from Renewing America

Morning Brief: Is Buffett Worried About Municipal Debt?

Berkshire Hathaway Chairman Warren Buffett attends a news conference in Japan in November 2011 (Kim Kyung Hoon/Courtesy Reuters).

August 21, 2012

Berkshire Hathaway Chairman Warren Buffett attends a news conference in Japan in November 2011 (Kim Kyung Hoon/Courtesy Reuters).
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Blog posts represent the views of CFR fellows and staff and not those of CFR, which takes no institutional positions.

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The Oracle of Omaha is pulling back from a multibillion dollar bet on the solvency of more than a dozen states (WSJ). Warren Buffett decided to terminate credit default swaps (CDSs) issued by Berkshire Hathaway to insure $8.25 billion in municipal debt. The CDSs were sold in 2007 to Lehman Brothers, and have been ended five years early. While the world’s richest octogenarian remains tightlipped, speculation spreads about what this move signals regarding his faith in local governments and the broader U.S. economy.

Two state efforts to prevent municipal bankruptcies were subjects of Renewing America Policy Initiative Spotlights: North Carolina’s Local Government Commission and Michigan’s Fiscal Accountability Act.

Limits to Competitive Gains in Health Care

CFR adjunct senior fellow Peter Orszag dives into Medicare Advantage plans and finds little improvement from privatization (Bloomberg). He says that Medicare Advantage plans appear to be a bargain, but are not. Private plan providers have become skilled at recruiting Medicare beneficiaries who on average require less health care than the government’s risk-adjusted payments.

As the Obama and Romney campaigns fight on through November, Medicare is likely to remain a major focus. This Economy Update on CFR’s Campaign 2012 channel delves into the debate.

Debt and deficits. Read more from experts on the challenges in reducing U.S. debt.


East Coast Ports Prepare for Big Ships

From New York to the gulf coast, eastern ports are deepening channels, raising bridges, and installing new equipment to serve supersized container ships that will begin to traverse the Panama Canal in 2015 (NYT). While some cities aggressively move forward with port investment in the hope of attracting more commerce, some outside observers question the ultimate benefit as many west coast ports already handle vessels larger than east coast ports will see.

Infrastructure. Read more on how upgrading the nation’s aging network of roads, bridges, airports, railways, and water systems is essential to maintaining U.S. competitiveness.

Education and Human Capital

More College Grads Joining the Military

More college graduates are entering the ranks of the U.S. military (NPR). A stint in the armed forces allows a young adult the opportunity to serve the nation, but also to receive a good paycheck, free health care, and a tax-free housing allowance. This package is increasingly attracting bright young students. As one Navy recruiter explained, "We have more people coming than we have positions for, that's just how busy we are. It's sad when we actually have to tell them, ‘Sorry, we've already met goal for this year.'"

Helping Those with Learning Disabilities to Succeed at Work

While the academic world has made great strides in providing those with learning disabilities the opportunity to excel, the working world is far behind (TheAtlantic). Learning disabilities do not disappear when a student graduates, but a well thought out support system often does.  Many are taking up the challenge themselves, finding strategies to utilize their strengths while mitigating challenges.

Education and human capital. Read more from experts discussing ways to improve U.S. education and immigration policies.


How E-tailers Value You

As people spend more time and money online, new startups are using the scraps of information we leave online to asses our attractiveness as customers (NYT). Proponents see greater efficiency in helping companies generate and pursue more valuable leads, but others worry that some unsuspecting consumers will be caught in the dragnet and face higher costs with more limited shopping options.

Innovation. Read more on how the U.S. capacity to innovate could play a chief role in economic growth.

The Morning Brief is compiled by Renewing America contributor Steven J. Markovich.

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