My finance view

A year ago, when Sydney property agent Peter Green

In the land of big-time deficits and trillion dollar budgets, Congress is spending less money on at least one thing.

Itself.

After voting last year to cut its own operating budget by 5%, House members have reduced the number of paid positions on their staffs, and are spending less on office supplies and computers.

The cuts have translated to 948 fewer salaried staff positions, a 62.5% drop in spending on computers and 30.7% less spending on office supplies, according to an analysis conducted by the Sunlight Foundation.

Staff assistant positions were the hardest hit, registering a 16.6% decline, while the number of part-time employees dropped 15.6%. Meanwhile, the number of slots for communication directors actually increased.

The House has around 12,000 staffers, and the job cuts amounted to a 7.4% overall decline in positions, according to Sunlight.

When compared to current deficits, the House spending reductions don’t add up to much in the way of savings. But for a Republican-controlled chamber, they are an important reflection of legislative priorities.

"The cuts are such a tiny fraction of the overall budget," said Lee Drutman, a data fellow at Sunlight. "And the reality is it makes it harder for them to do a decent job."

And more cuts are on the way, as funding will decrease another 6.4% for the legislative year that kicks off Tuesday.

Commentary: Debt crisis must be solved in the open

With many of the easy cuts already made, and staff salaries accounting for about half of congressional budgets, things might get tricky for lawmakers trying to keep a full roster of employees saving account pay day loan.

A report from the Congressional Management Foundation, a non-profit that helps congress improve its operations, backs that up.

"The 2011 cuts were manageable," the report said. "However, the consensus is that the cumulative two-year cut of 11.4% will require the large majority of offices to make painful cuts that will be felt by virtually all staff."

Drutman warns that any further reduction in staff levels will hurt the ability of congressional offices to independently produce sound policy recommendations and legislation.

"Capitol Hill staffers are already stretched incredibly thin," Drutman said. "And that means if you’re a staffer, you’re more dependent on outside sources."

And who are those outside sources?

For the most part, said Drutman, they’re lobbyists. And dependence on lobbyists for policy expertise is a dicey proposition.

Lobbyists can help fill policy knowledge gaps on congressional staffs, but at the same time come with deep-pocketed backers seeking a specific legislative outcome. 

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The U.S. is starting the year on a positive note, a sign that investors may be too gloomy.

Payrolls rose 200,000 in December, double the gain in November. A weekly measure of consumer confidence ended 2011 at a five-month high. And manufacturers reported their business in December grew at the fastest pace in six months. The combination indicates the world

+%3Cp%3E+It+looks+like+the+millionaire+surtax+is+going+down+again.%3C%2Fp%3E%3Cp%3EDemocrats+have+pushed+for+weeks+to+impose+a+millionaire+surtax+to+help+pay+for+the+cost+of+extending+the+payroll+tax+cut.+Republicans+have+said+it+would+be+a+job-killer.%3C%2Fp%3E%3Cp%3E%3Cp%3E%3C%2Fp%3E%3Cp%3E%3Cp%3E%3C%2Fp%3E%3C%2Fp%3E%3C%2Fp%3E%3Cp%3EOn+Wednesday+night%2C+with+time+running+out+before+Congress+adjourns+for+the+year%2C+it+appeared+that+Democrats+were+ready+to+give+up+in+the+name+of+getting+a+deal+done.+A+source+told+CNN+that+Senate+Democrats+would+propose+a+new+plan+that+did+not+include+the+tax.+%28Read%3A+The+latest+on+negotiations%29%3C%2Fp%3E%3Cp%3EThe+demise+of+this+version+of+the+millionaire+tax+would+not+be+a+surprise.+Lawmakers+have+already+voted+down+a+surtax+of+5.6%25%2C+then+3.25%25+and+most+recently+1.9%25.%3C%2Fp%3E%3Cp%3EBut+the+idea+of+taxing+the+rich+will+come+up+again+and+again+next+year%2C+since+themes+of+income+inequality+and+tax+fairness+will+be+sounded+repeatedly+on+the+campaign+trail.%3C%2Fp%3EPayroll+tax+cut%3A+What%27s+at+stake%3Cp%3EUrban+Institute+resident+fellow+Howard+Gleckman+points+out+that+an+extra+tax+on+millionaires+may+make+for+great+politics+but+it+would+make+for+awful+policy%2C+although+not+for+the+reasons+that+many+in+the+GOP+suggest.%3C%2Fp%3E%3Cp%3ERepublicans+still+cleave+to+the+notion+that+to+ever+ask+millionaires+to+pay+more+in+taxes+will+bring+the+economy+to+a+screeching+halt+because+it+would+hurt+small+business+job+creation.+%3C%2Fp%3E%3Cp%3EBut+there+are+problems+with+that+reasoning%3A%3C%2Fp%3E%3Cp%3E–A+very+small+percentage+of+tax+filers+with+business+income+make+more+than+%241+million.+%3C%2Fp%3E%3Cp%3E–There+is+no+way+to+tell+how+many+new+jobs+those+millionaires+create.+%3C%2Fp%3E%3Cp%3E–And+business+income+can+come+from+activities+that+don%27t+result+in+a+lot+of+hiring%2C+such+as+owning+rental+property+or+investing+in+a+partnership.+%3C%2Fp%3E%3Cp%3EFor+Gleckman%2C+a+big+problem+with+the+millionaire+surtax+is+that+it+feeds+the+myth+that+the+super+rich+can+pay+for+everything.+They+can%27t.+There+are+not+enough+of+them.%3C%2Fp%3EPayroll+tax+cut+divide%3A+How+to+pay+for+it%3Cp%3EAnd+by+applying+a+surtax+here+and+a+surtax+there%2C+soon+you%27re+talking+serious+rate+creep+–+to+levels+that+could+be+counterproductive+%3Ca+href%3D%22http%3A%2F%2Fus-fast-cash-now.com%22%3Efast+cash%3C%2Fa%3E%3C%21–+.+–%3E.+The+higher+rates+become+the+more+likely+it+is+that+the+rich+will+look+for+ways+to+avoid+paying+them.%3C%2Fp%3E%3Cp%3EIf+the+Bush+tax+cuts+expire%2C+the+top+rate+goes+to+39.6%25+and+the+value+of+certain+deductions+goes+down.+Add+in+a+new+Medicare+tax+for+high-income+households+starting+in+2013%2C+and+the+top+rate+could+approach+50%25+if+Congress+passed+a+5.6%25+surtax%2C+Gleckman+noted.+%3C%2Fp%3E%3Cp%3EDespite+the+flaws+in+the+parties%27+strategies+–+Democrats+always+reach+first+to+tax+the+rich+and+Republicans+always+rush+to+protect+them+even+at+the+expense+of+everyone+else+–+each+contains+a+bit+of+truth+the+other+side+will+have+to+accept+sooner+or+later.%3C%2Fp%3E%3Cp%3E%3C%2Fp%3E%3Cp%3E+%3C%2Fp%3E%3Cp%3EBoth+the+rich+and+the+middle+class+eventually+will+have+to+contribute+to+efforts+to+spur+the+economy+and+stabilize+the+federal+budget.%3C%2Fp%3E%3Cp%3E%26quot%3BDemocrats+today+can%27t+solve+our+nation%27s+many+budgetary+woes+primarily+by+taxing+the+rich%2C+and+Republicans+risk+alienating+the+middle+class+when+they+try+to+spare+the+rich+from+sharing+the+additional+burdens+most+Americans+soon+must+bear%2C%26quot%3B+former+Treasury+official+Eugene+Steuerle+wrote+in+his+public+policy+column+%26quot%3BThe+Government+We+Deserve.%26quot%3B%3C%2Fp%3E%3Cp%3EThe+rich+will+have+to+pay+more+in+taxes%2C+he+notes%2C+because+even+if+spending+is+cut+across+the+board%2C+they+won%27t+feel+the+pinch+since+they+don%27t+rely+on+government+spending+to+get+by.%3C%2Fp%3E%3Cp%3EAnd+the+middle+class+will+eventually+need+to+accept+some+spending+cuts+and+tax+increases%2C+Steuerle+said%2C+%26quot%3Bnot+because+the+rich+can%27t+pay+more%2C+but+because+most+income+in+the+economy+resides+with+that+80+percent+of+the+population+that+is+neither+poor+nor+rich.%26quot%3B%26nbsp%3B+%3C%2Fp%3E++%3Cp%3E%3Ca+href%3D%27http%3A%2F%2Fmoney.cnn.com%2F2011%2F12%2F14%2Fnews%2Feconomy%2Fmillionaire_surtax%2Findex.htm%27+rel%3D%27nofollow%27%3ESource%3C%2Fa%3E%3C%2Fp%3E+

U.S. stock futures are falling Monday as the initial enthusiasm over last week’s agreement on fixing the European debt crisis is replaced by worries that it won’t be enough.

The deal would allow for a central European authority to oversee future budgets for the 17 countries that use the euro. But it doesn’t help cut existing debt, which has caused Greece, Ireland and Portugal to need bailouts and is threatening Italy and Spain.

Less than an hour before the opening of trading in New York, futures for the Dow Jones industrial average are down 99 points to 12,044 while futures on the broader S&P 500 index are down 11 points to 1,242.

Markets in Europe are dropping, with France’s CAC-40 down 1.5 percent to 3,123.71, Germany’s DAX off by 1.2 percent to 5,862.44, and London’s FTSE 100 down 0.5 percent to 5,499.62.

Credit rating agency Moody’s said last week’s summit “offers few new measures.”

“The announced measures therefore do not change Moody’s previously expressed view that the crisis is in a critical and volatile stage,” Moody’s said, warning that it still intends to review all EU governments’ ratings for possible downgrades during the first three months of 2012.

Asian stocks mostly closed higher, as they caught up with the gains made in Europe and the U.S. on Friday.

Japan’s Nikkei 225 index jumped 1.4 percent to close at 8,653.82. South Korea’s Kospi added 1.3 percent to 1,899.76 and benchmarks in Singapore, Taiwan, Australia and Indonesia also rose.

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Employers likely added more jobs in November, encouraged by signs of modest economic growth. But the gains aren’t expected to be enough to lower the unemployment rate.

Economists forecast that employers added a net 125,000 jobs last month, an improvement from October’s gain of 80,000. The unemployment rate is expected to stay at 9 percent for the second straight month.

Some economists have revised their estimates even higher _ to roughly 150,000 _ after a spate of positive economic reports. And payroll provider ADP said Wednesday that private companies added 206,000 jobs last month.

Still, analysts say that while the economy is growing at a steady pace, it’s not accelerating enough to prompt employers to hire more aggressively.

And Europe’s financial crisis threatens to slow U.S. growth next year. A recession in Europe could reduce U.S. exports, hurt global financial markets and dampen business confidence.

Paul Ashworth, an economist at Capital Economics, estimates that the economy will expand 2.5 percent in the last three months of this year. But he expects growth to slow to 1.5 percent in 2012, partly because of the crisis in Europe.

“Things are getting a bit better, but perhaps only temporarily,” Ashworth said.

Weak job growth means companies don’t have to raise pay to keep their employees. Fewer jobs and lower pay leaves consumers with less money to spend. That’s holding back economic growth.

In the past three months, the economy has added an average of 114,000 net jobs per month. That’s barely enough to keep up with population growth. In the first four months of this year, the economy generated an average of 179,000 jobs per month.

For now, most recent economic reports have been positive.

Factories are expanding. The Institute for Supply Management, a trade group of purchasing managers, said Thursday that its manufacturing index rose to 52.7 in November, up from 50.8 in October. Any reading above 50 indicates expansion.

The ISM’s report also found that new orders and production both rose to seven-month highs. That’s a good sign for future output. Even export orders increased, despite the turmoil overseas.

Retailers reported a strong start to holiday sales over the Thanksgiving weekend, consumer confidence surged in November to the highest level since July, and Americans’ pay rose in October by the most in seven months.

Car sales also rose sharply in November, normally a lackluster month for the auto industry. Chrysler, Ford, Nissan and Hyundai all reported double-digit gains on Thursday, compared to a year ago.

Another report Thursday showed that U.S. builders spent more in October on new homes, offices and shopping centers. Construction spending rose for a third straight month, the Commerce Department said. Despite the gains, overall construction spending remained depressed.

Those reports have caused many economists to forecast a pickup in growth in the final three months of the year, to about a 3 percent annual rate. That would be an improvement from growth of 2 percent in the July-September period.

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TORONTO

Taiwan says fishermen on a Taiwanese boat fought back against Somali pirates and freed themselves after a hijacking in the Indian Ocean.

Some of the 28 crew on the Chin Yi Wen overcame the hijackers then the boat met up with British anti-piracy vessels nearby. Three crew had minor injuries.

The government news agency said the fight happened about 4 a.m. Sunday Taiwan time (2000 Saturday GMT). That was some 48 hours after the boat was reported missing.

The Central News Agency report cited the island’s Fisheries Agency. It said the 260-ton Chin Yi Wen is now heading to Port Victoria in the Seychelles.

Piracy is rife off the Somali coast. Somalia has not had a functioning government since 1991.

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With new Toronto condo units averaging just 749 square feet, baby boomers are finding the word downsizing is taking on new meaning

Baby boomers Jack and Leona Anderson made their first big step towards retirement last summer when they flew to Toronto from their home in Regina looking for a condo.

It wasn’t the sticker price that sent the teachers into a mild panic. It was the size of the units.

“I just kept thinking, if I’m going to move into a space this small, it’s going to be at an old folks’ home,” says Jack Anderson, 61.

The Andersons toured soaring glass and steel towers equipped with basketball courts, sprawling exercise rooms, granite countertops galore.

But they couldn’t see a place where they could actually live their new life, until their agent took them on a trip back in time to The Bentley, an almost 30-year-old condo building just steps from the St. Lawrence Market.

In the end, the couple opted to overlook the dated lobby, oak-trimmed kitchen cupboards and two bathrooms in need of updating.

It was the 1,200 square feet of living space that wowed them, along with the building’s wood-burning fireplaces and rooftop garden. They paid $339,000 for the one-bedroom plus den corner unit.

“Our house is 3,000 square feet with two fireplaces. We spend a lot of time outdoors. That (rooftop garden) is a viable substitute. We will be able to go up there in the morning and have our coffee and read the paper,” says Anderson.

With condos getting smaller by the day, especially in the downtown core where new units average just 749 square feet, baby boomers are finding the word downsizing is taking on new meaning.

“There is definitely a disconnect between what the demographics are telling us versus what’s actually getting built,” says Farrell Macdonald, a Coldwell Banker realtor.

“If there is a vulnerability in Toronto’s housing market these days it’s on the condo side — not just because of the sheer numbers we’re building, but because of the size and quality.”

Canadian condo developer Tridel Group says 25 per cent of its buyers are empty nesters and while it does build some larger units, its biggest market by far is first-time buyers for whom affordability is more important than size payday loans online.

“This (demographic) bulge is roaring towards us now and we’ve got people who are demanding alternatives but the market isn’t really responding,” says Macdonald. “We’re building lots of small, cheap and cheerful units but we’re not thinking long term.”

Macdonald hears complaints regularly from boomers who want to trade in family homes for simpler lives close to theatres and restaurants but refuse to be “plunked in a shoebox” better suited to single, young professionals.

That frustration is fuelling a renaissance among older condos, long considered less desirable because they lack flash and modern amenities and tend to have higher maintenance fees, says realtor Colleen Gray.

In the past year, Gray has seen even younger buyers starting to peek at the past.

Much of the renewed interest has been in decades-old buildings along Toronto’s waterfront, near the St. Lawrence Market and in midtown where units are selling for as little as $320 to $350 a square foot. That’s almost half the $600 to $700 per square foot of new units.

The tradeoff is higher maintenance fees. In The Bentley they average 67 cents per square foot (the Andersons pay $700 a month, which includes utilities), compared to about 50 cents in newer buildings, many of which don’t include utilities.

The biggest risk in older buildings is getting hit with costs for a new roof or heating unit that can overwhelm the maintenance fund.

But that day will come for newer units, too, given that fees don’t tend to reflect real costs, says Macdonald.

The Andersons are renting out their unit right now and plan to virtually gut their condo when they get ready to move to Toronto.

They know it will never have the look or feel of a brand-new building, but at the least it will have sparkling new bathrooms and a kitchen with the de rigueur stainless steel and granite, says Anderson.

“There are always going to be people who will want a property like this in downtown Toronto, just because of its square footage. I think in that way it was a very clever investment.

“Someday it’s going to sell itself.” Also read: Why downtown living is more attractive

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Finance ministers from the 17 euro countries agreed Friday to pay Greece its next batch of bailout loans, avoiding a potentially disastrous default, and moved closer to reducing the country’s massive debt burden.

But Greece’s debts are only one piece of Europe’s economic puzzle. The ministers meeting in Brussels were also struggling with two more complicated _ and arguably more important _ issues: boosting the firepower of the eurozone’s euro440 billion ($607 billion) bailout fund to keep the crisis from spreading and forcing weak banks to increase their capital buffers as a defense against market turmoil.

A European Union official said ministers had made progress on strengthening the banks, and that a plan should be ready for a summit of EU leaders Sunday. He spoke on condition of anonymity to discuss confidential negotiations.

However, more work remained to be done on Greece and the bailout fund, the European Financial Stability Facility. Decisions on those two fronts were not expected until a second summit on Wednesday.

Greek Finance Minister Evangelos Venizelos welcomed the news that Athens would get the next euro8 billion ($11 billion) installment, calling it a “positive step.” A day earlier, Greek lawmakers had approved new, deeply contentious austerity measures to get the money.

The loans, which still need the approval of the International Monetary Fund, should be delivered during the first half of November. The money will keep Greece afloat for a little longer, but most economists agree that the country also needs a substantial cut to its debt load.

The findings of a report from Greece’s international debt inspectors piled more pressure on European finance chiefs to find a solution for the country, whose troubles kicked off the crisis almost two years ago.

According to the report, Athens won’t be able to raise money on financial markets until 2021 unless it is allowed to write off more of its debt load. If that doesn’t happen, the country would need hundreds of billions of euros in new bailout loans.

A person familiar with the report said a tentative deal reached with banks in July to give Greece easier terms on its bonds would still leave it with a huge debt load of 152 percent of economic output in 2020. The person spoke on condition of anonymity because the report is confidential.

Germany is pushing for a revision of the July deal to have Greece’s private creditors take bigger losses of 50 percent to 60 percent and reduce its debt to some 120 percent of GDP by 2020.

The EU official said ministers had moved closer to Germany’s position on steeper cuts to Greece’s debt, but some financially weaker countries were still worried that could destabilize their markets and push their borrowing rates higher. “I wouldn’t say there’s a consensus but something close to that,” he said.

The eurozone needs to find a way to ensure that larger countries like Spain and Italy don’t get engulfed in the debt crisis, as they would be too expensive to bail out.

Increasing the firepower of the bailout fund, the European Financial Stability Facility, is meant to offer that protection, but Germany and France still disagree over how to do that.

Ministers failed to make much progress on that front Friday night and broke up the meeting shortly after starting discussions on the EFSF.

A German official, speaking on condition of anonymity, said that a combination of two options had crystallized as the most likely solution to giving the fund more leverage.

The first would involve the bailout fund acting as an insurer for bond issues from wobbly countries like Italy. That would essentially compensate investors against a first round of potential losses and keep governments’ borrowing costs in check.

In addition, the International Monetary Fund _ which has already provided about a third of the bailout cash for Greece, Ireland and Portugal _ would supply other stragglers with precautionary credit lines to make sure they have ready access to cheap money.

Last weekend, at a meeting in Paris, the finance chiefs from the Group of 20 leading economies opened the door for a larger role by the IMF, but only if the eurozone first does its part.

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