Free Republic

NEW YORK, April 25 (Reuters) - Increases in federal budget deficits do drive up long-term interest rates, Federal Reserve staff say in a research paper, contrary to White House thinking on the issue. An increase in the projected deficit-to-gross domestic product ratio of one percentage point raises long-term rates by a quarter of a percentage point, according to a report published on the Fed's Board of Governors Web site this week. "The estimated effects of government debt and deficits on interest rates are statistically and economically significant," the study by Fed economist Thomas Laubach said.

SACRAMENTO - A day before the governor is expected to release his May budget revision, Republicans today will call for a combination of spending cuts and delays of some expenses to plug the state's $20 billion budget shortfall. While not planning to make specific suggestions, Republican leaders will say the governor should place a cap on state spending and avoid imposing tax increases to help the state make ends meet in the 2002-03 fiscal year, which begins July 1. "We are not going to make specific recommendations; it's the governor's responsibility to offer a balanced budget," Assemblyman Bob Pacheco said...

<p>Sacramento, California, April 24 (Bloomberg) -- California must sell as much as a record $7.5 billion in short-term debt to pay its bills in June and July, the state controller said.</p> <p>The sale, which would surpass the record $5.7 billion worth of tax-exempt notes California sold last year, may be offered as soon as June, Controller Kathleen Connell said at a Sacramento, California, press conference. Governor Gray Davis must approve the sale, she said.</p>

<p>NEW YORK -- California's sale of $800 million in general obligation bonds stirred investor interest, but not enough for a first-day sellout.</p> <p>Meanwhile, a $500 million issue by the Port Authority of New York and New Jersey found good investor interest, thanks in part to tax exemption in New York and New Jersey.</p>