Social Security raise welcomed in tough economy (AP)

WEST PALM BEACH, Fla. – For some, the just-announced increase in Social Security checks amounts to an extra meal out, a little more cash for clothes or a new pair of shoes, some added comfort in retirement. For Elizabeth Davis, it's a crucial boost to the only thing keeping her afloat.

The 71-year-old Miami woman grew up picking cotton on her family's South Carolina farm, raised four children and has worked all her life, even now at a preschool. She is divorced, and her small 401k account "went down the drain," she said. So she counts the days to the third Wednesday of each month, when her $668 Social Security check arrives, and she is able to pay her bills.

"I could live a little better," she said of the 3.6 percent raise announced this week, the first in two years. "I don't have anything to look forward to until that check every month."

The reaction the cost-of-living adjustment has garnered illuminates the divide between the rich and poor among America's oldest residents. Social Security represents a staggering share of income for lower- and middle-class seniors — made evident just this week in a new government report — and for whom any increase can make a world of difference. For upper-income seniors, it's simply a nice plus.

Starting in January, 55 million Social Security recipients will get increases averaging $39 a month, or about $467 a year. In December, more than 8 million people who receive Supplemental Security Income, the disability program for the poor, will get increases averaging $18 a month, or about $216 a year.

Davis felt the effects of no raise the past two years. Her only other income is a small stipend for her work that averages about $232 a month. She's been using her credit card more and building debt. She's already trimmed as much as she can — from cutting her cable plan to limiting her phone usage to keeping the air conditioning off. She owns her home, but taxes, insurance, utilities and groceries eat up nearly all her income. As those costs rise, there was no wiggle room.

In Seattle, Joseph C. Visintainer, 63, lives alone with his cat in a U.S. Department of Housing and Urban Development complex, where rent is kept affordable. The retired restaurant worker said he keeps his expenses low in part by taking the bus instead of driving, and eating TV dinners instead of buying meat. Visintainer lives off Social Security and keeps some investments just for emergencies.

"I have to watch what I spend. I don't go out a lot like I used to," he said. "If I get an increase, I'll say thank you."

For John Bowker, 81, a retired executive, it's simply a little something extra. He and his wife, Linda, a retired computer programmer, live in the sprawling southwest Florida retirement community of Sun City Center, largely off their savings and investments. But a raise in Social Security adds some padding.

"We can do a little more on our weekends," Bowker said. "We'll feel a little less squeamish about going out and spending 40 or 50 bucks a month for a meal."

For many of the Bowkers' neighbors, though, it's different. He said some have even had trouble coming up with the modest $256-a-year dues residents of Sun City Center must pay on top of their mortgage or rent. Across the income spectrum, though, he said he hears wide acknowledgement from his neighbors that seniors are better off with Social Security.

"Even for us rock-red Republicans," he said, "this is one of the government programs that we would hurt very badly if it were not available to us."

The government formally announced the raise Wednesday, two days after the Government Accountability Office put out a report on income security among seniors that shed light on just how crucial Social Security payouts are.

The report found that household income rose 5 percent from 2007 to 2009 for those 65 and up, even though it fell 6 percent for those aged 55 to 64 who are just shy of retirement. Likewise, poverty rates increased among the younger demographic but decreased among those 65 and older. Many cite Social Security as a key factor.

Frank Chicoine, 80, of Stuart, Fla., receives a pension from his years working at a utility company, but that check's amount is fixed, never rising. The cost-of-living adjustment, or COLA, is the only raise he gets.

Medicare premiums cost him and his wife nearly $200 a month, and their supplemental health insurance is another $600 a month. His homeowner's premium went up by $600 to $2,000 this year as insurers have been granted hefty rate hikes. All his expenses seem to keep going up.

"I consider myself one of the lucky ones," he said. "But if I lost that $1,700 or $1,800 a month, it would change my life."

Chicoine isn't alone in seeing his income eaten up by higher medical costs. As much as one-quarter of the raises to Social Security beneficiaries could be wiped out by higher Medicare premiums, according to projections. Those premiums, for Medicare Part B, which covers doctor visits, could be announced as early as next week.

Richard Birch, 84, and his 72-year-old wife, Carol, said they spend thousands of dollars a year on medical treatments and roughly $300 a month on prescription medications after each survived bouts with cancer. They said their Social Security raise would likely be eaten up by the Medicare increases, so the couple will continue to live frugally as they've done for years.

The Birches have lived in their Geneva, Ill., home outside Chicago for 40 years and have driven the same car for 25 years. Despite earning a pension in addition to Social Security, they've changed many of their habits since the economic downturn.

"We think twice about driving places because of the price of gas, we don't buy clothes and we almost never go out to eat or have steak at home any longer," Carol Birch said with a smile and shrug.

The report from the GAO this week showed that among the bottom fifth of people 65 and older, Social Security comprised 83 percent of income. For the middle tier, it made up 64 percent. Among the most well-off, it represented less than 20 percent of their income.

The annual cost-of-living adjustment is tied to an inflation measure released Wednesday. The measure, which was adopted in the 1970s, produced no raises in 2010 or 2011 because inflation was too low. Those were the first two years without such a raise since automatic increases were enacted in 1975. Social Security recipients did, however, receive a one-time $250 payment from the economic stimulus package passed in 2009.

Doris Miller, 79, lives in the Tulsa, Okla., suburb of Broken Arrow and takes seven prescription medications every day for high blood pressure, arthritis and asthma. She also is recovering from a back injury. To pay for them, she's been charging all her prescriptions at the end of each month on credit cards and puts off seeing her doctor because she's afraid he will give her a new prescription to pay for.

She said she is worried that she could be close to maxing out some of those credit cards. With the cost of living increase, Miller hopes she can afford to pay cash for at least some of the drugs.

"Anything helps when you haven't had (an increase) in two years," she said.

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Associated Press writer Justin Juozapavicius in Tulsa, Okla., Manuel Valdes in Seattle and videojournalist Robert Ray in Chicago contributed to this story.

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Emails raise fresh questions on Obama energy loan (Reuters)

WASHINGTON (Reuters) – An Obama administration appointee at the Energy Department pressed White House analysts to sign off on a $535 million loan to Solyndra even though his wife worked for the failed solar panel maker's law firm, according to internal emails made public on Friday.

The revelation adds new drama to a political battle over the administration's backing for Solyndra, which has filed for bankruptcy and has been raided by the FBI. The newly disclosed emails reveal "a disturbingly close relationship" between the White House, campaign donors and wealthy investors relating to Solyndra, a senior congressional Republican said.

The emails show frequent inquiries from Steven Spinner, who was an adviser to the Energy Department on its use of economic stimulus funding to spur clean energy technology, on the Solyndra loan, according to a report in the New York Times.

On September 29, the Energy Department had posted a "fact check" on Spinner's involvement in the Solyndra case on its website, explaining that he started his job after the company received conditional approval for its loan application.

The department said Spinner "was recused from engaging in any discussions on decisions affecting specific loan applications in which his spouse's law firm was involved out of concern for the appearance of a conflict of interest."

Allison Spinner is a partner at the law firm Wilson Sonsini Goodrich & Rosati, which represented Solyndra.

Energy Department spokesman Damien LaVera said on Friday that the department's ethics officer had cleared Spinner to "oversee and monitor the progress of applications," although he was not allowed to make decisions on loans or their terms.

LaVera added that Allison Spinner had "agreed not to participate in or receive any financial compensation from her law firm's work on behalf of any loan program applicant."

Allison Spinner did not work on the Solyndra matter and the firm created an "ethical wall" between her and any of its work on Energy Department issues while her husband worked for the government, according to Courtney Dorman, a spokeswoman for Wilson Sonsini Goodrich & Rosati said.

While Steve Spinner was at the department, Allison Spinner had agreed to not work on Energy Department issues for clients, and the firm did not discuss or disclose related issues or documents with her, Dorman said.

Steven and Allison Spinner did not respond to requests for comment.

'BREATHING DOWN MY NECK'

The White House, which has aggressively defended decisions made on the loan guarantee, turned over the emails on Friday to the House of Representatives Energy and Commerce Committee, which has been probing the loan for the past eight months.

"The paper trail released by the White House portrays a disturbingly close relationship between President Obama's West Wing inner circle, campaign donors, and wealthy investors that spawned the Solyndra mess," Representatives Fred Upton, the panel's chairman, and Cliff Stearns, the head of the investigation, said in a statement.

The emails show Spinner discussed the pending final decision often with Solyndra officials, Energy Department colleagues, and the White House budget office, the New York Times said.

"I have the O.V.P. and W.H. breathing down my neck on this," Spinner wrote, referring to the office of the vice president and the White House in an email to an Energy Department loan officer.

Spinner, who advises clean tech companies in San Francisco, was an Obama fundraiser during the 2008 presidential campaign, the newspaper said.

Other emails showed top Treasury Department officials were alarmed about an Energy Department decision to restructure the company's debt earlier this year, when it ran out of cash.

The plan allowed some $75 million in private investment to be ranked ahead of the government in the event of bankruptcy. That private fund was backed by a prominent Obama fundraiser, George Kaiser.

IN THE DARK

Mary Miller, Treasury's assistant secretary for financial markets, emailed the White House budget director two weeks before Solyndra filed for bankruptcy, complaining the Energy Department had kept Treasury in the dark.

The loan was provided by Treasury's Federal Financing Bank but was guaranteed and monitored by the Energy Department.

Treasury Department lawyers did not think the law allowed for the government loan to be subordinated, Miller said in an August 17 email to Jeffrey Zients, deputy director of the White House Office of Management and Budget.

"In February, we requested in writing that DOE seek the Department of Justice's approval of any proposed restructuring. To our knowledge, that has never happened,'" Miller said in the email, excerpts of which were provided by House Republicans.

She also complained that "DOE has not responded to any requests for information about Solyndra" despite requests dating to July 2010.

But emails provided by the administration showed that top staff at the Energy Department discussed the concerns with the chief financial officer of Treasury's Federal Financing Bank.

"Ultimately, DOE's determination that the restructuring was legal was made by career lawyers in the loan program based on a careful analysis of the statute," an Energy Department spokesman said.

A Treasury spokesman declined to elaborate on the contents of Miller's email.

The House Energy and Commerce Committee has now requested Treasury turn over all documents related to the Solyndra loan guarantee.

The panel has collected tens of thousands of pages of documents from the Energy Department and White House, and has requested information from two private investors in Solyndra.

The committee has also asked the Energy Department for information on 27 other guarantees backing about $16 billion in loans. The panel is slated to hold another hearing on its findings next Friday, October 14.

(Editing by Will Dunham)

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IMF urges US lawmakers to raise $14.3T debt limit (AP)

By CHRISTOPHER S. RUGABER, AP Economics Writer Christopher S. Rugaber, Ap Economics Writer – 42?mins?ago

WASHINGTON – The International Monetary Fund urged U.S. lawmakers Wednesday to raise the nation's borrowing limit, warning that inaction could lead to a spike in interest rates that would harm the U.S. economy and world financial markets.

The debt limit is the amount the government can borrow to help finance its operations. The United States reached its $14.3 trillion borrowing limit in May. It is at risk of defaulting on its debt if it doesn't raise that limit by Aug. 2.

A disagreement over how to rein in the federal budget deficit has kept Congress from raising the borrowing limit. Republicans want President Barack Obama and Democrats to first agree on spending cuts equal to any increase in the borrowing limit. Democrats say any deficit-reduction deal must also include some tax increases.

The IMF warned in its annual report that rising U.S. budget deficits pose a risk to the economy. But it advocated a long-term strategy for reducing those deficits, not steep immediate cuts or tax increases. Cutting the deficit too quickly could slow the weak U.S. recovery, the fund said.

John Lipsky, acting managing director of the IMF, said a default on the debt "would have very serious and far-reaching consequences." But he added that the fund is confident the two sides will reach a deal.

Separately, President Obama insisted Wednesday that eliminating selected tax breaks for oil companies and the super-wealthy must be part of any deficit reduction plan. He also said that a bipartisan agreement is possible to cut deficits, raise the government's debt limit and avert a threatened financial crisis.

Obama said both Democrats and Republicans must be prepared to "take on their sacred cows" as part of the deficit-reduction negotiations.

Republicans say they will not support any proposal that raises taxes.

Treasury Secretary Timothy Geithner strongly criticized a Republican proposal that would prioritize interest payments on the nation's debt and cut spending rather than raise the borrowing limit.

Geithner said in a letter addressed to Sen. Jim DeMint, a South Carolina Republican, that the idea is "a radical and deeply irresponsible departure" from previous practices by presidents of both parties. The letter was copied to 16 other Senate Republicans, including Majority Leader Mitch McConnell.

The U.S. economy will grow this year and next but at a weak pace, the IMF forecasts. The fund projects the economy will expand 2.5 percent this year and 2.7 percent in 2012. Consumers are still paying off debts, which will reduce their buying power. And budget cuts at the federal, state and local levels will also reduce demand.

Lipsky noted that the fund's forecast for this year included an expectation that growth would pick up in the second half of this year, as gas prices have retreated from their peak last month of nearly $4 a gallon. And disruptions in auto manufacturing stemming from Japan's March 11 earthquake, which reduced the availability of key parts, is also likely to fade.

The IMF's forecast is below recent projections by the Federal Reserve. The Fed expects the economy will grow by as much as 3.3 percent next year. Many private forecasters, however, are more pessimistic and closer to the IMF's view.

The IMF's warnings on the U.S. deficits echo recent statements from major credit rating agencies such as Standard & Poor's and Moody's. They have warned that they may have to downgrade the United States' credit rating if a deal on the debt ceiling isn't reached and progress toward cutting the deficits isn't made.

Such a downgrade would have "significant global repercussions," the IMF said, given "the central role of U.S. Treasury bonds in world financial markets."

The budget deficit is projected to reach $1.4 trillion this year, above last year's $1.29 trillion gap and just below a record $1.41 trillion reached in 2009.

The IMF has 187 member nations and lends money to countries with troubled finances. It also regularly reviews major national economies to look for signs of trouble that could impact the world economy.

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AP Writer David Espo contributed to this report.

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