Kiplinger Connection
The Economy • Education • Energy

The Economy: Fannie and Freddie are safe, but at a cost.
Education: Community colleges are growing enterprises.
Energy: Cost gaps between solar and fossil energy narrow.

The Economy
Washington won’t let Fannie Mae or Freddie Mac fail...but at a cost.
Policymakers’ choices are agonizing: Risk free fall in both the financial and housing markets ... together, the two entities own or back half of U.S. mortgages. Or bail out the mortgage giants, eroding free market integrity and saddling taxpayers with a huge liability. For decades, the two companies operated under different rules than rivals, enjoying unspoken but openly accepted government backing. No more.
Lawmakers and regulators will insist on tough reforms. Heads will roll.
Fast action by the Federal Reserve and Treasury Dept. will avert meltdown. The trick is to stabilize markets without appearing to unfairly favor some investors.

Rumors of the Detroit Three’s imminent demise are greatly exaggerated. Both Ford and GM have the resources to weather the storm. Chrysler, however, is in greater danger. Parent company Cerberus will continue to hunt for a buyer.
The speed of consumers’ shift to smaller cars caught all of them flat-footed, leading to huge June sales drops: 36% for Chrysler, 30% for Ford, 18%, for GM. None of the automakers is likely to catch even a whiff of profit this year or next.
But Ford is sitting on $30 billion in cash, thanks to a big 2006 loan.
And GM could mortgage itself as well. Plus it has already put Hummer on the block. Another option: Unloading its Saab, Saturn, and Buick brands.

Better figure on digging deeper for groceries for years to come. Price increases for meat, dairy products, and more will moderate only slightly from past years, largely because of rising worldwide demand for food.
The impact will ripple through many sectors, including school lunch programs and businesses that subsidize employee cafeterias. They face having to trim services or increase food budgets.
How will sales of pricey organic foods hold up?
Quite well. Consumers won’t back off organics. Moreover, as organics claim a larger market share, price differences vs. conventional foods will narrow.

Education
The sluggish economy is making community colleges busier places as more people look to hone their skills and improve their employability. Enrollments are on the upswing for both credit and noncredit programs.
Businesses like the flexibility of community college curricula because it lets the schools respond quickly to local market forces. For example, after Hurricane Katrina hit the Gulf Coast, construction courses were added at local community colleges, enabling builders to find good help quickly. And Midwest schools are training workers for the booming ethanol business.

Energy
While coal and natural gas prices are rising, solar power is getting cheaper, edging it a lot closer to being cost competitive with electricity made by burning fossil fuels. For firms and homeowners in Calif. and the Southwest, the cost of solar-cell-made power will fall 25%, to 25¢ per kilowatt-hour, by 2011. And in 10 years or so, power providers in the West, South, and Mid-Atlantic regions likely will pay 12¢ to 15¢ per kWh for electricity from sun farms and rooftop panels. Coal- and natural gas-generated electricity is now at 11¢ per kWh and climbing ... prices will be further spurred largely by coming limits on carbon dioxide emissions.
Technological breakthroughs are driving solar volt costs down to earth by boosting cells’ efficiency at converting sunrays into electricity and slashing costs of making and installing systems. Coming soon: Buildings wrapped in sheeting that’s capable of cheaply converting and using solar power for heating and cooling.

Is your business doing all it can to curb mounting energy costs?
A free energy audit is available for firms that spend up to $3 million a year on energy. Under the auspices of the Dept. of Energy, qualified engineers will check out your facilities and recommend cost-effective ways to cut energy waste. The changes can save big bucks. For more details, see www.kiplinger.com/audit.
Another option: Free rooftop solar panels. Akeena Solar, Alpha Energy, Ausra, SolarCity, and other energy companies will install photovoltaic panels at your facilities and operate them while selling you the electricity they produce. Buyers sign a contract to buy the power at a set price for the panels’ life span.