On ascots, oil spills and wealth disparities

Today I taped an interview with Georgetown professor Dr. Michel Eric Dyson for his newly-relaunched radio show. It'll air Tuesday but here's a preview:

Dyson asked me about the long-term economic impact of the BP oil spill in the Gulf of Mexico and I said I thought we're already seeing it in the form of higher gas prices and that it would continue. A few weeks ago I was buying gas for $2.50 or less and a few days ago i filled up at $2.81 a gallon for regular. I also said I was skeptical of a report from Moody's Economy.com that said that the spill won't have a long-term impact on the US economy because the Gulf states only account for 1 percent of GDP.

We also talked wealth disparities in the wake of a new report that shows that the black-white wealth gap in the US has actually quadrupled since 1984. It's vexing because this is actually the period over which many thought that the black middle class was permanently expanding as the result of economic and employment gains in the decades following the civil rights movement. I've actually pitched a commentary to TheRoot.com about my take on those numbers so you'll read about that over there soon if they accept it. If not, I'll write it here no later than Monday.

And speaking of TheRoot, today they ran a colorful piece by yours truly called "We Had our Ascots Handed to Us." Its my take on black men's style cues and what we lost when Daily Show host Jon Stewart discovered that Roland Martin has interesting taste. Check it out and let me know what you think.

Advice for soon-to-be college grads

If you're a college senior and you watched the video, you're probably not encouraged. When I graduated a decade ago, jobs were plentiful and although the dot-com boom was about to go bust, unemployment never reached anywhere near 10 percent during the 2001 recession.

Students, are you concerned about leaving campus for the last time with the economy and job prospects still in the toilet? At least one reader has two questions that showed she's worried about exactly that:

What's the best way to invest money if you're a student w/ no real job but have leftover money once expenses are taken care of? If you were a student and you got an absurd refund, would you save it all or pay down an undergrad loan?

Both are good questions. After doing a little interviewing I found out that the questioner has about $600 in savings and as of now, no solid job lined up after graduation. If she doesn't find one, she plans on living with her parents while looking for work.

With that little in savings and facing graduation in a tough economy, I'd be adding any extra cash to my savings. I'm not sure how much it costs you to live a month under your parents' roof, but $600 isn't likely to last beyond a month or two. You'll need more cash than you have to weather the storm until you find a job. You can worry about stocks, bonds and mutual funds when you have a job and a serious income.

As for the refund, use the money to pay down the student loan. Remember that the refund is only a check for the difference between what you borrowed for school and the cost of a semester's tuition. It's not free money and ultimately you'll have to pay it back with interest. Better to do that now while your loans are in deferment than in a few months when you'll be paying interest on it -- perhaps without a job.

Obama lays more stimulus plans

Is the economy moving in the right direction, and if so, does it need more government help to keep it going that way?

President Obama said this morning that the economy swung further from recession toward growth than at any time in the past three decades, but that a recovery is still so feeble that more stimulus help was needed. His plan includes:

• eliminating the capital gains tax on and giving other tax breaks to small businesses;
• more spending to upgrade transportation and communication infrastructure;
• incentives for individuals to upgrade their homes to make them more energy efficient.
  

In this or any other recession, I've long said that there can be no recovery without jobs, so I'm a fan of the small business tax breaks and the infrastructure plans if they boost hiring. It'd be a failure if businesses take the tax breaks and run without hiring anyone, so hopefully there will be some safeguards in place.

I also like the infrastructure spending, but I desperately hope that includes significant funding for high-speed rail and other projects that move our transportation grid into the 21st century and away from fossil fuel dependence.

Your thoughts on the plan?

It's Payday!

Not literally, but that's the name of a radio show I taped last week. The host, Zachary Rinkins (on twitter here) is a phenomenal young business journalist who's hustled enough to get his own show on air. We talked for about an hour about how the recession has affected young professionals and young people should be doing to find the best opportunities in a continued downturn. Check it out.

Michael Eric Dyson & President Obama

I'm back on the Michael Eric Dyson Show this afternoon, discussing the economy this afternoon at 1:45. We'll be talking about the Obama administration's work on a "Cardholders' Bill of Rights" for credit card consumers, the fact that men are suffering more from job losses in the current recession than women and the troubles in the auto industry. Check the Dyson web site to see where the show airs in your city.

In the meantime, tomorrow marks 100 days in office for President Obama, so tomorrow's post will be about how he's done on the economy so far. How would you grade the president on his efforts on housing, the Wall Street bailouts, the economic stimulus package and other initiatives to turn the economy back around? Leave your grade in the comments section.

Talking economy with Dr. Dyson today

Yours truly will be interviewed on the Michael Eric Dyson show today at 1 p.m. Eastern about why President Obama is trying to bring his message of hope to recent speeches on the economy, how the financial services industry has largely ignored (or been left out of) the $116 billion market for affluent African-Americans, and just what you should do if you're lucky enough to hit the lottery one day. To see what time the show airs in your city or listen online, hit http://www.power88lv.com/nprprogramming.html.

Also, if you're in the DC area, I'll be talking the economy from 2 pm until 2:25 pm on Wealth of the Nation with DaRayl Davis, 1580 AM. Check me out, and as always, if you have a money question or issue, post in the comments section

Obama's economic town hall

The voting's done and President Obama is set to answer economic questions online at about 11:30 AM. So far, here are the top economic questions that were asked:

"For students graduating from college and graduate school, many of us have obscene amounts of debt. Do you have any plans to help alleviate some of that debt, given the current state of the job market?" -- 4,719 votes

"As a college student, I am very concerned about the cost of tuition and the interest of student loans. What is going to be done to make getting a higher education easier for those of us who have to pay our own way through college?" - 3,196 votes

"What will you and your administration do to help make college more affordable for every American?"

We have been focusing a lot on relief for homeowners, many of whom knowingly overextended themselves. But, what about relief for students who are having trouble paying back tuition loans?"

I'm not sure if there were so many cost-of-college related questions because mostly younger people responded on the Internet or what. Here are some of the top questions from other categories:

"President Obama: What benefits from the stimulus plan are there to those of us who are paying our mortgages, but living paycheck to paycheck?" - 3,661 votes

Do you have a strategy for assisting the small business, to help those struggling against the huge conglomerates to receive government help as the big corporations have received?" 1, 134 votes

A long, weak economy means people are saving more

I'm back, after a long week of moving. Let's get right to it.

I'll be on NPR's News & Notes this afternoon for one of my regular economics discussions and judging by everything I've read over the past week, the tone of the conversation won't be great. In short, there seems to be little in the way of hope for a quick recovery from recession.

Take this headline from USA Today last week: Why Home Values May Take Decades to Recover. 60 Minutes on Sunday ran this piece about another coming wave of foreclosures. One expert they interviewed predicted that the foreclosure mess has only halfway sorted itself out and that 2009 and 2010 will be a mess:



Scary stuff, but apparently it has done at least some good: Americans as a whole have actually started to save money and pay down debt -- for the first time since 1952.

The $800 billion bailout that might actually help you

I really didn't want to do another bailout post, but...

Yesterday the Fed rolled out another $800 billion package to prop up the economy. This time, though, the money is aimed at helping banks make affordable loans to consumers:

• $200 billion will be used to buy securities backed by consumer debt like car loans or credit cards

• $600 billion is intended to directly buy troubled mortgages, taking them off the books of Fannie Mae, Ginnie Mae and Freddie Mac, the three government-backed mortgage lenders.

The bottom line is that by guaranteeing investors' risk for taking on consumer debts, they'll start opening to door to giving out loans to the little guy again. In the same way, the hope is that the action on mortgages will quickly help lower rates and get people interested in buying again.

It could wind up being a better short-term thing for consumers than anything the government has done so far, given that so little of the trillions spent on bailouts have gone toward anything that might make it directly easier for you and I to borrow. Problem is, this, like everything else, will have to be paid for and will have long-term ramifications that most of us can't even imagine yet.

What's your take? Good idea or bad one?

Why Barack Obama needs to build trains

Yesterday we got introduced to Barack Obama's economic team during a noon press conference. An hour later, I was on National Public Radio talking with a woman who exemplifies why some kind of economic rescue is necessary. Julia Cox lost her job in the mortgage industry almost a year ago and can't find new work. With a daughter in college, she's losing her home and contemplating filing bankruptcy.

Obama's got another press conference today in which he's expected to discuss potential budget cuts for next year, so maybe we'll finally get a look at how we're really paying for all these bailouts. Meanwhile, here's an expensive idea that would be worth the cost in helping boost the economy: trains.

I've been wanting to write about this for a while but Stanley Crouch of the New York Daily News beat me to it. He wrote a column explaining how building a national high-speed rail system is exactly the kind of project that could have a real, decades-long, transformative impact on the American economy.

"Rebuilding and expanding our train system would bring about extremely fruitful construction projects. The new routes would add various levels of service to meet what could become a revolutionary number of customers who could not only count on speed, but also rely on the scenic experience that is much more likely when one is not driving. It would also get us away from the gasoline pump that has upended the American economy for the worst."

I couldn't agree more, but of course a new railroad system would take years to build. People like Julia Cox need help now. If you were on Obama's economic team, what ideas would you bring to the table to jump-start the economy immediately, what long-term projects would you push for and where, oh where, would you find the money?

Can Obama save the economy on a shoestring?

This man is working on a plan to create 2.5 million jobs over the next two years. I can't wait to hear the devil in the details.

Don't get me wrong: Obama shouldn't have a ton of difficulty passing whatever employment stimulus plan he sends to Congress. The legislature is controlled by Democrats, incoming presidents usually get at least one of their first initiatives passed by Congress and not even the most partisan Republican will want to be painted as being "against jobs" come January.

That said, Obama still has a problem that Cuba Gooding Jr. might characterize by saying "show me the money." There are many ways a government can stimulate job growth, from tax credits to employers for hiring, to lowering interest rates, to funding road and rail and school projects to lending money directly to companies, which seems to have become a favorite in Washington.

The problem is the Treasury is already tapped (can anyone tell me where the first half of that $700 billion went?), and will likely be more so by the time Obama takes office. Citigroup is about to get a $20 billion "rescue", and an Obama adviser said Sunday morning that the new president might let Bush's tax cuts for wealthy people run out on their own, instead of repealing them. That means more tax money being doled out while fewer is coming in.

Economic stimulus is going to be the first, most important thing that the Obama administration does, but no one has yet answered the first, most important question about it: How are we gonna pay for all this?

The layoff ax is falling hard

This economy is really starting to hit people where it hurts: at work.

A few months ago, I knew many people who were cutting back on discretionary spending but most of them weren’t worried about their jobs. No one I knew had lost his or her job.

Unfortunately yesterday, two people I know were laid off. They worked in different states and at different companies. And that's hardly the end. The company I work for is planning to lay off 10 percent of its workforce. I read yesterday that Fidelity Investments in Boston is planning a major layoff. Those folks would join the hundreds of thousands already laid off this year

To be on the safe side, Single Ma, who writes the Fabulous Financials blog, says she's beefing up her emergency fund to cover her for a full year. Good idea if you can afford to do it.

Are you worried about your job right now? And if so, what kind of contingency plan do you have in place to make sure you're alright if you lose it?

My three economic challenges to President Elect Barack Obama

The election is over. Obama won by a landslide, no doubt with the help of many readers of this blog.

But even having won a majority of the popular vote and with his party in control of both houses of Congress, making the kinds of changes that Barack Obama promises won't be easy and will require more than political maneuvering. Especially on the economy, much work and sacrifice will have to be made by the same electorate the ushered Obama to power. Here's my top three things that I think Obama will focus on to right the economy, what it will take to get them done, and a few suggestions for all of us to take heed of.

To ensure our economic future, Obama MUST:

1. Push through Congress meaningful healthcare reform that can actually be implemented. His campaign platform called for an aggressive plan to cover all Americans that is sure to be costly, but the challenges are many. A Democrat-controlled Congress will likely support his plan, but the healthcare lobby still looms large. Obama will have to be careful -- and rightfully so -- to make meaningful reform that is affordable to taxpayers and consumers but doesn't deter investment in the medical sciences or cause a catastrophic loss of jobs in the medical care industry.

Our responsibility -- Get healthier. Obesity, high blood pressure, heart disease, diabetes, cancers, HIV infection: For its wealth and relative prevalence of available medical facilities, America is one of the sickest nations of earth. Many of those ailments are not just extremely costly, but preventable. We'd all do ourselves and the new president a favor by eating better and taking a damn walk every day.

2. Re-regulate the financial markets -- but not too much. Wall Street's become too much like a casino, less a place where people take calculated risks that pay off when sound management or daring innovations are successful and more like a gambling parlor where bettors wager (and often lose) money only to sell their bad debts to the next sucker who comes along. Those suckers ultimately ended up being the American taxpayer and that can't continue. Obama's choice for Treasury secretary will be his most important cabinet pick besides outside Secretary of State.

Our responsibility: Continue investing, but do so responsibly. Panicking, abandoning banks that are still solvent and pulling out of 401(k)s is not the way to go. Neither, however, are irrationally bidding up the prices of IPO shares like during the tech boom, or homes like what happened in the earlier part of this decade. Weaning ourselves off credit won't hurt, either, but I'll come back to that later this week.

3. Mandate a financial literacy curriculum in elementary and high schools. Yes, this is a wild-card that wasn't part of Obama's election platform. But it stands, in my opinion, as the number-one challenge to our economic future. The housing bust and credit crisis both have roots in the fact that American schools continue to churn out workers educated enough to earn decent salaries but woefully equipped to know how to handle the money. Obama fails to make this a national priority at the peril of us all.

Our responsibility: First, make sure you understand the basics of personal finance. Pick up 401(k)s for Dummies or Investing for Dummies. Bookmark this blog. Watch CNBC or read the Wall Street Journal then look up terms you don't understand. Then teach your kids what you're learning. By the time they get out of elementary school, your child should have a savings account, a college fund and understanding that using a credit card doesn't mean the money won't have to be paid back.

Welcome to the Money Corner

If you read my old blog, thanks for following me over here. Newbies, here's an intro: I'm Keith Reed, a business reporter and economics commentator. I started blogging two years ago to share my answers to questions friends asked about how the economy, their spending habits, investing, saving and the like.

I'll take questions from anybody because I think there are few things more needed in America than more financially literate people -- check your credit card balance if you disagree.

Here's what I'm not: a day-trader, stock-picker or financial adviser giving out professional investment recommendations. Instead, this blog is a forum for your concerns and curiosities about money. I'm here to share my common sense opinions, informed by the hours I spend interviewing and interacting with entrepreneurs, analysts, executives and everyday people.

Hope you like the blog and find it useful.