8/23/10 Post

BUZZ: $4.4 Trillion: That's how much the spending baseline has increased in 31 months.

News
Hungary Central Bank Keeps Key Rate On Hold As Expected
The National Bank of Hungary's monetary policy council Monday left its key rate on hold, as expected, as looming fiscal concerns persist in Hungary and across Europe.
EU Says Greece Is Ahead of Schedule on Deficit-Cutting, Sees Loan Approval
Greece is ahead of schedule in meeting its deficit-cutting commitments and making structural reforms, putting the country on track to secure the next loan installment, the European Commission said.
LA unveils $578M school, costliest in the nation
Next month's opening of the Robert F. Kennedy Community Schools will make the inauguration of the nation;s most expensive public school ever with an eye-popping price tag of $578 million.
China becomes world's second-largest economy
As China's economy last week nudged Japan's into second place in the world rankings, it was a reminder, if any was needed, of its growing importance and influence. China may be only 1/10th of Japan's gross domestic product per capita, but there is no disputing when it comes to trade that China is the 800 lb. gorilla.
Foreclosure prevention program losing its punch
Only 36,695 troubled homeowners received long-term mortgage modifications in July under the Obama administration's Home Affordable Modification Program. This brings the total to 434,717 borrowers who have successfully made it out of the trial phase.
Facing Budget Gaps, Cities Sell Parking, Airports, Zoo
Cities and states across the nation are selling and leasing everything from airports to zoos—a fire sale that could help plug budget holes now but worsen their financial woes over the long run.
California's Furlough Fridays are back
The furloughs affect about 150,000 state employees and will save $150 million a month, the governor's office said.
Government Debt: A Bubble in the Treasury Market?
Treasury bonds maturing in 20 years or more have returned 21 percent so far this year.
Brokers could face fines over 'flash crash'
Brokers who may have had a role in May's devastating "flash crash" could face fines from the Financial Industry Regulatory Authority.
Mortgage Fraud Is Rising, With a Twist
Adopting to Tighter Rules After Collapse, Scammers Turn to More Complex Plots.
Five 'new normals' that really will stick
Whenever we go through a major change in our culture, it seems we have to adjust to 'the new normal.' And today is no exception.
Government says more than 23K workers affected by Gulf of Mexico drilling ban
A six-month ban on deepwater drilling in the Gulf of Mexico would directly put more than 9,000 people out of work and indirectly affect another 14,000 jobs.
Economic Reports This Week
Data will include existing home sales for July (Tuesday); durable goods for July and new home sales for July (Wednesday); weekly jobless claims (Thursday); and the first revision of second-quarter gross domestic product and the Thomson Reuters/University of Michigan consumer sentiment index for August (Friday).
Gulf Coast tourism suffers from perception of oil-coated towns and may take years to recover
With the summer tourist season coming to a close after Labor Day weekend, destinations are scrambling to keep businesses afloat and hang on to the region's 400,000 travel industry jobs.
McConnell Insists Repeal Of Tax Cuts Wouldn't Generate Revenue
“The problem is the spending problem," he said. "If we grind down the spending, we'll begin to get a handle on this."
American Crossroads Collects More Million-Dollar Checks
In its July filing with the IRS, Amercian Crossroads reported receiving $1 million from the Jerry Perenchino Living Trust and $1 million from the Dixie Rice Agricultural Corp.
Credit-Card Rates Climb
Levels Hit Nine-Year High as New Rules Limiting Penalty Fees Help Fuel Rise.

Blogs
Has ObamaCare’s Unpopularity Caused ‘Abject Panic at the White House’?
Americans still support ObamaCare’s price controls — which force insurance companies to over-charge the healthy and under-charge the sick — by 58-42 percent. But as President Obama has himself acknowledged, those price controls don’t work without the individual mandate. Unless a majority also supports the mandate, you don’t have majority support for either.
Surreal Environmental Regulations ? Even for California
This November, along with a host of anxious politicians, California’s own greenhouse gas law, AB 32, will be on the ballot.
GM: Successful Bailout or Successful Restructuring?
General Motors is making moves to sell some of its government-owned stock back to the private sector in what would be one of the largest initial public offerings in U.S. history.
The Left is in Full Retreat
Health care is not the only issue where the left is retreating in the face of strong disapproval from the American people.
Where Is the V-Shaped Recovery?
Unemployment and continuing claims have started to rise again. This isn't what happens in V-shaped recoveries.
Chamber of Commerce Reenters Dark Ages
Senior director says it's women's choices that have maintained the pay gap.
Growing Rental Trends Undermining US Home Sales
The American dream is on hold as the convenience of renting outweighs the risks and hassles of owning a home in this market.
Congressional Budget Office Says We Can Maximize Long-Run Economic Output with 100 Percent Tax Rates
The Capitol Hill bureaucracy basically has a deficit-über-alles view of fiscal policy. CBO’s long-run perspective is that deficits reduce output by “crowding out” private capital and that anything that results in lower deficits (or larger surpluses) will improve economic performance — even if this means big increases in tax rates.
July Unemployment Rates, by State: Uneven Progress
The job market’s slow recovery was a bit uneven last month, the Labor Department’s report on state employment showed Friday.
Which States Expected and Got the Worst?
Believe it or not, most politicians and bureaucrats don't live in a total vacuum, despite recent evidence to the contrary. If they know that trouble lies ahead, they prepare for it.
Secondary Sources: Bankruptcies, Education, Death of Manufacturing
A roundup of economic news from around the Web.
Perils of Macro Aggregation
Richard Ebeling, as usual, does an excellent job of showing how the inability to see macroeconomic phenomena as the outcome of complex micro-processes leads to poor policy prescriptions.
U.S. Debt: An Expensive Habit
If the US keeps borrowing money to finance large budget deficits, will the rest of the world have enough money to lend? A new paper from two economists, one of whom works for the US Treasury, suggests the US can make it through the year 2020, but only at great expense.
Solar Stimulus
"Solar panel experts say that panels have about a 25-year life, but the latest models, which no doubt are used in Ennis, may have a 40-year life. Taking that estimate, the panels leave us in the financial dark by 30 years. The rate of return looks like Las Vegas housing the past couple years."
Did Stimulus Work?
Stimulus is always going to get wrapped up in the agenda of whatever party is in power--it will concentrate too much on long-term strategic attempts to change the aggregate level of government expenditure; it will be deployed inefficiently; it will be stretched out to maximize electoral rather than economic effectiveness.
Summary for Week ending August 21st
Single Family Housing Starts decline in July...
Unleashing the power of Keynes
It turns out that the project that President Obama highlighted the other day–a police station renovation–was not a police station and wasn’t funded by the stimulus package.
Deficient Economics
...foreigners accept dollars because they want to spend those dollars, either on American exports or on American assets. Another term for spending dollars on American assets is “investing in America.”
Schedule for Week of August 22nd
Three key housing reports and the second estimate of Q2 GDP will be the highlights this week. Existing home sales will be released on Tuesday, New Home sales on Wednesday, the MBA Q2 National Delinquency Survey on Thursday, and Q2 GDP on Friday.
Locavores are loco
"The larger point is that not only is it not really bad to eat non-local food: eating food from a long way off is often the single best thing you can do for the environment, as counterintuitive as that sounds."

Research, Reports & Studies
RCM: Hudson Institute Economic Report
The surprising news this week was the continued deterioration in the jobs market. The number of seasonally adjusted initial claims was 500,000 with an unexpected increase of 12,000 from the upwardly revised figure of last week.
RCM: Wells Fargo Economics Group: Weekly Economic & Financial Commentary
U.S. Review: A Clear Step Backward.
Getting the Small-Boat Threat Right
Suggesting that the primary risk to U.S. national security lies with the millions of American pleasure boaters is the wrong way to approach the small-boat challenge.

Economists’ Comments & Opinions
Prime Numbers: Data Spurs Doubts about Recovery
With new data showing that the economy is growing more slowly than earlier predicted, there is little agreement about what and how much needs to be done.
Don't Tax -- Cut!
...Clinton didn't leave office with a surplus because of higher tax rates, but because of much less spending and a critical tax cut!
China's Looming Real-Estate Bubble
A massive Keynesian spending program has misallocated capital and set the stage for a crisis.
Bury Keynesian Voodoo Before It Can Bury Us All: Kevin Hassett
The fact is, the U.S. stimulus was the largest among members of the Organization for Economic Cooperation and Development, and the biggest ever tried in the U.S.
The unkindest cuts
It’s not just ‘the rich’ — we all will pay more taxes if Congress fails to act this fall.
The Case Against Corporate Social Responsibility
The idea that companies have a duty to address social ills is not just flawed, argues Aneel Karnani. It also makes it more likely that we'll ignore the real solutions to these problems.
When Economic Policy Became Social Policy
The recent Treasury Department conference is further proof we will never get out of this housing mess until we are ready to face facts.
ObamaCare's Tax on Taxes
The latest gambit to punish for-profit health insurers.
The Real Tax Gap: Paying for Unfunded Benefits
The Health Care Reform Bill is the largest Medicare cut ever. But it’s not enough.
How States Hide Their Budget Deficits
The SEC's charges against New Jersey for misleading investors should warn other states against sweeping the truth under the rug.
Inflation, not deflation, Mr. Bernanke
In the wake of a barrage of bad economic data, the yield on two-year U.S. Treasury notes has tumbled to 0.5% and the 10-year note to 2.8%, almost reaching the levels after Lehman's collapse. Pundits in the U.S. and other Western countries are talking about deflation again.
The "Courage" to Spend
Earlier this month, Secretary of Education Arne Duncan heaped praise on Congress for including $10 billion for "EduJobs" in a state-aid package that it had enacted. The move to subsidize teacher salaries and avoid layoffs was so admirable, Duncan told the press, because Congress's "historic vote means school officials won't need to make those tough calls." Indeed, Duncan termed mailing 10 billion borrowed bucks to the states "a real, real act of courage."
Economic Doldrums Leave Americans in No Mood for Obama's Liberal Agenda
Like many Democrats over the past 40 years, Barack Obama has hoped that his association with unpopular liberal positions on cultural issues would be outweighed by pushing economic policies intended to benefit the ordinary person.
Why Bond Volatility Is Acting Abnormally
Have bond traders lost the fear of their own shadows and decided to pursue getting paid back at par after paying a premium?
What Does Sudden Shift in Headline Risk Tell Us?
Investors must watch the shift in tonality by financial news outlets.

Graph of the Day
Political Calculations: The Obama Spending Future
See: Government Spending, Selected Categories
See also: CBO's Latest Projection

Book Excerpts
"Unemployment insurance is definitely a misnomer. There can never be any statistical foundation for such an insurance. Most countries have acknowledged this by dropping the name "insurance," or at least by ignoring its implications. It has now become undisguised "assistance." It enables the trade unions to keep wages up to a rate at which only a part of those seeking work can be employed. Therefore, the assistance of the unemployed is what first creates unemployment as a permanent phenomenon. At present many European states are devoting to the purpose sums that considerably exceed the capacity of their public finances." –Ludwig von Mises, Socialism: An Economic and Sociological Analysis (1922)

Did You Know
"Gallup's Potential Net Migration Index finds Singapore, New Zealand, Saudi Arabia, Canada, Switzerland, Australia, and Kuwait atop the list of countries that could see the highest net adult population growth from international migration. If all adults worldwide who desire to migrate permanently to other countries actually moved where they wanted today, each country would see their adult populations double or even triple."