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The Biz Roundup January 25

Buy less. Borrow less. Work more. Sounds like treason to me.

But it will be up to the United States, as the global leader, to pull the planet out of this tailspin and, to do so, experts say Americans will have to rebuild the engines that drive our economic growth. They say we’ll have to throttle back on consumption and rev up production, borrow less and export more. We’ll also have to figure out how to supervise global financial markets so they don’t melt down again and make sure that, when prosperity returns, it is more broadly shared.

Mark Zandi with Moody’s calls this “a major inflection point” in business affairs.

“For over a quarter-century the global economy has been driven by U.S. consumers spending aggressively beyond their incomes by borrowing,” Zandi said. “It will take time to adjust.”

(“Consume less, export more to end crisis,” San Francisco Chronicle, January 25) Why is it all the economic advice we’re getting is so, well, common-sensical? Were we stark raving mad the last eight years? Who was in charge all this time? Oh, I remember, of course, that explains it.

Speaking of those who used to be in charge, let’s just say they haven’t bought a clue yet.

Republicans plan to test President Obama’s commitment to bipartisanship as his $825 billion stimulus package heads to the floor of the House of Representatives this week, with the House Republican leader saying Sunday morning that many in his party will vote no unless there are significant changes to the plan. . . .

“We need to make tax cuts permanent, and we need to make a commitment that there’ll be no new taxes,” Mr. McCain said. “We need to cut payroll taxes. We need to cut business taxes.”

(“Republicans Are Resistant to Obama’s Stimulus Plan,” New York Times, January 25) The economy has gone off a cliff and the mad uncle in the back is still screaming about tax cuts. Do you have any question now who is resposible for the mess we’re in? And, hey, Democrats, remember when the Republicans were in charge? Did they care what you thought about anything as you groveled and begged? C’mon, you won the election, for Pete’s sake. Act like it.

You know all those credit card offers you get from Capital One every week? Well, turns out the blokes got a little too eager handing them out.

Cap One’s woes may be a harbinger of things to come for all credit-card companies, which have said that 2009 will be a dark year for them as the recession and rising unemployment cut into cardholders’ wallets. Cap One’s 2008 loan losses of $6.4 billion far exceeded the $5.6 billion in losses it had predicted. Consumers are struggling to pay their bills as the recession continues to roil the economy, and credit-card companies aren’t being spared.

In a November report, Fitch Ratings said that defaults on credit cards are likely to get increasingly ugly this year, setting records. American Express’ (AXP) stock price plummeted 63% in 2008. Lenders are scaling back credit lines and hiking rates to insulate themselves against a coming storm. Card issuers have also petitioned the government for a lifeline. American Express is likely to receive roughly $3.3 billion of taxpayer funds, and Cap One got $3.6 billion.

(“Credit Cards Deal a Losing Hand to Cap One,” Business Week, January 24) Highway robbery interest rates, almost total protection from borrower bankruptcies, and a taxpayer bailout? What next? Unlimited access to all our bank accounts? Free money-printing machines?

Want to buy a newspaper cheap? I mean the whole thing, presses, editors, reporters, and all. (“Newspapers Left Battered and Bruised,” Washington Post, January 25)

At least you have fast Internet on the 200 days you have to stay inside on account of rain each year in America’s most wired city. (“America’s Most Wired Cities,” Forbes, January 22)

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