Tuesday, June 29, 2010

6/29/10 Post


News
Consumer Confidence Tumbles
U.S. consumer confidence dropped sharply in June, as concerns over the sustainability of economic recovery and the outlook for jobs brought one closely watched indicator's three-month streak of consecutive gains to an end.
G20 deficits
The goal is the same, but the paths to deficit reduction are separated by a transatlantic rift.
Dow Slips on Deficit Vow
Investors again favored bonds over stocks, with major stock indexes slumping late in the day due to swirling fears about global growth.
For Sale: Government Tower, Ideal for Business Startup
Facing the prospects of a $1.4 trillion budget deficit for the second year in a row, President Obama has called for a major effort to cull the federal government’s property holdings in search of fresh revenue.
Consumers Stay Tightfisted
Gains in wages and salaries helped lift U.S. personal income 0.4% in May from April, the Commerce Department reported Monday, but consumer spending rose a more muted 0.2%.
Pentagon Looks for $100 Billion in Cost Savings
Defense Secretary Robert Gates said Monday he wants to trim some of the billions of dollars the Pentagon spends on weapons systems and contractor services, part of a Pentagon-wide effort to find $100 billion in savings in the next five years.
BIS Warns Countries About Risks of Debt
The Bank for International Settlements delivered a stern message to central banks and governments that keeping interest rates low for too long, or failing to act quickly to cut budget deficits, could sow the seeds for the next crisis.
Tax Amnesty Programs: Source of Quick Cash for States
To fill their coffers and avoid hiking taxes or enacting new ones, states are flocking to taxpayer amnesty programs, which encourage delinquent taxpayers to pay up in return for escaping penalties and interest, in some cases.
Interest rates keep falling as investor view of economy dims further
A darkening view of the economy sent bond market interest rates to their lowest level in 14 months and kept many investors out of the stock market.
States struggle to balance budgets after Congress refuses to offer more stimulus money
Now, with a new fiscal year just days away in most states, many governors are proposing to make up for the shortfall with tax increases, cuts in essential services and potential layoffs of thousands of public employees.
$5 billion for the uninsured
The Obama administration will dole out $5 billion to states to provide insurance for people who don't have coverage because of pre-existing medical conditions.
Pass the statins
Between 2000 and 2008 health spending per person increased by 4.2% a year on average, according to the latest data from the OECD, a rich countries' club. Average spending over the same period was 8.4% of GDP; last decade the average was 7.3%.
In Ireland, a Picture of the High Cost of Austerity
Wage cuts were easier to impose here because people remembered that leaders moved too slowly to overcome Ireland’s last recession. This time, Mr. Cowen struck accords swiftly with labor unions, which agreed that protests like those in Greece would only delay a recovery.

Blogs
The Euro and Armageddon
Individual debts matter for individuals. Government debts matter for constituents. But what is the significance of aggregate non-government debt of specific geographic territories within a currency union?
Economists React: Sustained Upturn in Confidence Remains Elusive
Economists and others weigh in on the June drop in consumer confidence.
Paul Krugman, Ipse Dixit 2
...we face government created uncertainties in the healthcare markets, the coming bankruptcy of Medicare and Medicaid, difficulties with Social Security as the population ages, state and local governments which have refused to make sensible reforms in the provision of their “vital” services for decades, and so forth. ...And the root of our problems, says Krugman, is the lack of Aggregate Demand.
A Look at Case-Shiller, by Metro Area (June Update)
The S&P/Case-Shiller Composite 20 home price index, a broad gauge of U.S. home prices, posted a 0.8% gain in April from a month earlier and rose 3.8% from 2009, as the expiration of a federal tax credit boosted prices.
Reject All Energy Subsidies, Not Just the Ones for Fossil Fuels Make no mistake, subsidies for fossil fuels are no better than subsidies for wind and solar. You may get more bang for your buck in terms of energy produced, but only in the short term. Subsidies create complacency within the industry and reduce the incentive to innovate
The United States: Deficit Champion
Evidence that the current Administration is taking a different tack on economic policy was abundant at the recent Group of 20, budgets must be cut.

Research, Reports & Studies
Are Free Trade Agreements Contagious?
This paper presents a new model of the domino effect which is used to generate an empirical index of how “contagious” FTAs are with respect to third nations... contagion is present in our data and is robust to various econometric specifications and samples.
Knowing What the Federal Government Owns
With millions of acres and thousands of assets in government portfolios, officials should take steps to identify what they own, determine whether government or private ownership is most effective, and streamline the efficient transfer of all unneeded real property.
Financial Reform in Congress: A Disorderly Failure
The goal of the legislation is clear: to minimize the chances that another financial crisis will occur. Unfortunately, the massive bill on the whole would hurt consumers and the economy, and rather than decrease the chances of another crisis or bailout, it would make them more likely to occur.

Graphic of the Day
State and Local Tax Revenue increased slightly compared to Q1 2009
See: Recession Continues to Depress Revenues
See: Federal Spending Is Growing Faster Than Federal Revenue

Economists’ Comments & Opinions
The End of Community Banking
Creditworthy borrowers will be denied loans as small banks devote more and more energy to regulatory compliance.
The Unemployment Insurance Crisis
As of this summer, unemployment insurance trust funds in 30 states were insolvent.
Prime Numbers:Inflation May Be Ahead Despite Federal Reserve Outlook
If the economists are right, a pickup in inflation next year may well be a greater risk than consumers — and even policymakers — now expect.
Paul Krugman's Depression
Nobel Prize-winning economist Paul Krugman says the U.S. is in the "early stages of a third Great Depression." If he's right, it's only because American policymakers have been following his advice.

Book Excerpts
"It is your mind that matters economically, as much or more than your mouth or hands. In the long run, the most important economic effect of population size and growth is the contribution of additional people to our stock of useful knowledge. And this contribution is large enough in the long run to overcome all the costs of population growth." -Julian Simon, The Ultimate Resource (1981)

"Did You Know"
Consumers' view on the present economic situation fell to 25.5 in June from 29.8 in May. Respondents saying current business conditions are "good" fell to 8% in June from 9.7% in May, while those saying jobs are "hard to get" rose to 44.8% from 43.9%. Respondents saying they expect business conditions to be worse in six months rose to 14.9% in June from 11.9% in May, while the percentage of those expecting better business conditions fell to 17.2% from 22.8%. Those expecting fewer jobs rose to 20.8% from 17.8%, while those expecting more jobs fell to 16% from 20.2%.