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To: xcr600 who wrote (9622)	11/21/2002 8:45:02 PM
From: Bucky Katt	Respond to of 48461

It gets worse, much worse>>US $20 TRILLION in the hole> Promised Benefits in U.S. Are $20 Trillion in the Hole From the WSJ>> A top U.S. Treasury official last week likened the U.S. government to a profligate insurance company that can't afford to make good on promises it has made. The cost of benefits the government vows to pay in the future exceeds projected tax revenues by roughly $20 trillion, he said. And that's no typo. No one took much notice. Maybe that's because Peter Fisher, the Treasury's undersecretary for domestic finance, spoke in Columbus, Ohio, far outside the Beltway. Or maybe it's because his alarmism was buried in a discourse on the riveting topic of government bookkeeping. His point is worth pondering. But is anyone in the Bush administration listening? "Think of the federal government as a gigantic insurance company with a sideline business in national defense and homeland security," Mr. Fisher said. It counts premiums and payouts as they come and go and worries little about how to pay claims in the future. "This particular insurance company, it turns out, has made promises to its policyholders that have a current value $20 trillion or so in excess of the revenues that it expects to receive," he said. "An insurance company with cash accounting is not really an insurance company at all," he added. "It's an accident waiting to happen." That's pretty strong stuff coming from the guy whose job makes him the chief salesman for U.S. Treasury debt. The chart accompanying this column (no chart allowed on SI) shows the problem. The combination of an aging population -- the oldest baby boomers turn 57 next year -- and rapidly rising health-care spending is inexorably pushing up the tab for Social Security and Medicare. President Bush wants to draw the line on federal taxes at 19% of gross domestic product (the value of all of the goods and services produced in the U.S.). It isn't enough to pay for what the government is promising. Focusing exclusively on this year's federal deficit and the size of next year's federal debt is a mistake, and arguing about the Social Security trust fund is a diversion. Dan Crippen, head of the Congressional Budget Office, says the real issue is: How much of our children's economy are we going to take to support ourselves in retirement? Look at the world his way, and there are just two moving pieces: How much are we promising future retirees? And how big will tomorrow's economy be? The U.S. isn't going to raise taxes sufficiently to cover the cost of keeping current promises. It ought to take steps now to reduce future costs of Social Security, Medicare and Medicaid and to make the future economy bigger so both retirees and workers can live well. Instead, Mr. Bush offers tax cuts as the cure to every economic ill and increased benefits to the politically potent, such as farmers. There are occasional bursts of rhetoric, and vague statements of principle from the White House. But, so far, there are few serious proposals and fewer practical political strategies for achieving those that have been floated. Look at the economy through Republican eyes, and judge Mr. Bush's policies. Mr. Bush's advisers believe that cutting marginal tax rates is a good way to improve long-run economic growth. Why then so much eagerness to continue the Clinton campaign to turn the tax code into a theme park full of special tax credits? Treasury Secretary Paul O'Neill says he is working on a far-reaching tax-overhaul proposal. Why then spend so much on traditional tax cuts -- and on extending them -- that there is nothing left to use as a carrot to get a tax overhaul through Congress? Every Bush economic adviser sees what Mr. Fisher sees. Why then dangle a Social Security plan that pretends we can preserve benefits without increasing taxes, by turning to the stock market? Saving more, Bush economists say, is key to investing more, and investing more is key to keeping productivity growing. Government deficits soak up savings. So what's the Bush plan for fighting a war, protecting the homeland, cutting taxes and avoiding deficits? Health-care costs are on the rise. So where is the White House strategy for devising and getting congressional approval of a plan to make Medicare work better? One Republican who has been in and out of government over the past 20 years quips privately that Mr. Bush's economic policy lacks only two things: a policy and someone to explain it. Write to David Wessel at capital@wsj.com Updated November 21, 2002

To: xcr600 who wrote (9622)	11/21/2002 8:46:24 PM
From: Bucky Katt	Respond to of 48461

Israel Eyes Up to $10B in U.S. Aid> By Dan Perry Associated Press Writer Thursday, November 21, 2002; 7:40 PM JERUSALEM –– Israel will ask the United States for loan guarantees aimed at jump-strating its economy which has been damaged by two years of violence and the request will total between $8 billion and $10 billion, a senior government official said Thursday. The official, who spoke on condition of anonymity, told The Associated Press that the Finance and Defense ministries are finalizing the request and would forward it to the United States in the coming days. The request for guarantees on foreign bank loans would be in addition to the $2.9 million in direct loans and grants that Israel receives annually from the United States, the official said. Israel, which receives the largest U.S. aid package of any country, relies on the loan guarantees to borrow at lower interest rates. There is no cost to the United States if Israel repays the loans and Israel has never defaulted on a loan, the official said. A State Department spokesman, Philip T. Reeker, said the United States has not yet received the request and declined to comment. Prime Minister Ariel Sharon, campaigning for re-election, asked President Bush for $10 billion in loan guarantees at a White House meeting last month, according to Jane's Foreign Report. Bush, following the Oct. 16 meeting, said "terror has affected the Israeli economy," but made no specific mention of further loan guarantees. "We've got great confidence in the Israeli economy, because we've got great confidence in the Israeli people," Bush told reporters at the time. "I'm convinced that the economy will be strong." More specific requests were discussed when Sharon's chief of staff, Dov Weisglass, met with U.S. officials in Washington several weeks ago, the official said. Israel's $100 billion economy has been battered by the violence, which has driven away tourists and investors, as well as the global economic slowdown and the crisis in the high-tech sector on which the country depends. Economic growth was above 6 percent in 2000, but has ground to a halt. More than 10 percent of the work force is unemployed and inflation has risen to about 8 percent this year. The official said the economic outlook could worsen if the United States attacks Iraq – which many fear could prompt Baghdad to fire missiles, or chemical or biological weapons, at Israel. The United States guaranteed $10 billion in loans for Israel a decade ago to help it absorb immigrants from the former Soviet Union. Angry over Israeli settlements in the occupied West Bank and Gaza, then-President George Bush held up the guarantees until the hard-line Yitzhak Shamir was replaced as Israeli prime minister by more moderate Yitzhak Rabin, who signed an interim peace treaty with the Palestinian Liberation Organization. © 2002 The Associated Press

To: xcr600 who wrote (9622)	11/21/2002 8:47:30 PM
From: Bucky Katt	Respond to of 48461

Tyco Is in Talks About Selling Debt of $4 Billion By ROBERT TOMSHO and JATHON SAPSFORD Staff Reporters of THE WALL STREET JOURNAL Tyco International Ltd., facing a deadline to repay as much as $6.2 billion in bank lines and convertible debt, is in discussions with investment bankers about underwriting a convertible debt offering of as much as $4 billion, according to people close to the situation. While cautioning that the conglomerate's refinancing strategy could ultimately go in a different direction, one person familiar with the discussions described the proposal as "very serious." Investment concerns involved are said to include J.P. Morgan Chase & Co., Goldman Sachs Group Inc., and Citigroup Inc.'s Salomon Smith Barney unit. If completed, the huge offering would allow the company to repay holders of $2.3 billion in existing convertible debt that comes due in February. Tyco, which is registered in Pembroke, Bermuda, could also pay down bank debt and renegotiate a $3.9 billion bank line that expires at the same time. Analysts said it would be a major help in restoring investor confidence in a scandal-plagued company that has been staggered by criminal charges against two former top executives accused of looting $170 million via unauthorized compensation and gaining another $430 million from illicit stock sales. "Something like this would totally put to bed fears of a financial crisis," said Glenn Reynolds, chief executive of CreditSights, a New York credit-research firm. "It would be a bold stroke." Bond investors seemed to think so. Tyco's 6 3/8% notes, due 2011, were trading in the range of 92-94 cents on the dollar, up three cents, after word of the possible debt offering was first reported by CNBC. Such an offering faces hurdles, however. People close to the company said Tyco is unlikely to proceed with an offer before the conclusion of an internal probe into Tyco's accounting practices. That investigation, led by attorney David Boies, is said to be nearing its end, however, and "the fact that this is sort of leaking out now suggests that the forensic audit may be reaching its conclusion with only minor issues," said Steve Altman, a bond analyst with Commerzbank in New York. Meanwhile, although the company itself hasn't been charged with any crime, it remains under investigation by the Securities and Exchange Commission, among other entities. Securities lawyers said that, while the SEC wouldn't have to formally approve such an offering, per se, its staff would have to sign off on the related registration. In cases where a company faces regulatory scrutiny, the SEC staff can raise so many issues that "it is essentially impossible to get the registration effective," said Matthew Maloney, a securities lawyer in Washington. "My guess is that they would try to do it on a private-placement basis," he said, echoing a strategy suggested by several other observers. At 4 p.m. in New York Stock Exchange composite trading Thursday, Tyco shares were up 7.2%, or $1.18, at $17.58 apiece.