May 26, 2018

Wealth Matters: A Guessing Game for Taxpayers on What They Owe

But for 2012, we overpaid our state and local taxes by a lot. Our accountant tried to comfort us: many of her clients did the same.

She said the negotiations at the federal level over the so-called fiscal cliff tax increases and budget cuts, which stretched into January, kept accountants from knowing who would be subject to the alternative minimum tax until just about the filing date for estimated taxes. The A.M.T., as it is known, ensures that people with a lot of deductions still pay federal tax. Those who fall into it lose various deductions, like state and local taxes and mortgage interest.

We made an estimated tax payment in January based on the worst-case situation, and when that didn’t happen, we discovered we had overpaid. But we also made the mistake of filing a paper return in New York, and the state has had huge delays in getting refunds to people who did not file electronically.

As we wait for that New York refund, I’ve thought about the increasingly confusing calculations that people who earn income from different sources — or have taxes withheld at different rates — have to make when it comes to paying estimated taxes.

“In years past, it was pretty easy to do a back-of-the-envelope calculation,” said Joshua Dubrow, a certified public accountant with Nussbaum, Yates, Berg, Klein Wolpow of New York. “Now with these new rules, with investment income taxes, Obamacare, the phaseout of deductions, not even the sharpest and most accurate practitioner can do a prediction.”

With the next estimated payment due on Sept. 15 — and the end-of-year reckoning not too far away — here are some things to consider and a few tips for the areas where you can have control over your tax payments.

TECHNOLOGY IS NO ADVANTAGE Filing electronically usually gets you faster processing, but it is not always possible. Allison P. Shipley, principal in PricewaterhouseCooper’s Private Company Services practice, said people with complicated earnings and income had to file paper returns because their tax preparer’s e-filing software might not accept a certain form or there might be limits to the number of a form that can be submitted. She said that the Internal Revenue Service required that other forms be mailed in, like the one for noncash charitable contributions.

Those who file electronically are not guaranteed a quick refund. My accountant said a client filed his 2012 federal return electronically and included routing information to get his five-figure refund wired to his bank account. Instead he received a letter saying the return could not be processed electronically. The reason? The amount on the refund no longer matched the amount on the return. Eventually he received the refund by mail, less $7.49 for unpaid taxes from 2010.

WATCH STATE PENALTIES There are three ways to pay estimated taxes, and you can select a new method each quarter. You can pay in 100 or 110 percent of last year’s tax (depending on your income), pay 90 percent of this year’s tax or “annualize” your tax. With this last method, if you made $50,000 in the first quarter you would pay tax at a rate based on an annual income of $200,000. If in the second quarter you made $40,000, you would adjust your tax to an income of $180,000 and so on.

The goal is usually the same: to pay just enough to make sure you don’t get hit with a penalty. Yet some times, it makes sense to pay that penalty and hold on to the cash, said Elda Di Re, a partner in Ernst Young’s personal financial services group. For example, when you don’t have the money to pay the tax on time or when you believe you can get a high return on the money. At 3 percent for federal taxes, she called the penalty “not a bad borrowing rate.”

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Mandatory Federal Cuts Hurt Private Sector, Too

It is no surprise that some of the companies that are hurting are closely associated with military spending, which was specifically targeted to absorb about half of the cuts from the so-called sequester that began March 1. But many of the businesses experiencing the most pain are those that provide a wide range of services, like plumbing and maintenance.

“We’re kind of invisible,” says Robert M. Sacco, general manager of Aleut Facilities Support Services, based in Colorado Springs, Colo., “until your toilet overflows.”

Contractors say they are trying to make do by picking up other projects where they can, but private sector and state and local government demand has also been weak or shrinking in recent years. Many in the facilities support field, a business category that includes janitorial, maintenance, trash disposal, guard and security, mail routing, reception and laundry services, say they are frustrated by the lack of public awareness about how defense budget cuts affect workers who are not performing stereotypical military functions.

“They just kind of left us hanging,” said James M. Galligan, chief executive and founder of Strategic Consulting Alliances, a small business in Maryland that employs veterans to do things like clean bathrooms and repair roofs on government properties. “In midstream the government just sort of cut its funding in half, but I, of course, still have to pay for my workers’ health care and taxes and everything else.”

As a result, he resorted to layoffs earlier this year that brought his total payroll down to 50 from about 80.

Mr. Galligan’s and Mr. Sacco’s companies both provide facilities support services; about 43 percent of the sector’s jobs are directly or indirectly paid for by military and other national security operations.

That makes it one of top five sectors that are most reliant on military spending to pay employees. The others in the top five are ship and boat building; aerospace product and parts manufacturing; scientific research and development services; and navigational, measuring, electromedical and control instruments manufacturing, based on calculations by The New York Times using Labor Department methodology. (The calculations involve looking at which industries receive government allocations, and then determine where hiring occurs when production rises or falls in one of those industries. For example, if the Pentagon spends money on fighter planes, that affects employment in the aerospace industry as well as upstream companies like metal manufacturers.)

“There is a huge amount of public sector employment today that is actually in the private sector,” said Justin Wolfers, an economics and public policy professor at the University of Michigan. “Who is a public sector worker used to be a simple thing and now it’s not.”

Across the five industries that are most sensitive to changes in military spending, employment fell at an annual rate of 2.5 percent in March and stayed flat in April, the latest month for which seasonally adjusted data are available. In all other sectors, by contrast, employment grew at annualized rates of about 1.6 percent in March and 1.7 percent in April.

Before the start of the sequester on March 1, employment at private companies heavily dependent on military spending had been more closely tracking employment in the rest of the economy, though the numbers were somewhat uneven. Military payrolls have been declining almost every month since November 2011 in response to the drawdown in American wars abroad.

These are just the sectors that are most directly hit by Pentagon cutbacks; economists fear that the sequester will ripple through the rest of the economy in more subtle ways, as downsized or furloughed government workers and contractors spend less money at their local businesses. The federal government has shed 45,000 jobs since the sequester began, and federal workers who were working part time but wanted full-time work numbered 55,000 in May, up from 38,000 a year earlier.

Government cutbacks, not just the sequester and other federal budget cuts but also several years of state and local government layoffs, appear to be an important factor in holding back the economic expansion. “The great puzzle in this recovery is why it’s not quicker, particularly relative to other recoveries,” Mr. Wolfers said. “The sequester is one of the many insults that been hurled at the recovery so far.”

Some government contractors said that their problems started even before the sequester officially began in March, partly because months of debate over Congressional budget cuts made government agencies and military bases wary about how much money they’d have available to spend.

In May 2012, for example, Kirtland Air Force Base in Albuquerque reduced the number of times it had its bathrooms and other facilities cleaned from every other day to twice a week, according to Brian Ammerman, associate vice president of business operations at Adelante Enterprises, a nonprofit that employs people with disabilities and whose facilities support services division holds the custodial contract with Kirtland.

In other cases, new contracts have been delayed, including projects to make government buildings more energy-efficient. “There are expected jobs that we’ve been tracking for several years that we knew were supposed to hit in the first quarter of this year that we haven’t seen yet,” said Dave Mannix, director of the federal market for Sebesta Blomberg, another firm that has facilities management and other technical and engineering contracts with both public and private sector clients. “There were things that were supposed to be up for contract in the second quarter, and we haven’t seen those yet either.”

Even companies that have not been affected so far are concerned about the pipeline for future government work.

“Fiscal year 2014 is going to be a bad year,” said Mario Burgos, president of the Burgos Group, a small business in Albuquerque that provides a variety of technical, administrative and management services to federal clients, including the Navy, the Air Force and the Bureau of Land Management. “The largest amount of contract awards comes in this last fiscal quarter, which ends in September. Well, that’s also the time that the government employees who make those award decisions, who get those contracts out, are all being furloughed.”

Mr. Burgos said his company had been enjoying a good year so far, mostly by casting its net more broadly and bidding on contracts at agencies the company had not previously worked for. Nonetheless, he has resisted expanding because of uncertainty over the next federal fiscal year, which begins on Oct. 1, and whether existing contracts, typically awarded on a five- or 10-year basis, might be canceled.

“It really makes us hesitant to invest in infrastructure, like additional people or additional tools, since we don’t know what could be taken away,” he said. “Usually one of the nice things about federal contracting is that you can plan on a longer time frame, as opposed to with business-to-business projects where somebody new gets hired and then they change their mind about the project. But now even in government work we don’t know what’s going to happen month to month.”

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White House Memo: Travels of the President Under Scrutiny

CHICAGO — Perhaps it is nothing more than an accident of timing that as federal workers brace for a summer filled with unpaid furlough days, their leaders are traveling the nation and globe on trips that exude luxury.

On Wednesday, President Obama left the White House for two Chicago fund-raisers in the hope of helping Democrats retake the House in next year’s elections. The cost of flying aboard Air Force One to his hometown: $180,000 per hour.

The same day, Michelle Obama traveled to Massachusetts to lunch with rich donors who had paid up to $37,600 per ticket at the Taj Boston Hotel. The meal included roasted Chilean sea bass with a fricassee of asparagus. Meanwhile, Vice President Joseph R. Biden Jr. and his wife, Jill, were in Rio de Janeiro, part of a six-day swing through Latin America to discuss trade and investment, including a stop in Trinidad and Tobago.

“We’ve got kind of an Obama cabal in this room,” the president joked Wednesday night during a $32,400-per-couple fund-raiser with about 70 of his friends at the home of Bettylu and Paul Saltzman, longtime supporters. He said returning to Chicago for the day was like “Old Home Week.”

For a leader presiding over automatic budget cuts and a slow-moving economic recovery, there are growing political costs to presidential travel. Every move a president makes costs money, and in an era when money is in short supply, that means heightened scrutiny. Vacations are especially touchy.

“The president is asking the people to sacrifice but never himself,” Representative Chris Stewart, Republican of Utah, said when he introduced a resolution this year asking Mr. Obama to forgo vacations to pay for resuming White House tours cut because of the automatic budget cuts, known as the sequester. “We don’t have a problem with him taking vacations, but it seems petty to close the White House to tours when forgoing one or two out-of-town vacations would easily pay for the cost of keeping it open.”

Bob Dole, the former Republican senator from Kansas, was more blunt when asked generally about Mr. Obama’s travels in a rare interview on “Fox News Sunday” this week. “He’s on the road too much,” Mr. Dole said.

Almost by definition, Mr. Obama lives a life foreign to most Americans, with the big white house and the ushers and chefs and the airplane fueled and ready to go. When he wants a weekend away, he can fly to Florida to golf with Tiger Woods. When his daughters take spring break, they head to Aspen to ski. He winters in Hawaii and summers on Martha’s Vineyard.

But this summer’s trips come as federal employees are tightening their belts. Last Friday, four federal agencies closed down — the Environmental Protection Agency, the Internal Revenue Service, the Department of Housing and Urban Development and even the Office of Management and Budget — as employees were ordered to take the first of several unpaid days off.

Many workers are canceling summer vacations of their own. Across the government, cutbacks are everywhere. The Blue Angels did not fly at the Naval Academy commencement, Head Start programs are turning away children, and there are no summer jobs for college students to cut the grass at Antietam.

In a nod to the pain that federal employees are feeling, Mr. Obama announced in April that he would cut his salary by $20,000.

Despite that gesture of solidarity, the president’s official and political trips still generate second-guessing. This summer he plans a diplomatic foray to Africa that will cost millions of dollars and involve hundreds of security, communications, military and technical personnel, just as it did when George W. Bush and Bill Clinton went. White House officials said they were not deterred by fear of criticism, although some said the president would probably avoid safari time.

Grover Norquist, president of Americans for Tax Reform, a group that opposes tax increases, said Mr. Obama brought such criticism on himself.

“The cost of every vacation and ‘work trip’ is now compared to things he cancels ‘due to sequester,’ ” he said. “And he cannot complain as he started this ‘blame-the-sequester, there-is-nothing-to-cut’ narrative.”

White House officials react to such criticism with weariness. Mr. Obama arrived in office during the worst economic crisis since the Great Depression and has been criticized for taxpayer expenses almost from the start. Aides said the public understands that being president costs money and that Mr. Obama has official obligations and deserves time off. They dismiss complaints as predictable carping from a party whose leaders enjoy perks of their own, including Congressional trips overseas. Speaker John A. Boehner of Ohio spends time playing golf and traveling the fund-raising circuit.

“Many Republicans in Washington criticize the president because the sun comes up in the morning,” said Dan Pfeiffer, a senior adviser to Mr. Obama. “So if that was our litmus test, we couldn’t get out of bed in the morning.”

Officials said the White House had pared back because of the sequester. Staff travel, equipment purchases and hiring have been curtailed. Among those furloughed was the assistant White House chef. And in general, some political and personal expenses are reimbursed to the government according to formulas.

But officials said the vast bulk of Mr. Obama’s expenses, including the $179,750-per-hour cost of Air Force One, are simply the price of the presidency and the communications and security required for a 24-hour-a-day commander in chief.

Other presidents have come under fire for vacation habits. Ronald Reagan retreated to his ranch at Santa Barbara, Calif., and Mr. Bush to his outside Crawford, Tex. Mr. Clinton had no home and, like Mr. Obama, favored rental estates on Martha’s Vineyard.

“It’s just a routine part of the Washington gotcha game,” said Joe Hagin, who spent 14 years in the White House working for three Republican presidents, most recently as Mr. Bush’s deputy chief of staff. “Democrats played it against President Bush, and Republicans are returning the favor. It’s been going on for a long time.”

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I.M.F. and E.U. Set Conditions for Cyprus Bailout

“This is a challenging program that will require great efforts from the Cypriot population,” Christine Lagarde, the managing director of the I.M.F., said in a statement.

The goal was to “stand by Cyprus and the Cypriot people in helping to restore financial stability, fiscal sustainability and growth to the country and its people,” Ms. Lagarde said in a second statement she issued jointly with Olli Rehn, the European Union commissioner for economic and monetary affairs.

The statements follow agreement on Tuesday between Cyprus and the so-called troika of international organizations — the European Central Bank, the European Commission and the I.M.F. — that painstakingly negotiated the €10 billion, or $13 billion, bailout and the terms of the deal.

“This is an important development which brings a long period of uncertainty to an end,” Christos Stylianides, a spokesman for the Cypriot government, said Tuesday in a statement made available on Wednesday.

“Undoubtedly, the completion of the agreement with troika should have taken place a lot sooner, under more favorable political and financial circumstances,” said Mr. Stylianides, who was apparently referring to infighting in Cyprus about responsibility for the financial debacle.

The memorandum of understanding between Cyprus and the troika outlines budget cuts, privatizations and other conditions Cyprus must meet to receive its allotments of bailout money. A parliamentary vote in Cyprus is needed to approve the deal, while Germany and Finland are also expected to seek the approval of their Parliaments.

Olivier Bailly, a spokesman for the European Commission, said Wednesday that the memorandum would not be made public while euro-area governments reviewed the document. But Cypriot authorities on Tuesday described elements of the agreement that they regarded as favorable.

Mr. Stylianides, the Cypriot spokesman, said the deal safeguarded important parts of the economy by keeping deposits of natural gas in offshore waters under Cypriot jurisdiction, and by winning two more years until 2018 to hit deficit targets and carry out privatizations.

Mr. Stylianides also said the government saved the jobs of contract teachers and of 500 civil servants, and had overcome demands by the troika to tax dividends.

Even so, the memorandum could be hotly contested in by the Cypriot Parliament, where many lawmakers have criticized crisis measures that already have been taken, like capital controls, which threaten to make a bleak economic outlook even worse.

In a move partly aimed at easing those tensions and smoothing parliamentary approval of the memorandum in Cyprus, the government in Nicosia on Tuesday appointed a new finance minister, Harris Georgiades, to replace Michalis Sarris, who resigned. Mr. Sarris has been blamed at home and abroad for his handling of the crisis. Mr. Georgiades was the deputy finance minister.

Over the course of the negotiations to reach a deal for Cyprus, the spotlight fell on whether the I.M.F. was too forceful in pressing countries like Cyprus to limit debt and force losses on investors. The approach of the I.M.F. strained relations with the European Commission, which had harbored concerns about the potentially confidence-sapping effects of such aggressive measures on other economies within the euro area.

The I.M.F. proportion of the package Cyprus is smaller than in some previous arrangements for countries like Greece, but that was not a sign of a change in the I.M.F.’s policy in the euro area, said Mr. Bailly, the commission spokesman. The sums given by the I.M.F. depend on “specific situation” in each country, he said, adding that the €1 billion, three-year loan for Cyprus “was unanimously agreed in the troika.”

Ms. Lagarde said substantial spending cuts would be needed “to put debt on a firmly downward path” including in areas like social welfare programs.

But she said the plan, which the I.M.F. could agree to early next month, sought fairness.

“The fiscal and financial policies of the program seek to distribute the burden of the adjustment fairly among the various segments of the population and to protect the most vulnerable groups,” she said.

More than 95 percent of account holders at Laiki Bank, which will be closed under the plan, and at the Bank of Cyprus, which is being restructured, were fully protected, she said. Bank of Cyprus and Laiki Bank are the two biggest banks in the island nation.

Key fiscal measures included raising the country’s corporate income tax rate to 12.5 percent from 10 percent, she said.

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European Leaders, Committed to Budget Cuts, Meet in Brussels

BRUSSELS — Jeered by angry protesters demanding an end to austerity and shaken by a resounding rejection of their economic strategy from Italian voters, European leaders gathered for an economic summit meeting Thursday amid few signs that the bloc’s policies were healing the twin blights of rising unemployment and recession.

Instead of bowing to a rising anti-austerity tide, however, leaders seemed determined to stay the course, insisting that only budget cuts and other measures to restore financial stability could return the continent to economic growth and create jobs.

Speaking as thousands of protesters gathered just out of earshot in a nearby Brussels park, Herman Van Rompuy, the president of the European Council, the body that organizes the leaders’ summit meetings, emphasized “green shoots” of recovery and said growth was returning, albeit slowly.

Officials of the European Union have repeatedly predicted a return to growth, only to be disappointed by data showing rising unemployment and continuing recession in the euro area.

The economy of the 17-member euro zone is expected to shrink for a second consecutive year in 2013, and growth for the whole of the 27-nation European Union is forecast to be about 0.1 percent. Unemployment in Spain and Greece, the hardest-hit countries, has soared above 25 percent.

Mr. Van Rompuy acknowledged “social distress” and said the success of anti-austerity and anti-establishment parties in the recent Italian elections was something that the leaders needed to consider. But he insisted that the departing Italian prime minister, Mario Monti, who was roundly defeated in the elections last month, had done “an excellent job” and that Italy and the European Union should “stick to the same general direction of the last 12 months.”

Italy is effectively without a functioning government after the Five Star Movement, led by Beppe Grillo, a comedian turned activist, made stunning gains in both houses of Parliament in the elections. Five Star has rejected an appeal by the Democratic Party to work together to lead the country. Without an alliance, the Italian government could limp along for as long as a year, political analysts say, before a likely collapse would force new elections.

The Brussels meeting is meant to focus on the tougher budgetary oversight agreed upon over the last two years to combat the kinds of extreme debt and deficit problems in many countries that nearly brought down the euro currency union. Leaders were also expected to endorse a strategy that should give France, Spain and Portugal more time to meet their deficit-reduction goals, on condition that they stick to a path of cutting debt.

Protesters, even if they were aware of such concessions, were clearly unconvinced.

“All they do is cut, but we need jobs,” said Michael Mercier, a worker at a Belgian prison for juveniles who took part in an anti-austerity rally organized by trade union groups in Parc du Cinquantenaire, near the site of the summit meeting and the headquarters of the European Commission, the bloc’s executive arm.

“This is all the fault of the E.U.,” said Mr. Mercier, who added that the way the bloc was run mixed “too many different things in the same big pot, and this causes problems for everyone.”

One group of demonstrators managed to enter an annex of the European Union’s principal economic policy-making arm, the European Commission’s Directorate General for Economic and Financial Affairs, and staged a protest meeting in the cafeteria.

“We occupied their building to denounce the misery they are imposing on millions of Europeans,” said Michel Vanderopoulos, a spokesman for the group, which organized the protest, called “For a European Spring.” He said those who took part came from Belgium, Germany, Italy and Denmark.

The annex houses some of the officials who form part of the “troika” of international lenders detested by many people in countries like Greece and Portugal for its role in demanding painful belt-tightening in exchange for bailouts.

A spokesman for the commission said the protest lasted about 15 minutes and did not involve any violent confrontations. “The Belgian police arrived on scene, and the protesters left of their own accord,” the spokesman said.

At the meeting, the increasingly acrimonious dispute over austerity pitted those who favor budget discipline — the European authorities and leaders of countries like Germany and Finland — against countries like France and Spain and groups like trade unions, which favor more government spending to promote growth.

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You’re the Boss Blog: S.B.A. Proposes Rule Changes to Lure Borrowers

The Agenda

How small-business issues are shaping politics and policy.

Concerned, apparently, that not enough businesses are taking advantage of government-guaranteed loans, the Small Business Administration recently proposed changing some of its lending rules. If adopted, the new rules could make the agency’s loan programs accessible and popular enough that they could reach their legal limits on lending — something the programs have seldom ever done. Oddly enough, this is happening at the same time the prospective “sequester” budget cuts may force the agency to make fewer loans.

The moves are the latest in a series of steps by taken by both Congress and the administration to expand the S.B.A.’s reach by making more existing businesses eligible for the agency’s programs. Many of these businesses would have been too large to get an S.B.A.-backed loan just three years ago.

In an interview, the outgoing S.B.A. administrator, Karen Mills, said, “you have to be inclusive when you look at our programs.” President Obama, she noted, vowed in his State of the Union address to make assisting domestic manufacturers a top priority for his second term, adding, “So without ever taking our eye off the ball on Main Street, we are now highly equipped to help our important manufacturing small businesses and job-creating supply chain members in-source more large-company manufacturing.”

In the changes announced this week, the S.B.A. would relax its affiliation rules, which are meant to ensure that a small-business loan applicant is not in fact controlled by a larger (and ineligible) company. Mainly, the agency would not look too deeply into the business connections of minority stakeholders. Ms. Mills said that stringent affiliation rules made sense for other S.B.A. programs, but not for getting a loan. “If you are a large company, there’s a benefit for you to pretending you’re small to get a government contract,” she said. But she said the agency was less concerned about infiltration in the lending program because a bigger borrower with good credit would find an S.B.A loan more expensive than a conventional loan. “Why should you pretend to be small?”

But in fact, S.B.A. loans have been available to larger businesses since 2010, when the Small Business Jobs Act increased both loan limits as well as the size of businesses eligible for loans to include those with net income of $5 million. Under those new size standards, which are ostensibly temporary, even a business with $100 million in revenue and a 5-percent profit margin could obtain a small-business loan. As a result, said Bob Coleman, who collects S.B.A. industry data for banks,  most of these larger companies can qualify for an S.B.A.-backed loan even after accounting for all of their affiliations. “That number-crunching, tree killing exercise” — establishing affiliates, that is — “is now moot,” he said.

Relaxing the rule, then, may entice some companies that were legally entitled to seek loans beginning in 2010 but found the affiliate issue too cumbersome to take another look. Indeed, Ms. Mills called the proposal her agency’s latest effort to streamline and simplify its programs. She described a situation where a gas station with three owners applied for a loan. “We had required 28 tax returns, because we said we wanted three years of tax returns of every individual who owns 20 percent or more, and then for each of those individuals, we wanted tax returns for other entities they owned.” Under the new rules, businesses with no clear majority owner would simply have to sign an affidavit identifying all of their affiliates. The owners would still have to supply their individual tax returns — but not documents for their affiliated businesses.

Ethan Smith, a lawyer in Port Washington, Pa., who represents S.B.A. lenders, said the change would lead to more lending simply by making the application and approval processes less intimidating. “If it brings more clarity to lenders — if lenders don’t have to sit there and guess what’s an affiliate and what’s not — it’s going to make it easier for them to extend financing,” he said.

The second big change the S.B.A. is considering, eliminating the agency’s so-called “personal resources test” for borrowers, could have more profound effects. This rule essentially requires investors with at least a 20-percent stake in a loan applicant and a lot of cash on hand to inject some of that cash into the business before the company can get a loan. (How much cash is determined by the resources test.) For decades, borrowers have had to show they cannot obtain credit elsewhere before getting a government-backed loan, and the S.B.A. has presumed that an owner’s deep pockets served as credit available to the business.

Now, though, the S.B.A. is reconsidering that view. “S.B.A. has become concerned that even borrowers whose principals have significant personal resources may be unable” to find reasonably priced loans, the agency said in its explanation of the change, concluding that the rule “unnecessarily restricts the pool of potential investors for small businesses” seeking loans.

However, doing away with the personal resources test could have other consequences. “It was not an unreasonable position to take that if you’ve got a lot of money, you should put your money on the line before we risk government assets,” said Mr. Smith. For banks, the lawyer added, the change poses a more practical problem: the S.B.A. would still require lenders to show that borrowers could not get credit elsewhere, a task made more difficult — and subjective — when the investors have a lot of cash on hand. “They’re eliminating the rule, but saying you still need to follow it,” he said. When a loan defaults under these circumstances, “the S.B.A. is going to come in and second-guess the lender’s decision prior to paying that guarantee.”

In the interview, Ms. Mills said that even if the business owners’ money has not been invested in the business, it is still on the line, in the form of collateral. “We still require them to back all their loan with all of their personal assets,” she said. As for the banks’ concerns, Emily Cain, a spokeswoman for the agency, noted that this was only a first draft of the rule. “Comments about what we are proposing are welcome and we will take them into consideration as the final rule is written,” she said.

Ms. Cain said that the agency has estimated that with the rule changes it would make as many loans as allowed by law — $22 billion in 2013 — and more if Congress increased the agency’s lending authority. However, unless the sequester is addressed, the agency is unlikely to have the money to approve more loans this year — the agency has said that if the sequester takes full effect, the amount of lending it can guarantee could fall by about $900 million.

So if the new rules take effect, it seems likely the agency will turn some small-business borrowers away. The only question is, which borrowers will be shown the door?

Interested members of the citizenry can read the proposed rules and comment on them as well before the rules are finalized. Comments are due April 26th. Ms. Cain said the agency would have a better sense of when it will be able to issue a final rule once the comment period has closed.

Of course, You’re The Boss readers can also comment below.

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Used to Hardship, Latvia Accepts Austerity, and Its Pain Eases

But instead of taking to the streets to protest the cuts, Mr. Krumins, whose newborn child, in the meantime, needed major surgery, bought a tractor and began hauling wood to heating plants that needed fuel. Then, as Latvia’s economy began to pull out of its nose-dive, he returned to architecture and today employs 15 people — five more than he had before. “We have a different mentality here,” he said.

Latvia, feted by fans of austerity as the country-that-can and an example for countries like Greece that can’t, has provided a rare boost to champions of the proposition that pain pays.

Hardship has long been common here — and still is. But in just four years, the country has gone from the European Union’s worst economic disaster zone to a model of what the International Monetary Fund hails as the healing properties of deep budget cuts. Latvia’s economy, after shriveling by more than 20 percent from its peak, grew by about 5 percent last year, making it the best performer in the 27-nation European Union. Its budget deficit is down sharply and exports are soaring.

“We are here to celebrate your achievements,” Christine Lagarde, the chief of the International Monetary Fund, told a conference in Riga, the capital, this past summer. The fund, which along with the European Union financed a $7.5 billion bailout for the country at the end of 2008, is “proud to have been part of Latvia’s success story,” she said.

When Latvia’s economy first crumbled, it wrestled with many of the same problems faced since by other troubled European nations: a growing hole in government finances, a banking crisis, falling competitiveness and big debts — though most of these were private rather than public as in Greece.

Now its abrupt turn for the better has put a spotlight on a ticklish question for those who look to orthodox economics for a solution to Europe’s wider economic woes: Instead of obeying any universal laws of economic gravity, do different people respond differently to the same forces?

Latvian businessmen applaud the government’s approach but doubt it would work elsewhere.

“Economics is not a science. Most of it is in people’s heads,” said Normunds Bergs, chief executive of SAF Tehnika, a manufacturer that cut management salaries by 30 percent. “Science says that water starts to boil at 100 degrees Celsius; there is no such predictability in economics.”

In Greece and Spain, cuts in salaries, jobs and state services have pushed tempers beyond the boiling point, with angry citizens staging frequent protests and strikes. Britain, Portugal, Italy and also Latvia’s neighbor Lithuania, meanwhile, have bubbled with discontent over austerity.

But in Latvia, where the government laid off a third of its civil servants, slashed wages for the rest and sharply reduced support for hospitals, people mostly accepted the bitter medicine. Prime Minister Valdis Dombrovskis, who presided over the austerity, was re-elected, not thrown out of office, as many of his counterparts elsewhere have been.

The cuts calmed fears on financial markets that the country was about to go bankrupt, and this meant that the government and private companies could again get the loans they needed to stay afloat. At the same time, private businesses followed the government in slashing wages, which made the country’s labor force more competitive by reducing the prices of its goods. As exports grew, companies began to rehire workers.

Economic gains have still left 30.9 percent of Latvia’s population “severely materially deprived,” according to 2011 data released in December by Eurostat, the European Union’s statistics agency, second only to Bulgaria. Unemployment has fallen from more than 20 percent in early 2010, but was still 14.2 percent in the third quarter of 2012, according to Eurostat, and closer to 17 percent if “discouraged workers” are included. This is far below the more than 25 percent jobless rate in Greece and Spain but a serious problem nonetheless.

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United Nations Presents Grim Prognosis on World Economy

The main author of the report, Robert Vos, director of the Development Policy and Analysis Division of the United Nations Department of Economic and Social Affairs, said it could take until at least 2017 just to recoup the jobs lost in the United States and Europe since the 2008-9 global recession.

He forecast world growth for 2013 at 2.4 percent, “a significant downgrade” from the United Nations midyear forecast of 3.1 percent. He said the 2012 growth rate was 2.2 percent, vs. the midyear forecast of 2.5 percent.

“I’m afraid this time around we’re not very optimistic about how things are moving,” Mr. Vos said at a news conference at United Nations headquarters.

“A worsening of the euro area crisis, the ‘fiscal cliff’ in the United States and a hard landing in China could cause a new global recession,” Mr. Vos said in the report, “World Economic Situation and Prospects 2013.” He said the forecast growth was “far from sufficient to overcome the continued jobs crisis that many countries are still facing.”

The report’s proposals to avoid that outcome — more government programs that focus on job growth, fiscal coordination and aid to developing countries — are not likely to be widely embraced by policy makers in the United States and Europe, where the preoccupation is on budget cuts and spending discipline. Still, the report provides one of the most complete assessments of the world’s economic trends and reflects what United Nations experts view as the most pressing areas of concern.

Shamshad Akhtar, assistant secretary general for economic development, who introduced Mr. Vos’s report, began by reciting a litany of maladies, including record unemployment in Europe, a decline in global trade, volatility in the flows of capital and low food stocks in many poorer countries that have made prices in those countries unpredictable.

While she and Mr. Vos acknowledged the news reports on progress in the debt-reduction negotiations between the White House and Congressional Republicans to avoid dire automatic year-end spending cuts, what has been called the fiscal cliff, they erred on the side of assuming the worst. Both said the shock of such spending cuts would further weaken economies elsewhere.

“Even if we don’t get to the fiscal cliff, what’s on the table now is not too far from what would happen if the United States goes over the cliff,” Mr. Vos said. “That is reason for some concern.”

He criticized the focus in developed countries on austerity, calling it “detrimental to their own economic recovery,” and said cuts “should not come at the expense of the development efforts of the poorest nations.”

Unlike the economic crisis four years ago, when China helped to cushion the impact with enormous doses of stimulus spending, there is no single savior this time. If China’s growth rate of 7.5 percent this year slows to 5 percent or less, Mr. Vos said, “that would have major global ramifications.”

He said growth rates in 2012 fell sharply almost everywhere except Africa, where economies grew in the 5 percent to 6 percent range, helped by strength in oil-exporting countries, spending on basic infrastructure improvements and expanding ties with Asian economies.

Nonetheless, he said, Africa remains plagued by armed conflicts and other “numerous challenges,” and the strong growth rates will not hasten the end of the continent’s poverty.

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DealBook: Live Blog: DealBook’s Post-Election Conference

The fiscal cliff in the United States, the European debt crisis and the slowdown in China’s economy have all weighed on deal-making. The 2012 election results were supposed to provide some clarity to our fiscal future, but the outcome of the much-debated tax increases and budget cuts remains uncertain. Our inaugural conference, “DealBook: Opportunities for Tomorrow,” will explore the challenges and the possibilities in this environment.

Writers and editors at The New York Times will interview leaders and chief executives from Wall Street to Silicon Valley in a day-long conference at the Times Center in New York. Whether you’re attending in person or watching our video feed above, you can read up-to-minute analysis from our live blog of the day’s events and take part in the conversation on Twitter with the hash tag #DBconf.

The official conference web site includes biographies of the speakers and an agenda for the day’s events.

For the best viewing experience, readers who want to watch the embedded video below should turn off auto-refresh.

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Economix Blog: When 2012 Sounds Like 1982

Here’s a situation that sounds like the current one, but isn’t:

The president faces a weak economy and a split Congress, with some Republicans furious over the president’s endorsement of a plan to cut budget deficits with a combination of a tax increase and budget cuts.

“He is adamant that we are wrong on the tax increase,” wrote the president after meeting with one leading House Republican. “He is in fact unreasonable.”

The year was 1982, the president was Ronald Reagan and the congressman was Jack Kemp.

(Thanks to William L. Silber, a professor of finance and economics at New York University and the author of “Volcker, The Triumph of Persistence,” a new biography of Paul Volcker, for bringing this to my attention.)

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