When George Bush took office at the beginning of 2001, the federal government was running a substantial budget surplus and projected rising surpluses "as far as the eye could see." Now, the United States is facing massive current deficits -- as a share of the economy, the largest since World War II -- and an increasingly dire and unsustainable outlook over the next 10 years and beyond.
How did we get into this fiscal mess? To quote a character in Ernest Hemingway's classic novel, "The Sun Also Rises," when asked by another how he lost his wealth, "Two ways. Gradually and then suddenly."
The gradual part was a series of policy actions adopted during the Bush administration. In 2001, the Congressional Budget Office projected that the 2008 budget would show a surplus equal to 4.5% of gross domestic product. The actual 2008 budget ran a deficit of 3.2% of GDP. Almost all of the reversal was the result of policy changes -- tax cuts and spending increases.
US President Barack Obama early Saturday hailed a 787-billion-dollar economic stimulus plan passed by Congress, calling it "a major milestone on our road to recovery."
"This is a major milestone on our road to recovery, and I want to thank the members of Congress who came together in common purpose to make it happen," Obama said in his weekly radio address.
He promised to sign the package into law "shortly."
The comments came after the US Congress late Friday approved a 787-billion-dollar package of tax cuts and fresh spending to salvage the broken US economy, handing the president his biggest yet political victory.
The Senate voted 60-38 to pass the measure hours after it cleared the House of Representatives by a lopsided 246-183 margin, setting the stage for Obama to sign the measure into law before his self-imposed February 16 deadline.
Unlike babies, credit scores do not come from a financial stork. There are 3 major credit bureaus in the United States: Experian, Trans Union and Equifax. Companies subscribe to their services to obtain information about you to decide if you are credit worthy or not. Under the old system, the credit scores ranged from 375 to 900. Under the new VantageScore system, they range from 501 to 990. The new system is more consistent among various credit bureaus, so you don’t end up with scores that go all over the place.
How can I get a copy of my report?
I personally go to a site called Myfico.com, where you can order reports from all 3 bureaus or just one. You can also go to freecreditreport.com (you know, the site with the really funny commercials). The law says that you are entitled to at least one free credit report every year. Also, if you are denied credit for any reason, you can write the bureaus, sending along a copy of the rejection letter, and request a copy of your credit report. If you choose to pay for your report, it will likely cost you about $8 dollars.
What factors go into calculating a credit score?
The factors that go into calculating a credit score are a little vague and it’s protected like the recipe for KFC chicken. While the formula is well-guarded, we do have some guidelines on what factors are theoretically used to determine whether or not someone should loan money to you.
The factors are broken into what they call “The Four C’s of Credit”: Character, collateral, capacity, capital and conditions.
Character is their way of trying to decide if you are a good person or not. I don’t agree with this, since having bad credit does not make you a bad person. It just makes you a person who does not have a good track record when it comes to borrowing money.
Capacity is represented mostly by your income level and how much money you’re expected to earn in the future.
Capital is noted by the amount of cash you have in reserves and other liquid assets at your disposal. If you have capital, that means you can withstand a short-term decline in income and still make payments.
Conditions are reflected by the environment in which you live. It might include the state of the economy, your line of work and other external factors that might impact your credit report. For example, during the liquidity crisis in America, conditions for lending are very, very bad.
Now you know where credit scores come from. You probably have more questions, since there is a lot of ground to cover. To get more information, please feel free to learn along with me and my students by visiting http://www.drboycefinance.com/.
Dr. Boyce Watkins is a Finance Professor at Syracuse University. He does regular commentary in national media, including CNN, ESPN, BET and CBS. For more information, please visit http://www.boycewatkins.com/
The Financial Crisis: A Finance Professor's perspective
by Dr. Boyce Watkins www.BoyceWatkins.com
1) FDR had it partially right when he said that "We have nothing to fear but fear itself." While we have other worries as well, the greatest obstacle to economic progress is the HUGE psychological impact of Americans watching the stock market plummet right in front of their faces. This is going to cause consumer spending, lending, borrowing and investing to freeze like a deer in stadium lights. When people stop spending, economies start dying.
2) This crisis was a long time coming. De-regulation pushes down on the economic gas, but increases the chances of an economic crash. The dramatic growth of the past 8 years was a result of the same policies that are leading to the huge challenges we are faced with today.
3) Much of the impact of this crisis is a financial illusion. A large percentage of the devaluation in stock and home prices is driven by the fact that the original value was incorrect in the first place. When prices are out of whack, they must correct themselves. While a crisis may also be a correction, a correction is not necessarily a crisis.
4) Prepare for a period of "Financial McCarthyism" in America. Many baby boomers are closing in on retirement, and scared to death. To boot, many of these individuals have not properly prepared for retirement. When Americans get scared, politicians get nasty. We will likely see some of the most Draconian legislation in history.
5) What makes this crisis such a concern is that even before the meltdown, the economy was already quite fragile. With soaring gas and food prices, the economy was the #1 issue on the minds of most Americans. The decline of many financial services firms was, for the most part, a logical continuation of the fact that many homeowners were defaulting at the start of the year. This crisis is most certainly going to shift the political landscape and might give us our first Black president.
Dr. Boyce Watkins is a Finance Professor and author of the forthcoming book "Black American Money". He does regular work in national media, including CNN, ESPN, BET and CBS. For more information, please visit www.BoyceWatkins.com
As one who has benefited enormously from the generosity of the publishers, editors and community-at-large of Black Commentator, I was distraught today, when I received an e-mail message which informed me of the financial-status of Black Commentator. BC (as it’s often known) has been extremely benevolent to me in the past, publishing roughly 7 of my articles within a 3 month period. My relationship with BC is one which is treasured, and viewed as irreducible. As a result of this and much more, Black Commentator is considered as both an asset, and ally.
Black Commentator was first published in April 2002, and has since remained a rich, independent, indubitably-wealthy and inimitable resource for the construction of progressive-structures -- in favor of seeking economic justice, social justice and peace. The range of thought and perspective offered on Black Commentator is one which has consistently pushed the limit on the perceived monolith-identity of the Black Community. BC has, without a doubt, built a foundation that, on a weekly basis, advances the intellect, spirituality and social-consciousness of its readers.
Bill Fletcher Jr., Executive Editor, describes BC as a "serious piece of work." He is absolutely right. A magazine with readers in over 115 countries can be safely considered as "serious." More astonishing, and perhaps striking, is the fact that the staff - Bill Fletcher, Jr., Nancy Littlefield, and Peter Gamble - receives no financial compensation for the remarkable work they perform. Such courage and conviction in a publication, is worthy of praise, adulation, and support (most especially, financially).
Peter Gamble, Chief Technical Officer and publisher of Black Commentator, spoke of the current status of BC, as experiencing a "financial plight" which has now become "extremely critical." With over 300,000 visitors on a monthly basis, what more can be said of a readership with no overwhelming desire to support a publication which edifies it weekly. Gamble speaks of this tragedy, saying, "Less than 10 percent of those who visit BC understand the importance of making a contribution even as small as ten dollars." It is also worth noting, that each Black Commentator reader, spends an average visit length of 25 minutes at the BC website. There's a reason for that: the content and quality of the publication. According to the foundation, 21cf, the Black Community is disproportionately philanthropic in nature. Studies have shown that Black folks, more than any other ethnic group, provide more financial support - on an individual basis - to religious organizations and other causes deemed worthy of support. I would argue vigorously, that Black Commentator is more than worthy of the altruism of Blacks, Browns, Reds and progressive-whites. It is fully understandable why most would be cautious of their spending-habits at a time of economical-disaster, but a seed sown in the right soil, will ultimately germinate, and redound toward the profit of the planter. Black Commentator is a soil worth planting upon, and furthering the best of the Black-literary tradition through.
BC is urging its readership to assist in this most turbulent of times, and take a stand on the side of solidarity. For those willing and compelled to donate, pls. visit the Black Commentator contribution page or paypal and fill in the first slot with: paypal@blackcommentator.com
