Friday, July 16, 2010

7/16/10 Post

Double-dip fears outweigh robust earnings
Fears of a “double-dip” recession in the US returned to haunt the markets as a welter of negative economic releases overshadowed positive news on the earnings front and another encouraging eurozone sovereign debt auction.
Data Shows the Factory Sector Slipping and the Economic Recovery Slowing
New evidence of a slowing economic rebound emerged Thursday in reports that manufacturing activity was slowing after helping push the early stages of the recovery.
Impact to Reach Beyond Wall Street
Key Questions Unresolved for Businesses and Consumers Until Bill Goes Into Effect.
Financial Overhaul Signals Shift on Deregulation
That era of hands-off optimism was gaveled to an end on Thursday as the Senate gave final approval to a bill that reasserts the importance of federal supervision of financial transactions.
Economists Split on Finance Bill
Asked how much the legislation would do to prevent a repeat of the global financial crisis, a majority (58%) said the overhaul would reduce the risks "just slightly," and only 6% thought it would have a "significant" impact.
Fiscal panel co-chair supports lower corporate taxes and a VAT
Erskine Bowles, co-chair of President Obama’s fiscal commission, said Wednesday that while he wants most of the government’s budget deficits to be closed by cutting spending, he also thinks a value-added tax is called for.
Obesity Rating for Every American Must Be Included in Stimulus-Mandated Electronic Health Records, Says HHS
The obesity-rating regulation states that every American's electronic health record must: “Calculate body mass index. Automatically calculate and display body mass index (BMI) based on a patient’s height and weight.”
Google search: political power
Google’s aggressive tactics have put it on top of the business world, and now the Internet giant is looking to leverage the high profile and sterling connections of its CEO to achieve similar power in the political sphere.
Senate Appropriators Set Cap $14 Billion Below Obama’s Budget Request
Senate appropriators agreed Thursday to slice $14 billion from President Obama’s fiscal 2011 budget request, roughly double the cut proposed by House Democrats. But that was not enough to satisfy Republicans in a year of pitched battles over federal spending.
Senate close to extending jobless benefits.
The Senate plans to take up a measure Tuesday to restore the extended benefits, right after a new Democratic senator from West Virginia is sworn in.
Consumer prices dip for third straight month
The prices that U.S. consumers pay for goods and services fell slightly in June, mainly because of lower gasoline costs.
Virginia has a $220 million surplus
After facing a $1.8 billion shortfall just six months ago, Virginia closed its fiscal 2010 budget with a $220 million budget surplus. Virginia scaled back expenditures in several areas, including public education and state-employee compensation.
Is the U.S. battery business for real?
Projects dedicated to advanced batteries have received over $2 billion in federal funding as part of the administration's $800 billion-plus plan.
Greenspan: Let Bush tax cuts expire
Former Federal Reserve chief Alan Greenspan believes Congress should let the tax cuts enacted by President George W. Bush expire for all Americans in order to address the widening deficit.
New Orleans takes another hit
First it was Hurricane Katrina and then it was the BP oil spill. Now the Louisiana coastal region faces a third economic crisis: Northrop Grumman Corp. will close the shipyard in Avondale, eliminating 5,000 jobs.
U.S. July consumer sentiment plummets
The UMich index fell to 66.5 in early July from 76 in late June as consumers have been worried about weak hiring and a slowly healing economy.

New hires or new jobs?
I’m not saying Keynes (or Obama or Larry Summers) is wrong because all spending does is bid up prices and wages. I’m not trying to prove that the stimulus failed. I’m challenging the standard macro textbook story that says aggregate demand leads to output that leads to employment.
Median Duration of Unemployment
This recession looks very different, and much more troubling, than those in the recent past.
When Nudging Isn’t Enough
When a policy is enacted to achieve a specific goal and then fails to achieve it, further policies are justified on grounds of achieving the goal that “we” have already agreed upon. In Loewenstein and Ubel’s op-ed, I believe our prediction is vindicated.
Experts at work
Great. I’m sure we’ll all be paying as much attention to those new rules as they get made as the people whose livelihood is affected. A field day for the bootleggers, no doubt, done in the name of protecting consumers and creating financial stability.
Europe vs. U.S.: The Post-Recession Productivity Divide
Each region is now at a key inflection point when it comes to productivity and the recovery. The drop in euro zone productivity suggests hiring won’t take place on a large scale even as the region recovers, since firms can simply increase the hours worked of their existing work forces.
Financial Reform: A Brief Take
I worry about these highly sophisticated financial mechanisms that enjoy de facto government insurance. My concern is that insurance that is free, or very much under-priced, is going to foster a lot of economically unsound financial practices.
Just Lend And Be Done With It!
So Bernanke has no “macroeconomic knowledge problem.” He knows that we would all be better off if there were more lending because matters like credit allocation as well as restructuring of firms and economic activities after a period of misallocations are irrelevant to business cycles. Feed the Aggregate Demand God and all will be better.
Pension spike
More hard-to-believe info on the world of public employee compensation in California.
Secondary Sources: Curious Job Market, Long-Term Unemployed, Deficits
A roundup of economic news from around the Web.
Drowning in Debt
no matter what one's ideology is, it is odd that anyone would claim that the U.S. does have a spending problem; the co-chairmen of the deficit commission were just in the news for talking about how our country is broken.
Three Million Imaginary Jobs
The White House says the stimulus worked beyond even its hopes. Seriously.
Businesses Are Not Hiring Because They Are Grouchy
The way I see it, the business community is often very conflicted and way too cozy with the government policies and officials from which, sadly, it derives many privileges. Isn't that more reasons to listen to businesspeople when they complain?
Major Whistleblower Provisions in Financial Regulation Bill
While it has not been a major focus of bill opponents, the Dodd-Frank financial regulation bill is loaded with major new extensions of whistleblower law into the economy’s financial sector.
Europe Falls Out of Love with Barack Obama
You know things must be going really badly for Barack Obama when even his most ardent supporters across the Atlantic are turning against him.
Chipping Away at the Union Stranglehold
Despite decades of union gridlock, the Washington, D.C., school board has successfully contracted with teachers unions to implement performance pay.
Side Effects: Obamacare Could Punish Docs for Better Quality Care
Pay-for-performance allows third parties to pay physicians based on treatment outcomes. In theory, this sounds like a great way to encourage doctors to improve outcomes. But in practice, it’s a bit more complex.

Research, Reports & Studies
Wells Fargo Economics Group: Factory Sector Gains Continue, Pace Moderating
Industrial production managed a 0.1 percent gain in June following its increase of 1.3 percent in May. And slower growth over the next few months after a very strong first half is the theme in the factory sector.
CBO’s Economic Forecasting Record: 2010 Update
...the current degree of economic dislocation exceeds that of any previous period in the past half-century, so the uncertainty inherent in current forecasts probably exceeds the historical average.
When Did the Rules Change?
Clinton proclaimed the era of Big Government was over, and left office quite popular. Barack Obama said, in effect, "Oh no, it's not!" and his presidency and his party are in freefall.
China’s Suspect Economic Data
China’s GDP officially rose 11.1 % on-year in price-adjusted terms in the first six months of 2010. A second glance is troubling, though. The comparison of GDP through June 2010 to GDP through June 2009 shows a nominal 23.6 percent gain.
Reclaiming America: Why We Honor the Tea Party Movement For 200 years, America’s principles have been under attack in the name of history and science and relativism, in favor of evolving truths, living constitutions, and bureaucratic government, through the Progressive Movement and the New Deal, the Great Society, and now into the age of Obama.
Europe What Future
…the full implications of what has gone wrong still need to be grasped by euro-zone countries, European countries outside the zone, and the United States. The global lessons to be learned are both political and economic; they relate especially to the danger of allowing politics to prevail over economics.

Economists’ Comments & Opinions
The Yo-Yo Market and You
The stock market will suffer dizzy spells until the fog of monetary policy uncertainty is lifted.
How to Tell a Nation Is at Risk
The ones with private sectors that are not doing well enough to bail out the government.
When the Cure is Worse Than the Disease
Invariably, the government rarely receives the amount of tax revenue the CBO estimates it will when tax rates are raised.
About That Financial Reform 'Victory'
Dodd-Frank may backfire on Democrats.
Economy puzzle solved
With each private-property owner seeking only the highest returns on the use of his or her property, an overall economic order is brought about. This order — this outcome — is intended by no one.
It's Time to Shift Spending to States
The U.S. fiscal path is unsustainable, primarily because of out-of-control entitlement spending. One way to avoid this outcome would be to transfer entitlement programs to the states.

Graphic of the Day
The Enterprise Blog: Major Financial Legislation: Number of Pages
VIDEO: Job creation and stimulus spending
See: The share of foreign-born labour in rich countries
See also: Travel and Tourism Expenditures in America

Book Excerpts
"…the Hudson Institute, Europe, has done a revealing study of the relationship between the growth of the public sector and real economic growth in fourteen countries. The findings show that overall growth is the lowest in countries where the government sector is largest… All such studies conclude that the expansion of government in the Western industrial nations results in shrinking profits, falling investment, and plunging growth rates." -Former Treasury Secretary William E. Simon, A Time for Truth (1978)

Did You Know
Recent reports from the L.A. Times show that since 2007, nearly $4.8 million in welfare funds have been withdrawn from ATMs in California casinos. And a new report shows that more than $12,000 from the Temporary Assistance for Needy Families program was withdrawn from ATMs in California strip clubs.