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Archive for Tuesday, October 28, 2008

Experts: Kan. will miss brunt of financial woes

From left, Robert DeYoung, Kansas University School of Business professor, Mohamed El-Hodiri, KU professor of economics, and Don Johnston, executive vice president of the northeast Kansas region for Intrust Bank, discuss the economy during a forum Monday at the Lawrence Public Library.

From left, Robert DeYoung, Kansas University School of Business professor, Mohamed El-Hodiri, KU professor of economics, and Don Johnston, executive vice president of the northeast Kansas region for Intrust Bank, discuss the economy during a forum Monday at the Lawrence Public Library.

October 28, 2008

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Experts say Kansas can endure economic woes

The nation is facing the worst financial crisis since the Great Depression. And while Lawrence will be affected, some local experts are saying the effects here might not be as harsh as in other parts of the country. Enlarge video

Lawrence and Kansas will likely weather the current national financial crises better than other areas of the country, according to a panel of economists and banking experts.

Just how bad it will be locally isn't yet clear, the panelists said during a town hall forum Monday night at the Lawrence Public Library, 707 Vt.

"We're insulated to some extent," said Don Johnston, executive vice president of the northeast Kansas region for Intrust Bank, who was one of three panelists. He was referring to the financial problems on Wall Street, the $700 billion federal bailout and the declines in the stock market in recent weeks, all connected to housing market problems.

But a strike by Boeing Co. employees could have serious effects on the Wichita area, Johnston said.

The Kansas economy generally stays a steady course no matter what is going on nationally, said Mohamed El-Hodiri, a Kansas University professor of economics, also a panelist. Much of the state's economy is based on federal institutions such as the Leavenworth penitentiary and military bases. The state's agriculture industry also is strong right now, he said.

Local banks are in good shape and have money to loan, Johnston said.

Johnston, El-Hodiri, and Robert DeYoung, a Kansas University School of Business professor who is an expert on banks, said the nation could be in a major recession for some time before it starts to recover.

The three spoke to about 25 people at the library in a forum moderated by Sheyda Jahanbani, assistant professor of history at KU.

A recession is not the time to raise taxes, the past history of national financial crises have shown, DeYoung said.

"There's a time for tax increases but it's not when the economy is growing slowly," he said.

In the long run the national economy will improve, the panelists said.

"We've got to tighten our belts for a few years but in the long run we'll have growth," DeYoung said.

It is not known how Lawrence's manufacturing businesses will fare, Johnston said, but the community needs to build its industrial base to help it get through future economic blips without having to rely on sales tax issues, Johnston said, referring to the city's upcoming sales tax election. Neglected infrastructure problems are compounded by economic downturns, he said.

The financial system will eventually get corrected but panelists think more federal regulations will be needed to prevent a future crisis.

In the meantime, local residents shouldn't panic and instead stay patient. Don't withdraw money and hide it in a coffee can, Johnston said.

Other advice from the panelists included spending when you can afford to, borrowing money at low rates and staying away from adjustable rate mortgages.

"If you are working and have the opportunity to put money in a 401(k) (retirement plan) that is wonderful," Johnston said.

Public officials also should be held accountable for the policies that led to the current crisis, DeYoung said.

"That's something we can all do something about," he said.

Comments

jmadison 5 years, 10 months ago

Sen Chris "Countrywide" Dodd and Rep Barney Frank helped block any substantive oversight of Fannie Mae and Freddie Mac. The last time I looked they are still in charge of oversight of the financial industry by Congress. The current structure and seniority rules of Congress do not permit for any meaningful accountability of those that have helped lead the US down the road of financial instability.

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kumatt 5 years, 10 months ago

Let's see, a three-person panel of "experts" and two of them are professors? Poor Don Johnston - probably mortified when he showed up and saw who his fellow "experts" would be. And what's with El-Hodiri's attire? Very professional, sir. You look real "expert" sitting there....

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nobody1793 5 years, 10 months ago

I don't know about El-Hodiri, I don't trust that DeYoung--sounds Dutch, and we know they all love pot and hookers, right?

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jonas_opines 5 years, 10 months ago

Hmmmm. . . . no comments yet on Dr. El-Hodiri's full name, and how it means he can't be trusted. Surprising.

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Godot 5 years, 10 months ago

Some democrats also want to eliminate the tax deductibility of your retirement contributions and tax the interest as it is earned; some democrats are saying that they want to charge a "windfall profit" tax on withdrawals from 401-k's; others want to force all workers to put 5% of their earnings in a 401-K that invests only in Treasuries. If we have a government where the executive and congress are controlled by Democrats, putting money into any kind of tax sheltered retirement account will be like putting money down a rat hole.

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Godot 5 years, 10 months ago

""Inside Today's BulletinDems Consider Taxing 401(k)s By Michael P. Tremoglie, The Bulletin 10/28/2008Email to a friendPost a CommentPrinter-friendlyCongressional Democrats might enact legislation taxing 401(k) plans if they obtain a supermajority in Congress after the next election. They have shown an interest in revamping the current system and in eliminating the current tax exclusion from contributions.Advertisement During the past two weeks, U.S. Rep. George Miller, D-Calif., chairman of the House Education and Labor Committee and U.S. Rep. Jim McDermott, D-Wash., chairman of the House Ways and Means Committee's Subcommittee on Income Security and Family Support have entertained proposals that would tax 401(k) plans. Both held hearings laying the groundwork for future legislation that could eliminate most of the $80 billion in annual tax breaks that investors receive by placing their money in the $3 trillion 401(k) system. "http://www.thebulletin.us/site/index.cfm?newsid=20179546&BRD=2737&PAG=461&dept_id=576361&rfi=8Just you watch - they will eliminate the tax deductibility of contributions to 401-ks, which are the retirement plans for private businesses, yet retain the tax deductibility for 403(b)'s and 457's, which are for educational institutions, non-profits, and government agencies. Mark my words.

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Chris Ogle 5 years, 10 months ago

"There's a time for tax increases but it's not when the economy is growing slowly," he said+++++++++++++++++++++++++++++++++++++Right on......this is not the time for any new taxes.

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Godot 5 years, 10 months ago

The national debit increased by over $1trillion just since July. That has nothing to do with taxes and everything to do with bailing out fraudsters and theives. Oust any Congress pig who voted for the bailouts.

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jmadison 5 years, 10 months ago

Kansas does still have part of its economy based on agriculture. The last time I looked, commodity prices have been falling from the peaks that they hit this summer. Surely, less paid for the commodities produced does not bode well for the Kansas economy.

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Quigly 5 years, 10 months ago

Do any of you people think that we are safe? It is this type of attitude that blinded everyone in the first place. No one is safe. This whole country is about to implode on its on C greed and we have"experts" telling us to relax? Bite me.

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NObamaNOwayNOhow 5 years, 10 months ago

oh, we have NOTHING to worry about with a panel of experts at the helm , especially these "creams of the crop".

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Shardwurm 5 years, 10 months ago

Translation:It's ok to raise tuition at KU!

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Shardwurm 5 years, 10 months ago

Can't answer your questions Hawk but I do know these institutions are going to so burden the current generation that they're all going to leave with the equivilent of a house mortgage in student loans...except of course the rich and the poor.What does that mean? It means that instead of buying new cars, going on trips, shopping, and even maybe getting their first house, our middle-class kids are going to be paying off their education for 10 years. That's money that is coming straight out of our economy. Think things are bad now? Wait until the cash flow dries up and these kids can't pay their loans any more.And the educators look at students with a straight face and tell them how useful a Politcal Science degree is and that it's well worth $80,000 in debt. Oh...and you won't have professors to teach you...we've got Grad students for that.They should have a mask and gun at enrollment.

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Richard Heckler 5 years, 10 months ago

Why is there always a Bush around when the nations financial instituions crumble. Lehman Bros had Paulsen,Jeb Bush and second Bush cousin George Walker on the payroll with another Bush in the White House. Paulsen as Treasury Secretary was the oversight and could have have stepped in after Paul Volcker and Barrack Obama warned him things needed to change in 2005.What party is in the white house and has been observing the sub prime loan scandals, pretending nothing was wrong? Republicans Who has history with financial institutions going south such as the savings and loan scandal? Republicans! http://rationalrevolution0.tripod.com/war/bush_family_and_the_s.htmMcCain-the-most-reprehensible-of-the-keating-fivehttp://www.phoenixnewtimes.com/1989-11-29/news/mccain-the-most-reprehensible-of-the-keating-five/1

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Richard Heckler 5 years, 10 months ago

What impact will McCain/ Bush Social Security plan have on the national debt?Unless taxes are raised, the government will have to borrow up to $4 trillion over the next 20 years to make up the money that is drained out of the system by private accounts. Bush,McCain and Congress already racked up a $475 billion deficit in Bush's first term. Social Security privatization would raise the size of the government's deficit to nearly $700 billion per year for the next 20 years, almost tripling the size of the national debt.How will the rest of the U.S. economy be affected if the McCain/Bush plan is enacted?Put simply, moving to a system of private accounts would not only put retirement income at risk--it would likely put the entire economy at risk.The current Social Security system generates powerful, economy-stimulating multiplier effects. This was part of its original intent. In the early 1930s, the vast majority of the elderly were poor. While they were working, they could not afford to both save for retirement and put food on the table, and most had no employer pension. When Social Security began, elders spent every penny of that income. In turn, each dollar they spent was spent again by the people and businesses from whom they had bought things. In much the same way, every dollar that goes out in pensions today creates about 2.5 times as much total income. If the move to private accounts reduces elders' spending levels, as almost all analysts predict, that reduction in spending will have an even larger impact on slowing economic growth.The current Social Security system also reduces the income disparity between the rich and the poor. Private accounts would increase inequality--and increased inequality hinders economic growth. For example, a 1994 World Bank study of 25 countries demonstrated that as income inequality rises, productivity growth is reduced. Market economies can fall apart completely if the level of inequality becomes too extreme. The rapid increase in income inequality that occurred in the 1920s was one of the causes of the Great Depression.http://www.dollarsandsense.org/archives/2005/0505orr.html

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