Monday, July 19, 2010

7/19/10 Post

Warning! Avalanche of earnings ahead
The quarterly reporting period kicks into full swing this week, with 122 of the largest companies due to report, giving investors more clarity on how corporate America and the consumer are faring amid the economic slowdown.
Economists see a modest pickup in hiring
In its second-quarter industry survey, the National Association for Business Economics said employers grew payrolls for a second consecutive quarter. The percentage of firms increasing staff levels grew to 31% in the quarter.
Obama to Senate: Pass the unemployment bill
Obama wants the Senate to pass a bill that would extend the deadline to file for unemployment benefits through the end of November. The bill would cost $34 billion in additional deficit spending, according to the CBO.
Obama's debt panel: Hints of an endgame
Here are just two ideas from the co-chair of the president's bipartisan debt commission to get the federal budget back on the right track: Rein in tax breaks. Set hard caps on federal revenue and spending.
Homebuilder Confidence in U.S. Falls to One-Year Low
The National Association of Home Builders/Wells Fargo confidence index dropped to 14 this month, the lowest level since April 2009.
China reduces US Treasury debt holdings in May as total foreign holdings post slight increase
The report said that China's holdings fell by $32.5 billion to $867.7 billion meanwhile total holdings of Treasury securities edged up $5.8 billion to $3.96 trillion in May, a slight increase of 0.1 % compared to April.
Senate expected to vote soon on extending jobless benefits
The U.S. Senate is expected to vote Tuesday. Since the extensions lapsed, more than 2 million people have lost benefits. Unless benefits are extended, that number will rise to about 2.86 million by July 24, and more than 3.2 million by July 31.
Moody's downgrades Ireland on loss of financial strength
Ireland's government debt-to-GDP ratio rose from 25% before the crisis to 64% by the end of 2009 and Moody's said it expects the further near-term deterioration in the country's debt metrics to be severe.
Why the financial reform bill won't prevent another crisis
The bill does not address the problematic nature of modern executive and professional compensation even though the data shows that these are leading causes of the Great Recession.
China Passes U.S. as World's Biggest Energy Consumer
...knocking the U.S. off a perch it held for more than a century, according to new data from the International Energy Agency.
Reality gap: U.S. struggles, D.C. booms
America is struggling with a sputtering economy and high unemployment — but times are booming for Washington’s governing class.
Cities Rent Police, Janitors to Save Cash
After years of whittling staff and cutting back on services, towns and cities are now outsourcing some of the most basic functions of local government, from policing to trash collection.
Ethanol Industry Struggles to Keep Tax Credits
The once-popular ethanol industry is scrambling to hold onto billions of dollars in government subsidies, fighting an increasing public skepticism of the corn-based fuel and wariness from lawmakers who may divert the money to other priorities.
Fall in Treasury Yields Poised to Continue
Treasury yields appear headed back to their lows for the year as worries about the U.S. economy replace worries about the euro zone.
Investors Ignore Plump Profits, Dump Stocks
One possible reason for the curious market behavior: We're all focused on the big picture now, and things are looking ugly.
McDonnell wants to show Virginia the way out of liquor business
sales bring in about $220 million a year, and many lawmakers -- particularly the Democrats who hold a majority in the state Senate -- are unwilling to support privatization unless it generates much more than that.
Prime Numbers: Small Business Problems Hinder Recovery
The index of small business optimism, published by the National Federation of Independent Business (NFIB), fell in June and is holding at levels that are still below those plumbed during the last two recessions.

Texas versus California
In this case, the contrast can be easily seen by comparing total employment in California and Texas.
Persistent unemployment
Maybe Ed Leamer was on to something important and Keynesian aggregate demand stimulus is not going to help unemployed construction workers until the housing market is allowed to return to normal pricing and quantity responses.
Weekly Summary and a Look Ahead
Three housing related reports will be released this week: the NAHB builder confidence survey on Monday, housing starts on Tuesday, and existing home sales on Thursday.
Macro Thought Experiment II
Ironically, in the real world, animal spirits make Keynes’s world less plausible.
Spectre Haunting Spectrum
It is worth asking the FCC if the harm done by regulations outweighs benefits that never materialize.
Zero marginal product workers
In general, which hypotheses predict lots more short-term unemployment among the less educated, but among the long-term unemployed, a disproportionately high degree of older, more educated people?
Housing Policy, Labor Mobility, and Unemployment Duration
One of the distinguishing features of this recession is that the duration of unemployment has been notably longer than in other recessions.
So Much For the Commerce Clause Challenge to Individual Mandate Being “Frivolous”
Just because the constitutional challenge to the health insurance mandate is not frivolous does not mean it will prevail. The odds are always that the Supreme Court will uphold an act of Congress. Given the wording of the Act, however, the implications of doing so using the Tax Power are so sweeping and dangerous that I doubt a majority of the Court would adopt this claim of power on these facts.
What Germany knows about debt
There really is a supply-side multipler, and a sustainble one at that.
NAHB Builder Confidence falls to lowest level since April 2009
Note: any number under 50 indicates that more builders view sales conditions as poor than good.
The Behavioral Economics of Marketing Behavioral Economics:
Could it be that there is a bubble in the way in which behavioral law and economics has grown so rapidly in recent years?
China's Housing Policy Paradox
The problem is that the productivity growth has kept the property bubble inflated, pricing out those looking to get into the housing market. Across China, new workers struggling to find affordable housing are becoming resentful.
Federal Bailouts of Medicaid Encourage the Unsustainable Status Quo
“Additional federal funds will have the effect of punishing states that essentially lived within their budgets while rewarding states that were more reckless or were counting on further federal dollars.”
Obama Flip-Flops on the Individual Mandate
The individual mandate has been a tricky issue for Barack Obama, leading him to make some impressive self-reversals.
Government Essentially Concedes Commerce Clause Challenge to Obamacare, Calls Individual Mandate a Tax
When Congress required most Americans to obtain health insurance or pay a penalty, Democrats denied that they were creating a new tax. But in court, the Administration and its allies now defend the requirement as an exercise of the government’s “power to lay and collect taxes.”

Research, Reports & Studies
RCM: Wells Fargo Economics Group: Weekly Economic & Financial Commentary
Slower Growth, Low Inflation with Big Budget Deficits.
Hudson Institute Economic Report
Retail sales fell for the second straight month, down 0.5 percent for June after falling 1.1 percent in May. This two-month slide could be the start of a worrying trend after half a year of growth in retail sales.
Surveying the Wreckage
What can we learn from the top books on the financial crisis?
Beware Greedy Heirs If You Hope to See 2011
Unless Congress extends the tax cut, starting on Jan. 1 all taxable estates that exceed $1 million will be taxed at the pre-2001 rate of 55 %.
Obama's Health Care Reform Gives Consumers Fewer Choices
The growing number of private health plans that are giving consumers fewer choices among doctors surprises proponents of Mr. Obama's health care reform.
Comparing Pay in the Federal Government and the Private Sector
Federal employees get substantially better wages and benefits than do the private sector workers. Federal employees earn cash wages 22 % above comparable private sector workers.

Economists’ Comments & Opinions
What Germany Knows About Debt
What an American considers as bad economic times, a German might see as relative prosperity. That perspective helps support a greater concern with long-run fiscal caution, because it is not assumed that a brighter future will pay all the bills.
Lost in Taxation
The IRS's vast new ObamaCare powers.
Three little pigs: How entitlements will destroy us
Our national debt recently topped the $13 trillion mark. That amounts to nearly 90% of this country’s GDP; $72,000 in debt for every household in America.
To Peer Into Obamacare's Future, Look to Massachusetts
The system's fundamental incentives won't change. The lesson from Massachusetts is that genuine cost control is avoided because it's so politically difficult. It means curbing the incomes of doctors, hospitals and other providers.
Venture Capital Could Shrivel Away
The only way to break some habits is to hit rock bottom.
A radical idea for airline security
The government shouldn't decide who can fly.
When Did the Rules Change?
The rules may have changed in ways no one would have predicted two years ago. And perhaps 10 years from now we'll look back on this moment and it will all seem so obvious.

Sticky prices and wages, lending relationships, agency problems: Macroeconomics is the study of trust and trustworthiness -Garett Jones, Twitter

Graphic of the Day
Mercatus Center: Medium-Term Debt Exceeds Expectations
See: Number of months required to close the job gap
See Also: ObamaCare Still Unpopular, Especially among Voters
Federal Budget Deficits Will Reach Levels Never Seen Before in the U.S.

Book Excerpts
"Under a system of perfectly free commerce, each country naturally devotes its capital and labour to such employments as are most beneficial to each. This pursuit of individual advantage is admirably connected with the universal good of the whole. By stimulating industry, by rewarding ingenuity, and by using most efficaciously the peculiar powers bestowed by nature, it distributes labour most effectively and most economically: while, by increasing the general mass of productions, it diffuses general benefit, and binds together by one common tie of interest and intercourse, the universal society of nations throughout the civilized world." -David Ricardo, On the Principles of Political Economy and Taxation (1821)

Did You Know
The New START Treaty would require greater U.S. reductions than Russian. The U.S. would have to cut delivery/ launch vehicles by 151 while Russia has room to add 134. The U.S would have to decrease its number of warheads by 265 while Russia would only decrease its arsenal by 189 warheads.