Monday, July 12, 2010

7/12/10 Post

BUZZ: U.S. Weighs Tax That Has VAT of Political Trouble

Analysis: How 2 million Americans lost their jobless benefits in an election year
Hundreds of thousands of workers unemployed for more than six months started losing the weekly checks in June and it's not clear when they could resume.
Congress is back - and so is the spending debate
To spend money or to watch their pennies that is the question. There are three pressing issues that lawmakers will wrestle with in July, Unemployment insurance, Aid to states, and Temporary Assistance to Needy Families Emergency Fund.
U.S. economy still in a soft patch
We're still growing, but the slower pace is forcing us to rethink how durable the recovery is. Retail sales, production expected to decline in June.
Some sound businesses shut by lack of credit: Bernanke
Although there is a debate over the causes of the problem of the lack of credit to small businesses, the bottom line is that some good businesses have been shut as a result.
Wall Street reform bill: One vote away
"It is a better bill than it was when this whole process started," Sen. Scott Brown, R-Mass., said in a statement. "While it isn't perfect, I expect to support the bill when it comes up for a vote."
Byrd seat at issue in special W. Virginia meeting
With Democrats in Washington seeking all the votes they can get for a financial-reform bill and an extension of unemployment benefits, members of the West Virginia legislature will meet Thursday to clarify how a successor to the late Sen. Robert Byrd will be decided.
The Herd Instinct Takes Over
Component Stocks' Correlation to S&P 500 at Highest Level Since '87 Crash.
Obama's debt commission warns of fiscal 'cancer'
The two leaders -- former Republican senator Alan Simpson of Wyoming and Erskine Bowles, White House chief of staff under President Bill Clinton -- sought to build support for the work of the commission, whose recommendations due later this year are likely to spark a fierce debate in Congress.
Changes Choke Cap-and-Trade Market
The market's collapse shows how vulnerable market-based approaches to reducing air pollution are to government actions. That could scare off investors, who won't commit to a market where the rules can change at any minute.
Crisis Awaits World’s Banks as Trillions Come Due
If institutions are unable to raise the money that they need on the open market, the European Central Bank would have to decide whether to continue to prop them up.
Revisiting the Regulations Affecting Business
White House, in Policy Review, Asks Executives to List Obstacles to Growth; No Specific Changes Proposed So Far.
IRS starts mopping up Congress's tax-reporting mess
With a new mandate looming that will require business owners to file millions more tax forms, the Internal Revenue Service has begun the daunting process of figuring out how to turn the law's sweeping demands into actual rules for taxpayers.
Hiring Tax Credit Pushed
The Joint Committee on Taxation estimated the stimulus program would cost $13 bil.
End of Census, and for Many, End of Job
In past decades, the bureau faced a challenge just keeping workers around to close up shop, as most dashed for new jobs that might pay better. Not this time around.
Debt, Bank Troubles Leave U.S. Trailing in Job Growth
One year into the global recovery, the U.S. is lagging far behind other major economies in restoring jobs lost in the recession.
US stimulus shifts to infrastructure spending
It was tilted towards tax breaks and safety-net payments to states and individuals in the first year, before shifting to infrastructure projects in 2010...
Investors Still Demand Treasurys, Despite Puny Yields
Faced with the prospect of a weak and uneven recovery and lingering concerns over Europe's fiscal problems, investors see plenty of reasons to buy traditionally safer government securities.
Racial quotas in Dodd-Frank financial regulatory bill
The Dodd-Frank financial regulatory bill, ostensibly aimed at reforming Wall Street and preventing a future financial crisis, will impose racial and gender quotas on financial institutions if passed, according to economist Diana Furchtgott-Roth.

Restore Free Markets to Health Care
Eline van den Broek urges the repeal of Obama-care and also points out some of the other reforms that are needed to restore a free market to the US health care system.
As Predicted, Obama Weak on Immigration Enforcement
Obama Administration’s year-old worksite audit policy is resulting in far fewer deportations of illegal immigrants, which means that those illegal immigrants are simply moving to different jobs elsewhere in America.
Are the Rich Really More Likely to Walk Away From Their Mortgages?
All the data I've seen show that millionaires--aka "high net worth individuals" are not particularly likely to live in million dollar homes. Who is? People who live in areas with expensive real estate. And where is the expensive real estate? Why, often in the areas that experienced the biggest inflation during the housing bubble.
Minsky-Jones Answers Tyler Cowen
Garett Jones would say that labor is mostly overhead, and firms have shed a lot of overhead. They are sacrificing growth in future capabilities in order to shore up current profits. Minsky would say that they are shoring up current profits because we are at the "hedge finance" stage of the business cycle, in which firms are trying to reduce debt in order to be able to finance operations internally.
Last Call
Daniel Okrent's Last Call, a history of the rise and fall of alcohol prohibition, is a masterpiece. Of course the writing is great but Okrent is also very good at building the history on a framework of analysis and social science.
Weekly Summary and a Look Ahead
This will be a busy week. The key economic report this week will be June retail sales to be released on Wednesday.
Still Hearing Defunct Economists in the Air: Krugman’s Misplaced Attack on Hayek
I fear that Dr. Krugman is one of those “practical men of affairs” who is the slave of a defunct economist named John Maynard Keynes.
Is the economy headed down again?
...I'm still not an economic optimist, but I do have a rosier view of the default course than do many other commentators. I just don't think the shocks have finished arriving.
Bernanke Urges Small-Business Lending
Federal Reserve Chairman Ben Bernanke urged banks and regulators Monday to seek out ways to ensure that small businesses get the credit they need to create jobs.
Euro and European Bond Spreads
Although off the recent peak, the Greek spreads have widened over the last month. For the other countries, the spreads have been mostly flat since mid-June.
Pearlstein Wants Tough Trade Measures Against China…and the U.S.
By balancing the economic relationship, presumably Pearlstein is speaking about the need to reduce the bilateral trade deficit, which spurs a net outflow of dollars to China, some of which the Chinese lend back to Americans, who in turn can then buy more imports from China, and the cycle continues. But to tip the scales in favor of the blunt force action he recommends later, Pearlstein characterizes Chinese investment in the United States as living beyond our means, losing ownership of “our” assets, and eroding our industrial and technological base. That is a paternalistic and inaccurate characterization of the dynamics of capital inflows from China.
Secondary Sources: Fed Action, Deficits, Rich Defaulters
A roundup of economic news from around the Web.
Tough Love
The Federal Government’s balanced budget requirement isn’t weak; it is nonexistent (you might say they are on the honor system). So what might we expect spending to look like if every state in the union could borrow from the Federal Government whenever it was expedient?
Easterly channels Hayek
How do you liberate people to allow them to help themselves? You look for the barriers that keep them from helping themselves. Ironically, sending large amounts of money to corrupt leaders probably creates the single largest barrier.

Research, Reports & Studies
On the New Culture War over Free Enterprise
“The Battle" presents the evidence that free enterprise is an expression of the core values of a large majority of Americans. Personal liberty, individual opportunity and entrepreneurship are the explanation for our nation's past success and the promise of greater things to come.
Bad Medicine: A Guide to the Real Costs and Consequences of the New Health Care Law
The more we learn about what is in this new law, the more it looks like bad news for American taxpayers, businesses, health-care providers, and patients.
Obama Economy Sends Americans to Their Mattresses
Government policies designed to stimulate the economy seem to be having the opposite effect. Consumers aren't buying, businesses aren't hiring and those fortunate enough to have some cash on hand don't seem to be investing. I call it the mattress economy.
Wells Fargo Economics Group: Weekly Economic & Financial Commentary
Those Lazy Days of Summer Are Here.
Public Interest Comment on the Connect America Fund
Creation of the Connect America Fund offers the FCC the opportunity to make a clean break with past subsidy disbursement practices that were often ineffective, inefficient, and unaccountable for achieving the outcomes articulated in the 1996 Telecommunications Act.
Hudson Institute Economic Report
In another sign of slower growth, wholesale inventories rose 0.5 percent in May, following a 0.2 percent increase in April, as shoppers stayed home and inventories built up.
Wells Fargo Economics Group: What Really Drives Growth in the Industrial Sector?
Although U.S. manufacturing employment has declined by 40 percent since its peak in 1979, the volume of industrial output in the United States has nearly doubled over the past 30 years.

Economists’ Comments & Opinions
Positives outweigh the negatives, top forecaster says
The U.S. economy has lost some momentum in the past month or two, but the recovery is still on track.
The Great Recession's Stranglehold
Most Americans, Pew says, believe adverse economic changes will be temporary. Optimism will return.
Immigration Can Fuel U.S. Innovation—and Job Growth
Lost amid the heated debate over U.S. policy is a key point: Immigrant entrepreneurs and skilled workers are a boon to the economy.
Here's How You Quickly Create Jobs
Abolish the corporate income tax.
Housing Gets Sick on Keynesian Roller Coaster
Many nonpartisan economists who have studied stimulus spending have generally concluded that it is counterproductive and destabilizing. The history of the homebuyers’ credit provides a case study that illustrates where that conclusion comes from.
Who Pays for ObamaCare?
...much of ObamaCare's redistribution will merely move income to the lower middle class from the upper middle class, and the President habitually promises that people earning under $200,000 will be exempt from his tax increases. We now know they won't be.
Canada's economy can teach the U.S. a thing or two
The United States will probably take years to recover from the global recession and credit crunch, economists say, but its northern neighbor is back in fine shape.
Prime Numbers: Oil Spill Has Little Effect on U.S. Economy
The industries most affected — oil and gas exploration, commercial fishing and tourism — account for about 9 percent of gross domestic product in the Gulf region, according to an analysis by Barclays Capital. That’s about 1.5 percent of U.S. GDP, and only a tiny fraction of that has been disrupted by the spill.
The Trilemma of International Finance
AS the world economy struggles to recover from its various ailments, the international financial order is coming under increased scrutiny.

Graphic of the Day
WSJ: Number of the Week: Euro Zone Debt Is Coming Due
INTERACTIVE: The Economist house-price indicators
PODCAST: Gregory on Politics, Murder, and Love in Stalin's Kremlin
See: Taking apart the federal budget
See also: Recent Federal Deficits

Book Excerpts
"Not understanding the process of a spontaneously-ordered economy goes hand-in-hand with not understanding the creation of resources and wealth. And when a person does not understand the creation of resources and wealth, the only intellectual alternative is to believe that increasing wealth must be at the cost of someone else. This belief that our good fortune must be an exploitation of others may be the taproot of false prophecy about doom that our evil ways must bring upon us." - Julian Simon, The Ultimate Resource (1981)

Did You Know
"About a quarter of the swine flu vaccine produced for the U.S. public has expired – meaning that a whopping 40 million doses worth about $260 million is being written off as trash."