the body of the would-be airplane bomber.
Chaffetz, for his part, doesn’t regret the amendment, telling the Salt Lake Tribune, "It's a difficult balance between protecting our civil liberties and protecting the safety of people on airplanes," adding, “I believe there's technology out there that can identify bomb-type materials without necessarily overly invading our privacy."

In the coming days, GOP criticism of the administration’s actions may give way to a louder, if more decorous din from Democrats questioning security procedures here and abroad.

A handful of key congressional chairmen have already scheduled hearings to see what did go wrong on that Northwestern Airlines flight.

Sen. Joe Lieberman (I-Conn.), who chairs the Senate Homeland Security and Government Affairs Committee, says his panel will investigate how the attempted bomber slipped through security and screening procedures.

"I view Umar Farouk Abdulmutallab as a terrorist who evaded our homeland security defenses and who would have killed hundreds of people if the explosives he tried to detonate had worked," Lieberman said.

"What we know about the Abdulmutallab case raises two big, urgent questions that we are holding this hearing to answer: Why aren't airline passengers flying into the U.S. checked against the broadest terrorist database, and why isn't whole body scanning technology that can detect explosives in wider use?"

One of the most important characteristics of personal investments is the real rate of return (i.e., the nominal rate of return adjusted for inflation)

In the December 28, 2009 New York Times article "At Tiny Rates, Saving Money Costs Investors," Stephanie Strom reports that savers lose purchasing power when the inflation rate exceeds the nominal rate of return. Thus, one of the most important characteristics of personal investments is the real rate of return (i.e., the nominal rate of return adjusted for inflation).
Millions of Americans are paying a high price for a safe place to put their money: extremely low interest rates on savings accounts and certificates of deposit.

The elderly and others on fixed incomes have been especially hard hit. Many have seen returns on savings, C.D.'s and government bonds drop to niggling amounts recently, often costing them money once inflation, fees and taxes are considered.

"Open a Savings Plus Account today and get a great rate," read an advertisement in the Dec. 16 Newsday for Citibank, which was then offering 1.2 percent for an account. (As low as it was, the offer was good only for accounts of $25,000 and up.)

"They're advertising it in the papers as if they're actually proud of that," said Steven Weisman, a title insurance consultant in New York. "It's a joke."

The advertised rate for the Savings Plus account has expired, according to the bank's Web site; as of Friday, the account paid an interest rate of 0.5 percent. The bank's highest-yield savings account, the Ultimate, was paying 1.01 percent.

The best deal Mr. Weisman has found is 2 percent on a one-year certificate of deposit offered by ING Direct, an online bank that has become a bit of a darling among the fixed-income crowd.

Interest on one- and two-year Treasury notes was just 0.40 percent and 0.89 percent, as of Monday. Bank of America offers 0.35 percent on a standard money market account with $10,000 to $25,000, and Wells Fargo will pay 0.05 percent on a basic savings account.

Indeed, after fees are subtracted, inflation is accounted for and taxes are paid, many investors in C.D.'s, government bonds and savings and money market accounts are losing money. In fact, Northern Trust waived some $8 million in fees on money market accounts because they would have wiped out all interest, and then some.

"The unemployment situation and the general downturn in the economy had an impact, but what's going to happen now as C.D.'s mature is that retirees and the elderly are going to take anywhere from a half to three-quarters of a percent cut in their incomes," said Joe Parks, a retired accountant in Houston on the advisory board of Better Investing, an organization that works to help people become savvier investors. "It's a real problem."

Experts say risk-averse investors are effectively financing a second bailout of financial institutions, many of which have also raised fees and interest rates on credit cards.

"What the average citizen doesn't explicitly understand is that a significant part of the government's plan to repair the financial system and the economy is to pay savers nothing and allow damaged financial institutions to earn a nice, guaranteed spread," said William H. Gross, co-chief investment officer of the Pacific Investment Management Company, or Pimco. "It's capitalism, I guess, but it's not to be applauded."

Mr. Gross said he read his monthly portfolio statement twice because he could not believe that the line "Yield on cash" was 0.01 percent. At that rate, he said, it would take him 6,932 years to double his money.

Many think the Federal Reserve is fueling a stock market bubble by keeping rates so low that investors decide to bet on stocks instead. Mr. Parks of Better Investing moved more money into the stock market early this year, when C.D.'s he held began maturing and he could not nearly recover the income they had generated by rolling them over.

He began investing some of the money in blue chip stocks with a dividend yield of at least 3 percent and even managed to find an oil-and-gas limited partnership that offered 8 percent.

Mr. Parks said, however, that he would not pursue that strategy as more of his C.D.'s matured. "What worked in the first quarter of this year isn't as relevant, because the market has come up so much," he said.

No one is advising a venture into higher-risk investments. Katie Nixon, chief investment officer for the northeast region at Northern Trust, said that, in general, "no one should be taking risks with their pillow money."

"What people are paying for is safety and security," she said, "and that's probably just right."

People who rely on income from such investments for support, however, are being forced to consider new options.

Eileen Lurie, 75, is taking out a reverse mortgage to help offset the decline in returns on her investments tied to interest rates. Reverse mortgages have a checkered reputation, but Ms. Lurie said her bank was going out of its way to explain the product to her.

"These banks don't want to be held responsible for thousands of seniors standing in bread lines," she said.

Such mortgages allow people who are 62 and older to convert equity in their homes into cash tax-free and without any impact on Social Security or Medicare payments. The loans are repaid after death.

"If your assets aren't appreciating and aren't producing any income, you're getting eaten up in this interest rate environment," said Peter Strauss, a lawyer who advises the elderly. "A reverse mortgage is one way of making a very large asset produce income."

Eve Wilmore, 93, has watched returns on her C.D.'s drop to between 1 percent and 2 percent from about 5 percent a year or so ago. Yet the Social Security Administration recently raised her Medicare Part B premium based on those higher rates she had been earning. "I'm being hit from both sides," Mrs. Wilmore said. "There's some way I can apply for a reconsideration, and I'm going to fight it. I have to."

She said she was reluctant to redeploy her money into higher-risk investments. "I don't know what my medical bills will be from here on in, and so I want to keep the money where I can get to it easily if I need it," she said.

Peter Gomori, who taught a course on money and investing for Dorot, a nonprofit that offers services for the elderly, did not advise his students on investment strategies but said that if he had, he would probably have told them to sit tight.

"I know interest rates are very low for Treasury securities and bank products, but that isn't going to be forever," he said.

But investment professionals doubt rates will rise any time soon — or to any level close to those before the crash.

"What the futures market is telling me," Mr. Gross said, "is that in April 2011, these savers that are currently earning nothing will be earning 1.25 percent."

Saturday, December 26, 2009

Even as economy mends, a jobless decade may loom

In the December 26, 2009 article "Even as economy mends, a jobless decade may loom," Associated Press economics writer Jeannine Aversa reports the United States could have high unemployment rates until at least 2015. Last year I cautioned that whoever won the 2008 U.S. Presidential election would endure a prolonged economic slowdown and would probably receive more blame than he or she deserves. We will see.
WASHINGTON (AP) -- Call it the Terrible Teens.

The decade ahead could be a brutal one for America's unemployed -- and for people with jobs hoping for pay raises.

At best, it could take until the middle of the decade for the nation to generate enough jobs to drive down the unemployment rate to a normal 5 or 6 percent and keep it there. At worst, that won't happen until much later -- perhaps not until the next decade.

The deepest and most enduring recession since the 1930s has battered America's work force.

The unemployed number 15.4 million. The jobless rate is 10 percent. More than 7 million jobs have vanished. People out of work at least six months number a record 5.9 million. And household income, adjusted for inflation, has shrunk in the past decade.

Most economists say it could take at least until 2015 for the unemployment rate to drop down to a historically more normal 5.5 percent. And with the job market likely to stay weak, some also foresee another decade of wage stagnation.

Even though the economy will likely keep growing, the pace is expected to be plodding. That will make employers reluctant to hire. Further contributing to high unemployment is the likelihood of more people competing for jobs, baby boomers delaying retirement and interest rates edging higher.

All this would come after a decade that created relatively few jobs: a net total of just 464,000. By contrast, 21.7 million new jobs were generated between 1989 and 1999.

Economist David Levy, chairman of the Jerome Levy Forecasting Center, says the country faces a new era of chronically high unemployment, averaging 8 percent or more over the next decade.

The "New Abnormal," he calls it.

Levy thinks the New Abnormal also means average pay will dwindle, along with consumer prices. That would make it harder for households to pay down debt, he warns.

By the Federal Reserve's reckoning, the jobless rate could remain as high as 7.6 percent in 2012. And it would take two or three years after that for the job market to return to normal, the Fed says.

It's possible jobs won't return to pre-recession levels at any point over the next 10 years, Levy says.

That's mainly because the economy's recovery, sluggish by historical standards, isn't expected to regain its vigor over the next few years. As a result, companies will be in no rush to ramp up hiring.

Other analysts think the economy will recover the jobs wiped out by the recession by 2013 or 2014 but that the unemployment rate will stay high. They note that the healing economy will cause more people to stream back into the labor force, vying for too-few jobs.

In addition, baby boomers whose retirement accounts have shrunk could put off retiring and stay in the work force longer. That would leave fewer positions available for the unemployed.

Other contributing forces -- businesses squeezing more work from employees they still have and relying more on part-time and overseas help -- have intensified. And record-high federal budget deficits and the threat of inflation could drive up interest rates, which could hobble growth and restrict job creation.

All those factors could combine to keep unemployment high.

"It will be the mother of all jobless recoveries," predicts economic historian John Steel Gordon.

On the other hand, it's possible some technological innovation not yet envisioned could generate a wave of jobs. Yet at the moment, most economists aren't betting that any such breakthroughs will rescue the labor market.

The last time the jobless rate reached double digits, in the early 1980s, it took six years to bring it down to normal levels.

Unemployment hit a post-World War II high of 10.8 percent at the end of 1982 as the country was emerging from a severe recession. The rate fell to around 5 percent in 1988. It took less than two years for the number of jobs to return to its pre-recession level.

In this recovery, the economy is far more fragile.

Hard-to-get credit is exerting a drag. Wounds from the banking system's worst crisis since the Great Depression will take years to fully heal. People and companies, scarred by the crisis, are likely to restrain borrowing, spending and investing.

Some analysts think the jobless rate might have already peaked at 10.2 percent in October. But most economists predict the rate will peak at around 10.5 percent by the middle of next year.

"We are digging out of a very deep hole," says Lynn Reaser, chief economist at Point Loma Nazarene University in San Diego and chief economist for the National Association for Business Economics.

Reaser estimates it will take until 2015 for the unemployment rate to drop to 5.5 percent.

A sputtering job market carries other consequences. One is flat wages. When many people compete for few jobs, employers have no incentive to raise pay.

The economic shocks of the past decade already have cut into Americans' incomes. That's among the reasons why people feel they're standing still economically.

Median household income, adjusted for inflation, fell to $50,303 in 2008, according to the U.S. Census. That gauge combines wages and salaries, investment income and government benefit payments like Social Security. It's down 4 percent from a peak of $52,587 in 1999, when incomes were bolstered by stock gains from the dot-com boom.

That bubble burst in 2000. Since then, workers have seen meager wage gains. Adjusted for inflation, wages grew about 13 percent in the past 10 years -- the slowest pace in five decades, according to calculations made by Scott Hoyt of Moody's

That trend is predicted to continue.

"There will be a continued hollowing-out of the middle class," says H.W. Brands, a historian at the University of Texas.

He points to productivity growth, which has let companies produce more with leaner work forces, the offshoring of service-sector jobs and the shrinking of factory jobs.

That's why Vicki Adriano, 51, who works at a General Motors plant in Lordstown, Ohio, looks ahead to the coming decade with trepidation.

The economic wreckage of the past year means she'll probably have to work longer than she had expected at the factory-- at least seven more years. She frets about the loss of economic security.

"Everything you worked for all those years can be gone in a minute," she says.

Friday, December 25, 2009

Democrats see GOP hypocrisy in health care debate

In the December 25, 2009 article "Democrats see GOP hypocrisy in health care debate," Associated Press writer Charles Babington reports on the hypocrisy of Republican criticism of Democratic health care proposals that add to the federal budget deficit when their own proposals from a few years ago are a significant contributor to the public debt.
WASHINGTON – Republican senators attacking the cost of a Democratic health care bill showed far different concerns six years ago, when they approved a major Medicare expansion that has added tens of billions of dollars to federal deficits.

The inconsistency — or hypocrisy, as some call it — has irked Democrats, who claim that their plan will pay for itself with higher taxes and spending cuts and cite the nonpartisan Congressional Budget Office for support.

By contrast, when Republicans controlled the House, Senate and White House in 2003, they overcame Democratic opposition to add a deficit-financed prescription drug benefit to Medicare. The program will cost a half-trillion dollars over 10 years, or more by some estimates.

With no new taxes or spending offsets accompanying the Medicare drug program, the cost has been added to the federal debt.

All current GOP senators, including the 24 who voted for the 2003 Medicare expansion, oppose the health care bill that's backed by President Barack Obama and most congressional Democrats. Some Republicans say they don't believe the CBO's projections that the health care overhaul will pay for itself. As for their newfound worries about big government health expansions, they essentially say: That was then, this is now.

Six years ago, "it was standard practice not to pay for things," said Sen. Orrin Hatch, R-Utah. "We were concerned about it, because it certainly added to the deficit, no question." His 2003 vote has been vindicated, Hatch said, because the prescription drug benefit "has done a lot of good."

Sen. George Voinovich, R-Ohio, said those who see hypocrisy "can legitimately raise that issue." But he defended his positions in 2003 and now, saying the economy is in worse shape and Americans are more anxious.

Sen. Olympia Snowe, R-Maine, said simply: "Dredging up history is not the way to move forward." She noted that she fought unsuccessfully to offset some of President George W. Bush's deep tax cuts at the time.

But for now, she said, "it's a question of what's in this package," which the Senate passed Thursday in a party-line vote. The Senate bill still must be reconciled with a House version.

The political situation is different now, Snowe said, because "we're in a tough climate and people are angry and frustrated."

Some conservatives have no patience for such explanations.

"As far as I am concerned, any Republican who voted for the Medicare drug benefit has no right to criticize anything the Democrats have done in terms of adding to the national debt," said Bruce Bartlett, an official in the administrations of Ronald Reagan and George H.W. Bush. He made his comments in a Forbes article titled "Republican Deficit Hypocrisy."

Bartlett said the 2003 Medicare expansion was "a pure giveaway" that cost more than this year's Senate or House health bills will cost. More important, he said, "the drug benefit had no dedicated financing, no offsets and no revenue-raisers. One hundred percent of the cost simply added to the federal budget deficit."

The pending health care bills in Congress, he noted, are projected to add nothing to the deficit over 10 years.

Other lawmakers who voted for the 2003 Medicare expansion include the Senate's top three Republican leaders, all sharp critics of the Obama-backed health care plans: Mitch McConnell of Kentucky, Jon Kyl of Arizona and Lamar Alexander of Tennessee. Eleven Democratic senators voted with them back then.

The 2003 vote in the House was even more divisive. It resulted in a nearly three-hour roll call in which GOP leaders put extraordinary pressure on colleagues to back the prescription drug addition to Medicare. In the end, 204 Republicans and 16 Democrats voted for the bill.

Democrats certainly have indulged in deficit spending over the years. They say they have been more responsible over the last two decades, however. Bill Clinton's administration was largely constrained by a pay-as-you-go law, requiring most tax cuts or program expansions to be offset elsewhere with tax increases and/or spending cuts.

Clinton ended his presidency with a budget surplus. But it soon was wiped out by a sagging economy, the Iraq war, GOP tax cuts and the lapsing of the pay-as-you-go restrictions.

Obama and many Democrats in Congress have vowed to restore those restrictions. But they waived them this year for programs, including heavy stimulus spending meant to pull the economy from the severe recession of 2008-09.

The 2010 deficit is expected to reach $1.5 trillion, and the accumulated federal debt now exceeds $12 trillion. When the Republican-led Congress passed the Medicare expansion in 2003, the deficit was $374 billion, and was projected to hit $525 billion the following year, in part because of the new prescription drug benefit for seniors.

Some GOP lawmakers cite these numbers in arguing that their current worries about heavy government spending are legitimate, even if they voted for the deficit-financed Medicare bill in 2003.

But Judy Feder, an analyst with the Democratic-leaning Center for American Progress, said these Republicans had their chance and blew it. In the second Bush administration, she said, "there was a total elimination of any kind of pay-for responsibility."

Those responsible should now show some humility, she said.

Thursday, December 24, 2009

Does $1 million still mean you're rich?

In the December 24, 2009 Investopedia article "$1 Million: Does It Still Mean You're Rich?," Douglas Rice reports that "becoming a millionaire used to mean you were set for life, but that's not the case anymore."
Becoming a millionaire used to mean you were on top of the world. Nowadays, it means you are climbing up the ladder. While a million dollars is completely out of reach for many people, it's just a step along the way for many others. Why? Because it doesn't go as far as it used to.

The term millionaire has been synonymous with being rich ever since we became a country. The person most often credited to be the first American millionaire, Elias Hasket Derby, made his fortune as a privateer during the American revolution. Back then a millionaire did really mean rich.

Also, we all love round numbers. We love to see 1999 become 2000, and our odometer roll over to 100,000 miles. So it's only natural we would fixate on $1,000,000. It's a milestone with a lot of zeros. It's even got an additional comma. Now that's rich -- having two commas in your net worth! But what does that get you? Not as much as you would think.


Housing is where most people hold their largest chunk of wealth and with real estate falling considerably in many areas, some might think that the lifestyle a million dollars would provide would be luxurious. But that depends on where you live.

There are plenty of nice places to live that don't cost very much, but according to the California Association of Realtors, the median house price in Palo Alto, Los Altos, Manhattan Beach and Cupertino is over $1 million. The median price for the entire San Francisco Bay Area tops $500,000 and Orange County is right behind at just under that. And those are just averages, not even something special. While other areas of the country aren't nearly this expensive, being a millionaire in some areas just means you paid off the mortgage.


Another aspect of becoming a millionaire is not working. If you had a $1 million right now, could you retire and would your money last? This is a simple calculation. If you want to try to live off the interest and you invest the money in tax exempt municipal bonds that pay 4 percent, then you would have $40,000 a year to live on.

But that doesn't account for inflation going forward. If $1 million today doesn't feel like much, imagine what it will feel like in 30 years. At 3 percent inflation compounding for the next 30 years, $1 million dollars will have the purchasing power of $412,000 today and your $40,000 income will feel like $16,500. So retiring when you have $1 million may sound nice, but it's likely that it won't be what many people have in mind when they think of retiring a millionaire.

Instead of living on the interest, you could tap into the principal as well. Those are slightly more difficult calculations. For example, if you were 50 years old right now and wanted to plan for your money to last until you were 95, then you need money for 45 years in retirement. If you stick with the 4 percent return, then you could withdraw about $48,000 a year. Again this doesn't account for inflation going forward. Each year if prices rise, your standard of living would fall. In this example, you have 45 years of prices going up at 3 percent. So that last year will feel like $12,600 does today.

Combining Retirement and Real Estate

If we factor in a house, this gets even worse. If we take the price for a house out of the $1 million, even in a reasonable area and not San Francisco, it's going to be a big piece of your net worth and cut into your funds for retirement. For example, if you bought a nice $250,000 home, you would only have $750,000 left to live on. At 4 percent that would be $30,000 a year or $2,500 a month. That's before inflation takes a bit every year.

These retirement calculations show that even if your house is paid off, that living off a million dollars isn't what it's cracked up to be. And if your house isn't paid off, it's probably not even close to what you want to do.

Bottom Line

So the bad news is that even if you fall into a million dollars, you probably aren't set for life, especially if you are young. But the good news is, you'll still be a millionaire, and that's better than the alternative.

Wednesday, December 23, 2009

Geithner: Job growth should resume by springtime

According to the December 23, 2009 article "Geithner: Job growth should resume by springtime":
WASHINGTON – Treasury Secretary Timothy Geithner says he believes it's reasonable to expect "positive job growth" by spring and that people should have confidence about an improving economic climate.

In an interview broadcast on ABC's "Good Morning America," Geithner (GYT'-nur) also said he believes many banks around the country still have work ahead of them to regain the public's faith. He said, "They need to work very hard to shore it up" and said he wasn't certain that "all banks get it."

Geithner's stewardship of the Treasury has come in for criticism on occasion. He said Wednesday, "I think most people would say the economy actually is strengthening now going into the end of the year," but that the key is to regain lost jobs.

Teachers Score Higher Than Other Professionals in Well-Being

In the December 23, 2009 Gallup article "Teachers Score Higher Than Other Professionals in Well-Being," Shane Lopez and Sangeeta Agrawal
report that according to a recent survey "teachers rate their lives higher in four of six well-being indexes."

WASHINGTON, D.C. -- A career in teaching might be good for your well-being. While the Gallup-Healthways Well-Being Index previously revealed that business owners were richer in well-being than other job types, further research isolating teachers from other professionals finds teachers fare as well as or better than business owners in overall well-being.

Gallup typically includes teachers in the "professional worker" occupation category, but asks an additional question --"Are you currently a teacher in a public or private school (at any level, secondary, elementary, college, pre-school)?" -- to distinguish teachers from non-teaching professionals.

An analysis of data collected between July 2008 and June 2009 finds that teachers score highest (or tied for highest) among all 12 job types on how they evaluate their lives, access to resources needed to lead a healthy life, emotional health, and their the likelihood of engaging in healthy behaviors. Overall, the findings reveal numerous benefits and some drawbacks related to the teaching profession.

(Page 2 includes details on how Gallup defines each occupational category.)

Teachers View Their Lives in Positive Terms

The Life Evaluation Index, which is based on the Cantril Self-Anchoring Striving Scale, is one of four sub-indexes on which teachers rank first. People are asked to evaluate their present and future lives on a scale with steps numbered from 0 to 10, where 0 is the worst possible life and 10 is the best possible life. Based on their scores, teachers are at the top of the list, expressing far more optimism than all other professions.

Next on the list, non-teaching professionals were nearly seven percentage points lower on this index than their fellow professionals in the education ranks. Business owners lagged 10 points behind teachers. Workers in many other job types had scores more than 15 points below teachers, suggesting that they tend to see their lives much less positively.

Teachers Have What They Need for a Healthy Life

Teachers are also in the top spot, tied with managers/executives/officials and non-teaching professionals, on the Gallup-Healthways Basic Access Index. The Basic Access Index measures access to resources and services needed to lead a healthy life (based on 13 indicators gauging access to food, shelter, healthcare, and a safe and satisfying place to live, among other things).

Clerical/office workers, business owners, and sales workers also report a high degree of access to basic resources. Workers in the farming/fishing/forestry and construction/mining industries rank lowest on this sub-index.

Teachers Share the Top Ranking in Emotional Health

In terms of emotional health, teachers share the top spot with numerous job types including farming/fishing/ forestry workers (who topped the list in a previous analysis), non-teaching professionals, business owners, and managers/executives/officials, all of which have index scores within two points or less of teachers. A high level of emotional health involves positive daily experiences (e.g., smiling or laughter, learning or doing something interesting, being treated with respect), more positive than negative emotions, and no history of depression.

Underscoring the level of positive emotion teachers experience on a daily basis, when surveyed, 87% of teachers said they smiled or laughed a lot yesterday. Sales workers were next in line with 86% reporting smiling or laughing a lot the day before the survey. Manufacturing/production and transportation workers smiled and laughed least often with 82% reporting that they did so a lot yesterday.

Teachers Make Healthy Choices

Teachers also rank near the top on the Healthy Behavior Index, again sharing a comparable score with farm/fishing/forestry workers and business owners; non-teaching professionals follow. The Healthy Behavior Index measures four behaviors strongly linked to health: eating healthy, smoking (scored in reverse), weekly consumption of fruits and vegetables, and weekly exercise frequency. Manufacturing/production, transportation, installation/repair, and sales workers rank lowest on the Healthy Behavior Index.

Teachers Do Not Report the Best Work Environments

Teachers and fellow professionals lag far behind business owners, who hold the top spot on the Work Environment Index. The Work Environment Index asks people if they are satisfied with their jobs, if they get to use their strengths at work, if their supervisor treats them more like a boss or a partner, and if their work environment is open and trusting. Given that conditions in an employee's work environment are directly related to his or her engagement level, the finding may have implications for students and administrators. Teachers who are given the opportunity to do what they do best at work (91% say they get to use their strengths at work) may be more likely to engage students in the learning process.

Business owners, despite working longer hours than people in other job types, report having the best work environments -- likely buoyed by the fact that many business owners are their own supervisors. Farming/fishing/forestry workers have a higher score on the index than teachers, but teachers score higher than people in construction/mining, sales, installation/repair, clerical/office work, service, manufacturing/production, and transportation.

Teachers Are as Physically Healthy as Most Workers in Other Professions

Construction/mining workers, managers/executives/officials, professionals, and business owners lead the way on the Physical Health Index, and teachers along with sales workers and installation/repair workers are close behind. This index includes nine items addressing chronic or daily illnesses, including colds and flu. When asked if they were sick with the flu yesterday, 1.2% of teachers (and business owners) said "yes," whereas the percentage of flu sufferers was as high as 2.9% for individuals in the farming/fishing/forestry industry. Teachers were more likely to report having a cold yesterday (7.0% said "yes" to this item). Service workers were most likely to report having a cold (7.4%), and business owners were the least likely (4.6%).

Bottom Line

Teachers score highly on many aspects of well-being, even when compared with non-teaching professionals and business owners. It is unclear whether the relatively higher scores of teachers on several measures of well-being are because working in that profession enhances one's well-being, or if people who have higher well-being in general seek out teaching professions.

While teachers reap the personal benefits of high well-being, this level of well-being may also prove beneficial to their students and the broader community. At the same time, community leaders and administrators would do well to improve teacher's work environments not only to help boost teacher well-being, but also to boost student and community well-being even higher.

Learn more about the Gallup-Healthways Well-Being Index.

Survey Methods

Results are based on telephone interviews with adults, aged 18 and older, who are employed in one of the 11 job categories Gallup typically uses to assess occupation. A total of 409,261 interviews were conducted July 1, 2008-June 30, 2009, as part of the Gallup-Healthways Well-Being Index. However, because many Americans are not in the workforce and because some Americans work in jobs that do not fit any of these job classifications, the final sample was 179,007.

Each occupational group has at least 3,336 respondents, which means that for most occupations and most indexes the margin of sampling error is always less than ±2 percentage points. However, because farmers and small business owners often could not answer questions about their supervisors, sample sizes for these two groups on the Work Environment Index drop as low as 1,327. The margin of error for this smallest sample size (incorporating the design effect) is ±3 percentage points. Rankings, and ties within rankings, were determined using margins of error.

Interviews are conducted with respondents on landline telephones (for respondents with a landline telephone) and cellular phones (for respondents who are cell phone only). In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

About the Gallup-Healthways Well-Being Index™

The Gallup-Healthways Well-Being Index measures the daily pulse of U.S. well-being and provides best-in-class solutions for a healthier world. To learn more, please visit

Job Classifications

Teacher -- Typically included in the professional worker category in the Gallup-Healthways Well-Being survey data; people were included in this category (and excluded from the professional category) if they said yes to "Are you currently a teacher in a public or private school (at any level, secondary, elementary, college, pre-school)?"

The Gallup-Healthways Well-Being survey uses the following job labels.

Professional worker -- lawyer, doctor, scientist, engineer, nurse, accountant, computer programmer, architect, investment banker, stock brokerage, marketing, musician, artist

Manager, executive, or official -- in a business, government agency, or other organization

Business owner -- such as a store, factory, plumbing contractor, etc. (self-employed)

Clerical or office worker -- in business, government agency, or other type of organization -- such as a typist, secretary, postal clerk, telephone operator, computer operator, data entry, bank clerk, etc.

Sales worker -- clerk in a store, door-to-door salesperson, sales associate, manufacturer's representative, outside salesperson

Service worker -- policeman/woman, fireman, waiter or waitress, maid, nurse's aide, attendant, barber or beautician, fast food, landscaping, janitorial, personal care worker

Construction or mining worker -- construction manager, plumber, carpenter, electrician, other construction trades, miner, or other extraction worker

Manufacturing or production worker -- operates a machine in a factory, is an assembly line worker in a factory, includes non-restaurant food preparation (baker), printer, print shop worker, garment, furniture and all other manufacturing

Transportation worker -- drives a truck, taxi cab, bus, or etc, works with or on aircraft (including pilots and flight attendants), trains, boats, teamster, longshoreman, delivery company worker or driver, moving company worker

Installation or repair worker -- garage mechanic, linesman, other installation, maintenance or repair worker

Farming, fishing, or forestry worker -- farmer, farm worker, aquaculture or hatchery worker, fisherman, deck hand on fishing boat, lumberjack, forest management worker

The Gallup-Healthways Well-Being Index™

The Gallup-Healthways Well-Being Index™ has been developed to provide the official measure for health and well-being. It's the voice of Americans and the most ambitious effort ever undertaken to measure what people believe constitutes a good life.

Over the next 25 years, the Well-Being Index will collect and measure the daily pulse of the nation's well-being and provide best-in-class solutions for a healthier world. By helping Americans understand how work impacts life and health and conversely how life affects work and health, we can work together to improve well-being for a better way of life.

Partnering to Improve Well-Being

In a historic partnership for American health transformation, Gallup and Healthways are providing a new national daily pulse of individual and collective health and well-being, as well as solutions for a healthier America.

On January 2, 2008, Gallup and Healthways formed an unprecedented 25-year partnership merging decades of clinical research and development expertise, health leadership and behavioral economics to understand the key factors that drive well-being. The Gallup-Healthways Well-Being Index is the result of both companies' commitment to transform healthcare by advancing the world's understanding of well-being and its impact on our lives.

The Gallup-Healthways collaboration draws on diverse backgrounds and achievements of individuals that include published researchers and scientists specializing in employee engagement as well as industrial and organizational psychology; a Nobel Prize winner in economic sciences whose research pioneered behavioral economics; leaders specializing in the discipline of health and care support interventions; and the inventor of an economic model that establishes a direct correlation between human nature in the workplace, employee engagement and business outcomes.

About the Gallup-Healthways Well-Being Index

The Gallup-Healthways Well-Being Index provides a comprehensive, real-time view of the public's well-being in the United States, giving governments, health plans, employers and communities unmatched insight into the health and prosperity of their populations. The Well-Being Index is today's "voice of the people" and the most ambitious effort ever undertaken to measure what it is that people believe constitutes a good life, who is feeling good about life, and who is in need of a helping hand.

With the goal of providing the world's most up-to-date measure of individual and collective health and well-being, the Gallup-Healthways Well-Being Index tracks the well-being of U.S. residents 350 days out of the year interviewing no fewer than 1,000 U.S. adults nationwide each day.

The Well-Being Index also aligns with Healthways' care and support solutions to help people maintain and improve their health. With measures that reflect Americans' evaluations of their day-to-day lives as well as their daily emotional and physical experiences both at work and at home, Gallup and Healthways are now able to provide an unprecedented view and understanding of public well-being in the United States.

Tuesday, December 22, 2009

Court orders Microsoft to stop selling Word

In his December 22, 2009 blog article "Microsoft Word sale prohibited as of Jan. 11, fix promised," Christopher Null reports that a U.S. federal court has found Microsoft in violation of patent law. This is another example of how some corporations abuse their market power to the detriment of consumers. Most economists agree government regulation is necessary to achieve more desirable social outcomes when there are market failures, such as a lack of sufficient competition.
Office workers of America, enjoy your Christmas break. Because come the new year, things could get a little hairy around the office. Microsoft Word is now scheduled to be prohibited from sale beginning January 11, 2010. That's less than three weeks away. The good news: Microsoft has promised a fix, one which will be rolled out before the deadline arrives.

If you don't understand, you might have simply missed this story, or dismissed it as something that Microsoft would ultimately use its considerable clout to have pushed under a legal rug.

But it's no joke. In August of this year, a court sided with a small Canadian company called i4i that holds a 1998 patent on the way the XML language is implemented, finding that Microsoft was in violation of that patent. The result: Microsoft was told to license the code in question from i4i or reprogram it, or else Microsoft Word would have to be removed from sale in the market. The original ruling gave Microsoft until October to get its legal affairs in order, but appeals pushed that out a bit.

Now a federal court has upheld that original ruling -- plus a fat, $290 million judgment against the company -- imposing the new January 11 D-Day on the matter. Microsoft Word and Microsoft Office will both be barred from sale as of that date -- though naturally you'll still be able to use copies of Word and Office that you already own, and Microsoft will be allowed to keep supporting those copies.

Unless Microsoft ships the promised technical workaround very quickly, things are going to get extremely dicey in the computer world, and fast. Not only will retail outlets selling shrinkwrapped copies of the software be affected, computer manufacturers (who complained loudly about this injunction when it was announced) who bundle Word and Office on the computers they sell will also be seriously impacted by the ruling.

There's always a chance things will change again as the January 11 deadline approaches, but if your company requires Word or Office to keep operations running, it might not be a bad idea to stock up on a few extra copies now.

Keep IRS auditors away: earn less than $200,000

In the Decembeer 22, 2009 article "Keep IRS auditors away: earn less than $200,000," Associated Press writer Larry Margasak reports the Internal Revenue Service (IRS) seldom audits tax returns of individuals earning less than $200,000 per year.
WASHINGTON – Want to keep IRS auditors away? Keep your earnings under $200,000 and they won't bother you 99 percent of the time.

IRS enforcement numbers, released Tuesday, show that returns under that amount have a 1 percent chance of getting audited.

Returns showing income of $200,000 and above have a nearly 3 percent audit chance. The percentage jumps to more than 6 percent for returns showing earnings of $1 million or more.

The percentages apply to both individual and joint returns.

The number of audits jumped 11 percent from 2008 to 2009 for returns with earnings of $200,000 or more, but rose 30 percent for returns showing earnings of $1 million or more. For those under $200,000 the number of audits remained steady.

The IRS conducted 1.4 million audits of individual returns in the financial year ended Sept. 30, with more than 1 million conducted through correspondence with the taxpayer. The others were conducted through face-to-face meetings with IRS auditors.

The IRS does not do random audits, but does conduct "research audits" that will test compliance in business tax categories. In 2010, the target will be payroll taxes, according to Steve Miller, deputy commissioner for enforcement.

What happens if you're audited while unemployed? The IRS may give you a break.

"While our assessments were up, the ability to pay went down drastically" due to the economy, Miller said. "We have a series of tools. We can have them pay partially, over time. If the money is not collectible, it's treated as non-collectible. It's going to depend on each case.

"We have to ensure there's a balance between our responsibility to collect taxes with economic realities. We give people more time and determine how fast they can pay and whether they can pay."

The total revenue collected from IRS enforcement actions, $48.9 billion in 2009, is a drop from $56.4 billion in 2008 and $59.2 billion in 2007.

Miller said the higher numbers in 2007 and 2008 reflect collections from settlements of several major tax shelter cases.

The IRS has stepped up its examination of tax-exempt organizations, checking the books of more than 10,000 groups in 2009 compared to 7,800 the previous year.

The number of business tax returns examined was down slightly in 2009 from the previous year.

Monday, December 21, 2009

Gov't imposes 3-hour limit on how long airlines can keeping passengers waiting on tarmacs

In the December 21, 2009 article "Gov't imposes 3-hour limit on tarmac strandings," Associated Press writer Joan Lowy reports a new government regulation will limit the length of time passengers can be stranded on a an airport tarmac. Is this an unnecessary intrusion on the free market? Or is it an example of government fulfilling its Constitutional mandate to "promote the general welfare… to ourselves and our posterity” and to secure the rights to life, liberty, and the pursuit of happiness as specified in the Declaration of Independence.
WASHINGTON (AP) -- Stinky toilets, crying babies, airless cabins -- the Obama administration said Monday passengers don't have to take it any more. It ordered airlines to let people get off planes delayed on the ground after three hours.

Transportation Secretary Ray LaHood said the three-hour limit and other new regulations are meant to send an unequivocal message to airlines not to hold passengers hostage on stuck planes. Coming on the eve of the busy holiday travel season, the announcement was hailed by consumer advocates as "a Christmas miracle."

The airline industry said it will comply with the regulations -- which go into effect in 120 days -- but predicted the result will be more canceled flights, more inconvenience for passengers.

"The requirement of having planes return to the gates within a three-hour window or face significant fines is inconsistent with our goal of completing as many flights as possible. Lengthy tarmac delays benefit no one," said Air Transport Association President and CEO James May.

LaHood, however, dismissed that concern.

"I don't know what can be more disruptive to people than to be stuck sitting on a plane five, six, seven hours with no explanation," LaHood said at a briefing.

This year through Oct. 31, there were 864 flights with taxi out times of three hours or more, according to the Bureau of Transportation Statistics. Transportation officials, using 2007 and 2008 data, said there are an average of 1,500 domestic flights a year carrying about 114,000 passengers that are delayed more than three hours.

Last month, the department fined Continental Airlines, ExpressJet Airlines and Mesaba Airlines $175,000 for their roles in a nearly six-hour tarmac delay in Rochester, Minn. In August, Continental Express Flight 2816 en route to Minneapolis was diverted to Rochester due to thunderstorms. Forty-seven passengers were kept overnight in a cramped plane because Mesaba employees refused to open a gate so that they could enter the closed airport terminal.

It was the first time the department had fined an airline for actions involving a ground delay. Transportation officials made clear the case was a warning to the industry.

Under the new regulations, the only exceptions to the requirement that planes must return to the gate after three hours are for safety or security or if air traffic control advises the pilot in command that returning to the terminal would disrupt airport operations.

Homeland Security Secretary Janet Napolitano said she thought the 3-hour rule would not cause any problems for security. "I can't imagine it would. I call it the rule of common sense," she said.

Airlines could be fined $27,500 per passenger for each violation of the three-hour limit.

The regulations apply to domestic flights. U.S. carriers operating international flights departing from or arriving in the United States must specify, in advance, their own time limits for deplaning passengers. Foreign carriers do not fly between two U.S. cities and are not covered by the rules.

Tarmac strandings have mostly involved domestic flights, but the department is studying extending the three-hour limit to international flights, LaHood said.

"This is the beginning," LaHood said. "We think we owe it to passengers to really look out for them."

Airlines will be required to provide food and water for passengers within two hours of a plane being delayed on a tarmac, and to maintain operable lavatories. They must also provide passengers with medical attention when necessary.

Airlines will also be prohibited from scheduling chronically delayed flights. They must designate an employee to monitor the effects of flight delays and cancellations and respond to consumer complaints. And they would have to post flight delay information on their Web sites. Carriers who fail to comply could face government enforcement action for using unfair or deceptive trade practices.

Provisions sponsored by Sens. Barbara Boxer, D-Calif., and Olympia Snowe, R-Maine, in pending legislation would also impose a three-hour limit, but the new regulations go even farther, giving passenger rights advocates many of the reforms they've sought for years.

"No more will they be able to strand passengers for over three hours in hot, sweaty, metal tubes," said Kate Hanni, founder of Hanni, who called the rules a Christmas miracle, was stuck on an American Airlines jet in Austin, Texas, for over nine hours in December 2006 when storms forced the closure of Dallas-Fort Worth International Airport, stranding more than 100 planes.

Past efforts to address the problem have fizzled in the face of industry opposition and promises to reform.

Congress and the Clinton administration tried to act after a January 1999 blizzard kept Northwest Airlines planes on the ground in Detroit, trapping passengers for seven hours. Some new regulations were put in place but most proposals died, including one that airlines pay passengers who are kept waiting on a runway for more than two hours.

The Bush administration and Congress returned to the issue three years ago after several high-profile strandings, including a snow and ice storm that led JetBlue Airways to leave planes full of passengers sitting on the tarmac at New York's Kennedy International Airport for nearly 11 hours.

After those incidents, DOT Inspector General Calvin Scovel recommended that airlines be required to set a limit on the time passengers have to wait out travel delays grounded inside an airplane.

A year ago, the Bush administration proposed airlines be required to have contingency plans for stranded passengers, but the proposal didn't include a specific time limit on how long passengers can be kept waiting. It was denounced as toothless by consumer advocates.

AP Airlines Writer Harry R. Weber contributed to this report from Atlanta. Associated Press Writer Suzanne Gamboa in Washington contributed to this report.

Department of Transportation

Air Transport Association

How reliable are recommendations for buying individual stocks? You will probably be better off buying an index mutual fund.

In the December 21, 2009 Wall Street Journal article "'Hot Stocks For a New Decade?' Wait a Minute!," Brett Arends explains that the alleged experts at picking individual stocks that will perform well in the future do not have a reliable record.
Hands up if you had Southwestern Energy.

No? How about XTO Energy? Range Resources? Precision Castparts?

You should have. These were top stocks of the decade in the Standard & Poor's 500-stock index. Ten years ago, the smartest thing you could have done with your money was to invest in these. Each $1,000 invested then would be worth tens of thousands today.

Now look at the stocks the experts told you to buy instead.

The most widely recommended -- according to a quick survey at the time in the Washington Post -- were America Online, Cisco Systems, Qualcomm, MCI WorldCom, Lucent Technology and Texas Instruments.


Any people who invested in that portfolio have lost about two-thirds of their money. The average stock picked at random was up 3%, including dividends.

Beware of 'Disaster' Picks

Money Magazine's "The Best Investments for 2000 and Beyond": down about a fifth.

The SmartMoney/Wall Street Journal Sunday picks fell by about a half. The list was heavily weighted toward technology, and most stocks plummeted. MCI WorldCom and Nortel Networks ended up in Chapter 11.

OK, it's easy to poke fun. But it's something to think about -- especially around this time of year, when wise men once again come bearing stock tips.

The embarrassments don't stop there. Investors have just endured an absolutely terrible 10 years -- a string of crashes, crises, financial scandals, recessions and collapsed bubbles.

According to Standard & Poor's analyst Howard Silverblatt, it has actually been the worst decade for U.S. investors on record. When you look at total returns, including dividends, we've even done worse than the 1930s. Investors in the S&P 500 have lost about 10% this decade.

After you count inflation, investors have actually lost about 30%. That's even behind the inflationary 1970s, when investors lost about 23% in real terms.

And that's if you managed to hang on. Those shaken out during the crashes of 2001-2003 and 2007-2009 may have done much worse.

The Nasdaq Composite fell about three quarters from its peak, and, of course, many technology stocks were wiped out altogether. But how much warning did investors get from the pros? Almost none.

When Barron's, our sister publication, held its annual investment roundtable in January 2000, just two of the 10 major Wall Street figures who took part warned investors about a looming bear market. This was just three months before the Nasdaq reached its all-time high -- which is still more than double where it stands today.

Avoid 'Coffee-Cart' Tipsters

One fund manager admitted to Barron's that "I have a guy who sells me coffee in the morning, who grew up in Bombay, and he is more into the stock market than I am," echoing those infamous tales of stock tips from shoe-shine boys just before the Crash of 1929. Yet even that ominous sign wasn't enough to turn the group bearish. Instead Goldman Sachs strategist Abby Cohen said the stock market was "roughly at fair value based upon our view of S&P profits." Even technology stocks were "not overvalued" based on standard measures, she insisted.

Hubris, meet schadenfreude. Face, meet egg.

(Goldman Sachs notes that Ms. Cohen did turn more cautious some months later, near the peak.)

Ten years later, some things have changed on Wall Street. But plenty hasn't.

Much of the stock-market community is still just a marketing machine that happens to sell investments, the way, say, a drugstore like CVS sells pills. (Unfair? Just a little: CVS, after all, won't deliberately sell you bad pills.)

Investors, forewarned after the last 10 years, are better forearmed ahead of the next 10. Anyone seeking to protect his or her money needs to correct for the biases of the financial industry.

The most powerful and dangerous force on Wall Street is the herd instinct. Look out.

It's easy and safe for most "investment professionals" to stick together and recommend the same things, no matter how foolish. It's better -- for them, though perhaps not for the clients -- to be wrong in a crowd than risk standing alone. Few things are more dangerous to investors than a consensus.

And there is, of course, generally a strong bullish bias on Wall Street. Even today, as usual, most stock recommendations are positive. Never mind that the market is already nine months into a recovery that has seen the S&P 500 rise more than 63% and the Nasdaq jump over 70%. (And all the while, 17% of the country is unemployed, underemployed or has stopped looking for work.)

No matter how overvalued a stock, an analyst can always be found to say it's cheap compared to some other (even more overvalued) stock. This was common during the dotcom bubble.

It hasn't gone away. And no matter how dangerous markets may be, someone will always warn you -- just as they did in 1999 -- to stay fully invested because "you can't time the market." That this advice happens to be in their interests is, of course, mere happenstance.

Don't Chase Highflying Stocks

These days investors have relearned that the investments everyone is talking about are usually ones you don't want to buy. The risks of chasing a highflier generally outweigh the rewards. It takes a 100% profit to recover from a 50% loss.

The best investments are usually the ones nobody is talking about. Ten years ago, everybody was talking about which technology stocks to buy. Almost nobody was talking about gold. The Bank of England could barely give the stuff away at $260 an ounce.

As I've poked fun at others' poor foresight, I had better 'fess up to my own, too. Ten years ago, a money manager friend repeatedly urged me to sell everything and buy gold.

Did I listen? Don't ask.

Write to Brett Arends at

Your Money: A To-Do List

Looking for money tips for the next decade? Here are a half dozen:

1. Pay off your credit cards already. Then cut them up. Obvious but true. That saves you 15% or more. A cert to beat the market.

2. Slash your taxes. They're only heading in one direction. Make the full use of your 401(k) and IRA allowances each year. If you have children, save in a 529 college-savings plan too.

3. Run the numbers on buying a home. Real estate has plunged, and fixed-rate mortgages look cheap below 5%. Do the math to see if owning now makes more sense than renting.

4. Weed out your high-fee mutual funds. Most funds charge a bundle: Few are worth it. Unless a fund is exceptional, you're better off in a low-cost index fund.

5. Check your inflation risk. Long-term bonds, including Treasurys, corporates and municipals, are all at risk if these deficits lead to higher inflation down the road, as many fear.

6. Looking for a wager? Try the iShares MSCI Japan Index exchange-traded fund (EWJ). At the start of the new decade, the Tokyo stock market may be the world's least fashionable investment.

-- B.A.

Charitable aid declines when it is most neeed

In the December 21, 2009 Reuters article "Aid groups adjust as funding crisis bites," Katherine Baldwin reports that the recession is causing a reduction is charitable aid. Many people would argue that this is why the government should provide assistance. When aid is most needed, the private sector is least able to provide it.

LONDON – Relief agencies have been hit by the global recession and falling donations, forcing them to cut jobs and to scale back or slow aid projects, and experts warn they may have to take more extreme measures.
The combination of a shortfall in donations, exchange rate pressures, erratic inflation levels overseas and reduced income from interest on reserves has put the squeeze on the aid sector.
Even as markets rebound and the world economy shows signs of recovery, relief groups are braced for tougher times.
Unemployment could rise further and economic growth will bring higher interest rates, cutting donors' disposable income.
"The decline in donations lags behind the worst of the recession," said John Low of the Charities Aid Foundation (CAF), a UK charity that helps other charities manage money.
"History suggests there might be more pain to come."
Charitable giving in Britain fell 11 percent in 2008-9 in inflation-adjusted terms, according to UK Giving, a report by CAF and the National Council for Voluntary Organisations.
In the United States, donations fell by 5.7 percent in real terms, according to Giving USA's 2008 report - the largest drop since the group began tracking U.S. donations fifty years ago.
InterAction, a U.S. coalition of more than 150 humanitarian groups, says funding could fall further, particularly by foundations, whose assets have been hit hard.
"We know some foundations have either frozen what they're doing or are cutting back," said Barbara Wallace, InterAction's vice president for membership and standards. "I don't know if we've seen the worst either."
Some areas of giving, certain charities and some regions of the world more immune to the crisis have bucked the trend.
Low said giving through payroll in Britain is rising, for example. Agencies with child-sponsorship models, such as Plan International, are faring better as are some faith-based groups.
Donations have fallen but those who monitor the sector say giving has not collapsed. Many existing supporters are staying loyal to their causes - the problem is recruiting new donors.
It is the combination of less giving with other aspects of the economic crisis that is causing charities so much pain.
UK groups have been hit by a weak pound. Their overseas work is largely priced in dollars so their money buys less.
In addition, British charity Cafod said it had lost 1 million pounds off its reserves because of lower interest rates.
"Some programs have had to be scaled back," said Tom O'Connor, Cafod's director of communities and supporters. "If things got worse, if the economy got worse and our income dropped, we'd have to pull out of particular countries."
Cafod is facing a 10 percent budget shortfall next year and is making about 12 posts redundant in the UK and abroad. Oxfam and World Vision have also cut staff.
At Christian Aid, there may be up to 90 redundancies as the charity faces a 7 million pound deficit for 2010-11.
Afghan Aid, a UK-registered charity that works solely in Afghanistan, has had to lay off almost 150 staff over the last 18 months, close to a third of its work force.
"Come March next year, I know we'll have to make more painful decisions on staff layoffs," said managing director Farhana Faruqi Stocker.
The crisis is forcing charities to manage money more effectively, target new donors and think more strategically.
"We've had to revise our project fundraising strategy to focus more on local sources," said Ridwan Gustiana, founder and director of Indonesian aid group, IBU Foundation.
For many, the last option is to merge. Earlier this year, Interact Worldwide, a small British sexual health charity, merged with Plan after struggling to raise funding to match European Union grants it had received.
Britain's Charity Commission is urging members to consider merging while InterAction is helping members find ways to pool staff and resources and to identify the right time to merge.

The Real Jobless Rate

In the December 21, 2009 TIME magazine article "The Real Jobless Rate," Justin Fox explains why the unemployment rate may not be the best measure of labor market conditions.
At 8:30 on the morning of the first Friday in December, the Bureau of Labor Statistics (BLS) reported that the unemployment rate had fallen to 10% in November from 10.2% the month before. Hooray! Headlines heralded the unexpected drop. Stock prices surged. Enthused White House press secretary Robert Gibbs: "We're moving in the right direction."

By late morning, though, stocks were slumping. Commentators began to focus on concerns with the numbers. By the following Monday, Federal Reserve Chairman Ben Bernanke was warning that "we still have some way to go before we can be assured that the recovery will be self-sustaining."

So much for that fall in unemployment, huh? It was a telling reaction, indicative of the still gloomy national mood, the perceived fickleness of monthly economic indicators — and the diminished status of the unemployment rate as a statistic. Once the indispensable, largely unquestioned measure of the state of the job market, it is now treated with suspicion and disdain. With good reason, because the unemployment rate fails to accurately reflect just how bad things are out there.

Each month, interviewers contact 60,000 households — most by phone, some in person — and ask about the employment status of household members age 16 and over. Those who don't have jobs but have looked in the past four weeks are classified as unemployed. After some statistical adjustments to extrapolate the data from those 60,000 households to the total U.S. population, the number of unemployed is divided by the size of the labor force (employed plus unemployed), and there's your rate. Measured that way, unemployment still isn't as bad as it was at the lowest point of the 1981-82 recession, when it hit 10.8%. And it's nowhere near what it was in 1933, when the rate peaked somewhere around 25%.

This method of calculating unemployment was pioneered by the head of the Massachusetts Bureau of Statistics of Labor in 1878, and it has its merits. It's simple. It's straightforward. And it provides a pretty accurate count of those who really, really want jobs. But it also misses millions of people who may not be actively looking for a job but would happily take one if offered. Those ranks surely swell in a deep recession or during a time of economic turmoil that destroys entire job categories (like autoworker). The government's statisticians are aware of this, and since the 1970s the BLS has published broader measures of unemployment that include at least some of these people. In 1994 the broadest measure — which counts as unemployed those who have looked for work in the past year but not the past four weeks, plus part-time workers who would rather be working full time — was dubbed U-6 unemployment. During this recession, it has gotten far more attention than ever before. U-6 unemployment was at 17.2% in November, down from 17.5% the month before and up from 8.4% two years ago. These figures aren't strictly comparable with those from before 1994, but the New York Times has taken a stab at recalculating the earlier numbers — with help from the BLS — and estimates that U-6 unemployment peaked in December 1982 at 17.1%. Meaning this recession is worse.

Even these figures leave out people who say they want a job but haven't looked in the past year. Economist and gadfly John Williams, whose online newsletter Shadow Government Statistics has gained a big following lately, adds them in, makes a few tweaks and gets to 21.8% unemployment in November, down from 22.1% in October.

Such measures still rely on people's own assessment of whether they want to work. A BLS study a decade ago found that these self-assessments aren't all that reliable. So how about the simplest possible job-market measure, the employment-to-population ratio? Among Americans ages 25 to 54, it was at 75.1% in November, down from 80.3% in early 2007 and — with the exception of October's 75% — the lowest it's been since 1984. Because of the entry of women into the workforce, the ratio trended upward from the 1960s through the 1990s. If you look just at men ages 25 to 54, the picture is much more dire. Their employment-to-population ratio of 80.6% in November is the lowest since the BLS began keeping track in 1948. It's 4 percentage points lower than it was in the depths of the early-1980s downturn.

There are certainly other factors at play here besides just a tough job market — more stay-at-home dads, more rich loafers, more prison inmates. But it also may be a sign that these are in fact the worst times for American workers since the 1930s. Which helps explain why there was so little excitement about that drop in the unemployment rate to 10%.

Friday, December 18, 2009

Drop in Unemployment Rate May Reflect More Discouraged Workers Rather than Increased Employment

Photo by Scott Olson/Getty Images.

In the December 18, 2009 article "Fewer States Add Jobs As Recovery Sputters Along," Associated Press business writer Daniel Wagner reports that recent declines in the unemployment rate may reflect an increase in discouraged workers who have stopped looking for jobs rather than a significant increase in employment.
WASHINGTON -- In a reversal of earlier gains, more states lost jobs than added them in November, signaling that hiring is occurring only sporadically around the country.

Unemployment rates dropped in 36 states and the District of Columbia, but that trend appeared to reflect more people leaving the work force. Unemployed people who stop looking for jobs out of frustration aren't counted in the labor force.

Friday's Labor Department report underscored that employers have yet to ramp up hiring, and many Americans can't find work. The number of people jobless for at least six months rose last month to 5.9 million, according to a separate report released earlier this month. And the average length of unemployment exceeds 28 weeks, the longest on records dating to 1948.

It was the first time since April that more states' unemployment rates fell than rose. But two states, South Carolina and Florida, saw joblessness reach its highest point in 25 years. And economists say most states' unemployment rates will rise as the stimulus programs wind down and seasonal jobs taper off.

"Even though things are getting better, they're not getting better fast enough to keep unemployment from rising in the next six to nine months," said Mark Vitner, senior economist at Wells Fargo & Co.

Vitner said he expects unemployment nationally and in most states to continue inching up before cresting in about nine months. He predicts it will be six more months before there are any consistent job gains.

In all, 19 states added jobs in November, down from 28 in October. Thirty-one states and the District of Columbia suffered a net loss of jobs.

Labor said there were statistically important employment changes in four states. All four showed job losses. They are Michigan, Nevada, Mississippi and Hawaii.

The states that reported the largest jobs gains were Texas, Ohio, Georgia, Arizona and Iowa. Those shifts were not considered statistically important as a proportion of those states' large work forces.

Signs emerged in some states of people rejoining the work force to seek jobs as the economy slowly improves. Of the eight states where unemployment rose, five added jobs. All but one saw their work forces grow, indicating more people were looking for work.

The states that saw their labor forces grow faster than they could add jobs were Ohio, South Carolina, Georgia and Idaho.

"Now that the economy is stabilizing, we're seeing more people come back into the work force and looking for jobs," Vitner said. "The net effect of that is to push unemployment up."

The figures for jobs and unemployment don't always match because they come from separate reports. The unemployment rate is calculated from a survey of households. The jobs count reflects a survey of businesses.

Similarly, unemployment rates can drop when people give up looking for jobs. Of the seven states with statistically important drops in unemployment rates, five saw their labor forces shrink. They were Connecticut, Kansas, Kentucky, New York and Pennsylvania.

In Nebraska and Texas, unemployment fell even while people entered the labor force, a sign of relatively robust job markets.

In Texas, hiring was even across many sectors, including finance, professional and business services, education and health, hospitality and government. The only areas to lose jobs were construction; manufacturing; and trade, transportation and utilities.

Nebraska saw job growth in every sector except finance and hospitality, which declined slightly.

Florida was the only state whose unemployment rate rose significantly, to 11.5 percent from 11.3 percent. Vitner said the state's construction industry experienced a short-term boost over the summer due to a tax credit for first-time homebuyers that was set to expire in November. Congress extended the program, but people who had feared it would expire closed on their houses before November. Many related jobs have since dried up.

Since November 2008, all 50 states have seen a net loss of jobs and a rise in their unemployment rates.

November's jobs picture is bleaker than October's, in part because last month's gains were driven by a rise in temporary employment, economists said. Temporary hiring often is a sign that employers are gearing up to add full-time jobs.

But economists cautioned that October's gains might not be sustainable. They were driven by temporary demand in the auto sector to replace inventories depleted by the Cash for Clunkers rebate program.

November's falling unemployment rates are due in part to the Thanksgiving holiday. Because Thanksgiving came early this year, Vitner said, more holiday hiring than usual took place in November.

Still, the U.S. unemployment rate dropped to 10 percent November from 10.2 percent in October. It was the first unemployment decline since July. Economists called it a hopeful sign that the economy is on the mend, however slowly.

Thursday, December 17, 2009

Credit card with a 79.9% interest rat

I have jokingly described credit card companies as the crack dealers of the financial world. In the December 17, 2009 article "Credit card's newest trick: 79.9 percent interest," Associated Press personal finance writer Candice Choi describes a company that charges almost 80% annual interest.
NEW YORK (AP) -- It's no mistake. This credit card's interest rate is 79.9 percent.

The bloated APR is how First Premier Bank, a subprime credit card issuer, is skirting new regulations intended to curb abusive practices in the industry. It's a strategy other subprime card issuers could start adopting to get around the new rules.

Typically, the First Premier card comes with a minimum of $256 in fees in the first year for a credit line of $250. Starting in February, however, a new law will cap such fees at 25 percent of a card's credit line.

In a recent mailing for a preapproved card, First Premier lowers fees to just that limit -- $75 in the first year for a credit line of $300. But the new law doesn't set a cap on interest rates. Hence the 79.9 APR, up from the previous 9.9 percent.

"It's the highest on the market. It's the highest we've ever seen," said Anuj Shahani, an analyst with Synovate, a research firm that tracks credit card mailings.

The terms are eyebrow raising, but First Premier targets people with bad credit who likely can't get approved for cards elsewhere. It's a group that tends to lean heavily on credit too, meaning they'll likely incur the steep financing charges.

So for a $300 balance, a cardholder would pay about $20 a month in interest.

First Premier said the 79.9 APR offer is a test and that it's too early to tell whether it will be continued, according to an e-mailed statement. To comply with the new law, the bank said it will no longer offer the card that has $256 in first-year fees as of Feb. 21, 2010. However, customers will still be able to use their existing cards. The bank said "no final decisions" have been made regarding any rate changes for those cards.

First Premier noted that it needed to "price our product based on the risk associated with this market."

The bank declined to specify how many people were offered the 79.9 APR card.

According to First Premier's Web site, the credit cards are serviced by its sister organization Premier Bankcard. The company, based in Sioux Falls, S.D., says Premier Bankcard is the 10th largest issuer of MasterCard and Visa cards in the country, with more than 3.5 million customers.

In a mailing sent to prospective customers in October with the revamped terms, First Premier writes " might have less-than-perfect credit and we're OK with that." The letter notes that an online application or phone call is still required, but guarantees a 60-second status confirmation.

The letter also states there are no hidden fees that aren't disclosed in the attached form. That's where the 79.9 percent interest rate and $75 annual fee are listed. There's also $29 penalty if you pay late or go over your $300 credit limit.

Even if First Premier doesn't stick with the 79.9 APR, it will likely hike rates considerably from the current 9.9 percent to offset the lower fees, said Shahani of Synovate.

The revamped terms may not be the only changes; First Premier also appears to be moving away from the riskiest borrowers.

The bank typically mails offers to subprime households, meaning those with credit scores below 700. In the third quarter, however, 84 percent of its offers were sent to subprime households, down from 91 percent the same period last year, according to Synovate.

First Premier could be cleaning up its credit card portfolio since the new regulations will limit its ability to raise interest rates. That could mean First Premier won't issue cards as liberally to those with bad credit.

As harsh as First Premier's terms seem, that could be a blow to those who rely on the card, said Odysseas Papadimitriou, CEO of

"Even when the cost of credit is astronomical, for people in true emergencies, it's much better than not having access to credit," said Papadimitriou.

Until Feb. 21, First Premier is still offering its even-higher-fee card online. So the price for credit the bank charges is at least $256 in first-year fees.