Thursday, July 15, 2010

7/15/10 Post


News
The financial regulation bill
Highlights of the compromise legislation to overhaul financial rules.
U.S. June producer prices fall 0.5%; core rises 0.1%
U.S. wholesale prices fell a seasonally adjusted 0.5% in June, marking their largest decline since February, led by lower food prices.
U.S. pockets $20.6 bln in sin taxes in FY'09
The U.S. federal government collected $20.6 billion in taxes on alcohol, tobacco, firearms and ammunition in fiscal year 2009, up 41 percent from the previous fiscal year.
Jobless claims sink to near 2-year low
The number of Americans filing for initial unemployment insurance dropped to the lowest level in nearly two years last week.
Lost decade: The new threat to the U.S. economy
Now some economists are starting to talk about an even worse fate: a prolonged period of very weak growth, a so-called "lost decade."
China's economic growth eases to 10.3%
China's GDP grew at an annual rate of 10.3% during the second quarter of 2010. The pace slowed from the 11.9% growth posted in the first quarter.
Industrial Production in U.S. Rose 0.1% in June
Industrial production in the U.S. unexpectedly rose in June as higher temperatures across the nation led to increased utility use. Factory output, which makes up 75 percent of the total, declined the most in a year.
The Fed's broken crystal ball
The latest forecasts from the Fed cut estimates for economic growth, predicted that high unemployment will be more persistent than previously thought and raised the risk of a deflation.
Signs of the Stimulus
Some Call it Transparency, Others Another Example of Government Waste.
Payday: Trial lawyers could get major tax cut despite major federal deficit
According to a Legal Newsline report from the annual meeting of the American Association for Justice, the nation’s lobbying arm for trial lawyers, the industry may get a tax break from the U.S. Treasury Department that would give trial lawyers the ability to write off expenses involved in contingency fee cases much in the same way businesses write off expenses. But unlike businesses, lawyers will benefit from the tax write-off in addition to the fee they charge clients.
Companies pile up cash but remain hesitant to add jobs
Nonfinancial companies are sitting on $1.8 trillion in cash, roughly one-quarter more than at the beginning of the recession.
As Tax Cuts' Expiration Date Nears, Little Consensus
President Barack Obama wants to extend the Bush-era tax cuts for the middle class only. Many House Democrats want to extend them for that group, too, but perhaps only for a year or two. Republicans, and a handful of centrist Democrats, are talking about extending all the tax cuts.
Public Policy Polling: Obama approval hits record low
45% of voters approve of the job he’s doing while 52% disapprove. This is the first time he’s topped the 50% disapproval mark in our surveys.
Rousing the Spirits of Business to Create More Jobs
Optimistic forecasters say the U.S. economy is likely to grow at a bit better than a 3.5% annual pace over the next 12 months, but even they say that will leave unemployment at a still-high 9% or so a year from now. The moderately pessimistic, whose ranks are growing daily, foresee growth a full percentage point or more slower. The seriously pessimistic are talking "double dip."
The Crippling Costs of Obesity in the Workplace
...private employers are hit with an estimated $45 billion a year in medical expenditures and work loss, according to a 2008 report by the Conference Board (the latest report available).
Richmond Fed chief opposes bail-outs
Jeffrey Lacker told the Financial Times that markets must have clear expectations about how short-term creditors would be treated in a bank failure. “Ambiguity about that was just deadly over the past few years coming into this crisis,” he said.

Blogs
U.S. Trade Deficit Improves
The trade data showed good news on the export and import front, with U.S. exports up 17.7 percent, imports up 21.4 percent from the first five months of last year.
Morning Bell: Why the Obama Stimulus Failed
A new CBS poll out today shows that 74 percent of Americans believe the Obama stimulus either damaged the economy or had no effect.
GOP Spending Cap
Republicans on the Senate Appropriations Committee have announced support for caps on the discretionary spending portion of the federal budget.
The Stolen Auto Sales
Remember back in 2009, when critics were claiming in the Cash for Clunkers program would just steal demand from the future? Well, about a year later here is some evidence that could be attributable that.
Spending Can Be Cut
It’s time for lawmakers and the policy community to start acting like real people with real money and to start excising those billions from the nation’s bloated budget.
Bill Gates Gets It
If we want to move forward on fixing our institutions, we have to get an accurate picture of how badly they’re being mismanaged, and eliminate those harmful practices.
Jobless Claims: Take the Latest Drop with a Grain of Salt
Aside from the usual disclaimer about not reading too much into a one-week trend, there are additional complications with the claims data right now resulting from some seasonal quirks.
Reid’s Cap-and-Trade Doublespeak
...Reid’s assumption of voter stupidity might actually outreach Kerry’s, because he also seems to think that chanting “utilities only” will fool people into thinking that, somehow, they won’t ultimately pay the price of higher energy costs resulting from the need of power generators to pay for carbon emissions.
The CEA's Impossible Job
The stimulus act instructed them to do the (nearly) impossible. Perhaps someday someone will conduct a study that credibly measures the macroeconomic effects of this particular fiscal stimulus. But it won't be easy. And it won't look much like the study released today.
Big Box Stores Don’t Produce Big Tax Gains
So-called big box stores like Wal-Mart and Home Depot produce few tax revenues relative to their size, according to a presentation by Peter Katz, Sarasota County, Fla. Director of Smart Growth.
More on Debt Collection
My commenters offer wise advice. One points out something I neglected to mention: do not pay the debts of dead people. Many collectors will attempt to collect from children. That's a matter for the estate, not the kids, and if there is no meaningful estate, the debt dies with them. Do not let an unscrupulous collector tell you otherwise.
Another Credit Market Regulation, With a Twist
The bottom line here is that those who are supporting legislation to chase out payday lenders are portraying themselves as the humanitarians, but it is they who are denying some of the poorest among us access to the credit they need to put food on the table between paychecks or to not have to wait what might be a crucial few days to buy medicine for their children.
The road to poverty
As I say in The Choice, self-sufficiency is the road to poverty. I’m liking this Keynes fellow less and less.
Minority-Owned Businesses Grew at Fast Rate From 2002-2007
The number of minority-owned businesses grew nearly 46% between 2002 and 2007, more than twice the rate of all U.S. businesses, according to a new U.S. Census Bureau’s survey of business owners.
What is the Fed Thinking? and What is the Fed Thinking, 2?
...the Fed could be thinking that setting an inflation dial to 3 percent is not an option. For small changes in Fed policy, the inflation rate will not be affected. And if the Fed goes beserk, the result will be to move us into the regime of high and variable inflation rates, which will actually be worse.
Just Say No to Extending the Bush Tax Cuts
...a temporary extension is simply going to make it harder to let them expire next year, for the same reasons that the AMT keeps getting "fixed" on an annual "temporary" basis. It is going to be hard enough, psychologically, for people to give up tax breaks they have had for ten years. Stretching it out longer just makes the pain more fierce.

Research, Reports & Studies
“Mostly Free” - The Startling Decline of America’s Economic Freedom and What to Do About It
With a score of only 78.0 the United States has fallen below the cutoff that earns countries the right to call themselves truly “free.”
A Rational Post-Spill Policy That Allows Offshore Drilling
Louisianans are the ones bearing the brunt of the damage from Deepwater Horizon, yet they overwhelmingly support continued offshore oil and gas production.
Obama's Tax Plan: Bad for Economic Growth
The 2001 and 2003 tax relief packages expire at the end of 2010. All taxpayers will see a steep tax hike in 2011 unless Congress acts soon.
The Constitutionalization of Money
The market will not work effectively with monetary anarchy. Politicization is not an effective alternative. We must commence meaningful dialogue with acceptance of these elementary verities.
Using Biofuel Tax Credits to Achieve Energy and Environmental Policy Goals
...assesses the incentives provided by the biofuel tax credits for producing different types of biofuels and analyzes whether they favor one type of biofuel over others. In addition, the study estimates the cost to U.S. taxpayers of reducing the use of petroleum fuels and emissions of greenhouse gases through those tax credits; it also analyzes the interaction of the credits and the biofuel mandates.
Wells Fargo Economics Group: Retail Sales Stalled in June
June’s retail sales figures provide further evidence that economic activity has slowed in a major way. Overall retail sales fell 0.5 percent, following a 1.1 percent drop in May. Sales ex autos fell 0.1 percent.
Migration as Trade Facilitation: Assessing the Links between International Trade and Migration
The results suggest that both immigrants and emigrants are significantly related to higher trade volumes. Immigrants seem to be especially good at facilitating trade in differentiated goods, for which information costs are particularly important.

Economists’ Comments & Opinions
Speaking Up for American Capitalism
Business has taken a pounding on Capitol Hill and at the White House and for the most part has remained silent. It's time to make our case.
Andy Grove Shouldn't Lose Faith In Startups
New businesses create a net of 3 million new jobs in America every year.
The Ugly Truth About Financial-Regulatory Reform
The financial-reform bill that hits the president’s desk this week is a 2,500-page failure that will only create more problems for federal regulators...
Economics Behaving Badly
As policymakers use it to devise programs, it’s becoming clear that behavioral economics is being asked to solve problems it wasn’t meant to address.

Graphic of the Day
States are facing a record decline in revenues due to the recession.
See: Summer Spending Trends Similar to 2009
See also: Where Have All the Millionaires Gone?
See also: June Industrial Production

Economic Outlook Hearing



JEC Ranking Republican Brownback questions Chair Romer about Unemployment Insurance during the July 14th Joint Economic Committee Hearing on the Economic Outlook.

Click to see addtional videos of the Hearing

"In January 2009, you published an economic analysis of Obama's stimulas $787 billion plan and forecast that if Congress were to pass this plan
1. The unemployment rate would remain below 8%
2. Non-farm payroll employment would increase to 137.6 million by the fourth quarter of 2010
3. 90% of the jobs created would be in the private sector.

Now let us compare your promises with reality
1. Since the stimulus was enacted the unemployment rate has never been below 8%. It has been up to 10.1% and is currently at 9.5%
2. In June 2010, non-farm payroll employment was 130.5 million, 7.1 million payroll jobs short of your forcast
3. Since February 2009, only the federal government has added payrol jobs. The private sector has actually lost 3.3 million payroll jobs.

Clearly, Obama's stimulus plan failed to work as you predicted. Instead this recovery has been unusually weak for one after a severe recession. Turning to the long-term consequences of the Democrats' economic policies, one sees higher taxes, heavy regulation, gaping federal budget deficits, and soaring federal debt."

- Congressman Kevin Brady, Ranking Republican House Member, Joint Economic Committee


Congressman Brady's opening statement to Chair Romer, in reference to the The Economic Impact of the American Recover and Reinvestment Act of 2009 Fourth Quarter Report released July 14, 2010

Click here to see the Fourth Quarter report

Book Excerpts
"It is not in the power of the government to make everybody more prosperous." - Ludwig von Mises, Bureaucracy (1944)

Did You Know
Nearly 528,000 homes were taken over by lenders in the first six months of the year, a rate that is on track to eclipse the more than 900,000 homes repossessed in 2009. The number of households facing foreclosure in the first half of the year climbed 8 percent versus the same period last year, but dropped 5 percent from the last six months of 2009. In all, about 1.7 million homeowners received a foreclosure-related warning between January and June. That translates to one in 78 U.S. homes.