Features

Pennies saved

National | Business

Issue: "Iraq: Liberation Day 2004," April 10, 2004

Pennies saved

IN A TURNAROUND FROM RECENT years, incomes are rising faster than consumer spending, which could provide the economy with more needed capital investment in coming months.

While total income rose 0.4 percent, the Commerce Department reported that consumer spending increased 0.2 percent in February, well below the 0.5 percent jump seen in January.

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"People are continuing to spend, though they are not breaking down the doors to the malls," said Joel Naroff, president of Naroff Economic Advisors.

Some analysts believe that could change this spring with tax refunds arriving in the mail and extra cash coming from continuing home-mortgage refinancings.

In February, the amount spent on big-ticket items such as cars and appliances was down 0.2 percent. Spending on food, clothing, and other similar products inched up 0.1 percent. Spending on services rose 0.4 percent.

Billions borrowed

WITH AMERICANS HOLDING tight to their hard-earned cash, they may also be hard pressed to support new taxes at the voting booth. That belief has prompted many state leaders to consider borrowing billions to support their spending habits.

In the past two years, overall municipal bonds -- combining state and local governments -- hit records of $358 billion in 2002 and $380 billion in 2003.

California is the early leader in the buy-now, pay-later strategy. In March, Golden State voters overwhelmingly backed new Gov. Arnold Schwarzenegger's plan to use $15 billion in bonds to slash state debt. It marked the first time California voters agreed to use bond financing for anything other than constructing roads, building schools, or making other infrastructure improvements.

Following in California's footsteps, legislators in Illinois, Pennsylvania, New Jersey, and South Carolina are considering similar options.

"We've taken borrowing to a new level," said Illinois state Sen. Steve Rauschenberger, a critic of Illinois governor Rod Blagojevich's plan to borrow $1 billion for road work, after that fund was raided to pay daily costs of running state government last year. "The piper's going to come due."

Balance Sheet

Blaming the increased use of cell phones and the national Do Not Call registry, bankrupt telecommunications company MCI is cutting 4,000 jobs -- more than 7 percent of its work force -- and closing three call centers. Formerly known as WorldCom, MCI is hoping to emerge from bankruptcy protection by the end of April.

3» Looking to regain market share from Lowe's, home improvement retailer Home Depot is targeting newlyweds. The Atlanta-based company launched its online gift registry last week, banking on research showing that as more people get married later in life, they already have small appliances, fine china, and cutlery. Among the top items selected by early registrants were hammocks, wheelbarrows, electric power washers, and leaf rakes.

3» The federal government appears to be more aggressively seeking taxpayers who misreport information on their returns. According to the Internal Revenue Service, taxpayer audits rose 14 percent in the 2003 fiscal year, including a 24 percent increase for those earning $100,000 or more.

General Motors Corp., Ford Motor Corp., and DaimlerChrysler reported overall sales through February rose just 1.7 percent over the same period last year. Asian cars were up 11.4 percent, while European products were off 9.3 percent.

Despite a backlash from politicians and parts of the public, corporate information technology executives say outsourcing is here to stay. A recent survey by DiamondCluster International reported 86 percent of respondents expect the use of offshore IT outsourcing to increase over the next 12 months.

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