Tuesday, July 27, 2010

7/27/10 Post

Waiting for home prices to come back quickly? Don't hold your breath.
Despite four years of falling prices and recent signs that they were finally bottoming out, homes are expected to lose still more value in many metro areas over the next year.
The tax hike nobody's talking about
Get ready for a smaller paycheck. At least that's what could happen if Congress doesn't approve President Obama's proposal to extend the Making Work Pay tax credit soon.
States face another $12 billion budget shortfall
States filled an $84 billion gap to balance their 2011 fiscal year budgets, which took effect earlier this month. But they could collectively face a new $12 billion hole if Congress fails to help cover growing Medicaid costs.
The fear economy
Uncertainty about the economy is proving pretty scary, and a major drag on the recovery.
Home Prices in 20 U.S. Cities Rose More Than Forecast
The S&P/Case-Shiller index of property values increased 4.6 percent from May 2009, the biggest year-over-year gain since August 2006.
Investors will have more power in 2011
The Securities and Exchange Commission is committed to adopting rules that would give greater power to shareholders and investors next year.
August conference set on what next for Fannie and Freddie
The Obama administration has scheduled an Aug. 17 conference on the U.S. housing finance system, including mortgage-finance giants Fannie Mae and Freddie Mac.
Euro-zone credit expands at a crawl
M3, the broadest measure of money supply in the 16-nation euro zone and the ECB's favorite measure of near-term inflation pressures, grew 0.2% in June compared to the same month last year, the first positive reading since October.
Top 10 consumer complaints
These are just a few of consumers' biggest complaints, according to a survey released Tuesday by the National Association of Consumer Agency Administrators and the Consumer Federation of America.
Course of Economy Hinges on Fight Over Stimulus
The debate is more than academic. It is shaping congressional decisions on whether to respond to the distressing prognosis for the U.S. economy with more government spending or a dose of deficit reduction.
Defense can't account for $8.7 billion
The Defense Department is unable to account for $8.7 billion of the $9.1 billion in Development Fund for Iraq monies in received for reconstruction in Iraq. This according to a study published today by the Special Inspector General for Iraq Reconstruction.
States Expect Tax Collections to Rise
State governments expect tax collections to grow for the first time in two years as tax increases and a recovering economy lead to higher collections.
North Dakota, Alaska lead US job creation, study says
Forty states have fewer jobs now than five years ago.
Temp Jobs Gain as Uncertainty Reigns
Despite rising profits, big businesses remain hesitant to hire permanent employees, a reluctance that is fueling demand and higher profits for the companies providing temporary staffing services.
Property Taxes Soar to Close Budget Gaps
Homeowners are feeling the strain of higher property taxes as state and local governments struggle to balance their budgets.
IMF Sees Yuan as Undervalued
Despite China's decision to adopt a "flexible" exchange rate, the International Monetary Fund's long-delayed review of the Chinese economy found that the yuan is "substantially undervalued," according to IMF officials.
Google eyes more government deals for online apps
Google Inc. is gearing up to sell its e-mail and other Web-hosted applications to a wider range of government agencies after winning a prized security clearance.
Dow Climbs 100.81 Points, Now Up in '10
The Dow Jones Industrial Average closed up 100.81 points, or 0.97%, to 10525.43, with all but one component rising. The Dow's three-day winning streak has pushed the index back into positive territory for the year.
Texas beats Virginia for best-business title
States come out winners again in an analysis of 10 categories

Public Service Is Not What It Used to Be
Managing the city of Bell, California, is apparently twice as challenging as being President of the United States. The Los Angeles Times reported on July 15, that Bell’s soon-to-be-former Chief Administrative Officer Robert Rizzo earns $787,637 a year.
Tax Break for the Trial Lawyers: A Bad Idea
Do the nation’s trial lawyers deserve a taxpayer bailout? That’s what they’re after: a special-interest tax break of $1.6 billion.
Let’s Not Make a Deal
Now that the President’s signature foreign policy achievement, the New START nuclear agreement with Russia, is on the ropes, the left is again back to their hyperbolic ways.
Chinese Investment: Danger or Opportunity?
China doesn’t invest widely in the U.S due to political interference here. For understandable reasons, Chinese investment in technology has been blocked.
Rep. Paul Ryan (R-WI) Tells MSNBC Where to Cut
Rep. Paul Ryan (R-WI) made the case for preventing President Barack Obama’s impending job killing tax tsunami.
Age is Not the Only Number for Social Security
There are other ways of looking at the impact of raising the retirement age, and more structural – dare I say “progressive” – ways of reforming Social Security in the context of alleviating the long-term deficit problem.
Dallas Fed: Manufacturing Activity Remains Sluggish in July
...with the inventory adjustment over, export growth appearing to slow, and domestic consumer demand sluggish, these surveys might provide a hint of weakness in the manufacturing sector.
A Look at Case-Shiller, by Metro Area (July Update)
The S&P/Case-Shiller Composite 20 home price index, a broad gauge of U.S. home prices, posted a 1.3% gain in May from a month earlier and rose 4.6% from 2009, as the expiration of a federal tax credit boosted prices.
Goats do a better job than government workers
According to a June 2010 report on the use of goats, it costs an annual $5,300 to employ government workers to clear the brush and $1,995 to “employ” goats. Also, clearing the brush took 1 week when government workers did the job, but the goats did it in just 3 days.
Q&A: Rethinking U.S. Poverty Measure
It is pre-tax money income, which is compared to thresholds that were set in the ’60s. It’s bad because it doesn’t account for taxes or transfers such as the earned income tax credit, Medicaid, public and subsidized housing, food stamps. None of those enter the official measure even though those are the main things we’ve done to reduce poverty over the past 30 years.
Structural Unemployment
...a sustainable pattern is one in which comparative advantage is realized. An unsustainable pattern is one in which comparative advantage is not realized, presumably because people are deceived for a while about the costs of their enterprises.
Health Care Reform's Terrible, Tiny Tax
...starting in a few years, businesses will have to provide 1099s for goods as well as services.
Q2 2010: Homeownership Rate Lowest Since 1999
The homeownership rate increased in the '90s and early '00s because of changes in demographics and "innovations" in mortgage lending.
Secondary Sources: Basel III, Structural Unemployment, Securitization
A roundup of economic news from around the Web.
The Limits of Enforcement
In the case of the 1099s, at $1.7 billion a year I don't see how the increased taxes can possibly justify the enormous new compliance burden, especially when you consider that some of that burden will be a direct cost to the government in the form of IRS agents dispatched to untangle the inevitable false flags in the audit system.
Economists React: European Stress Tests Leave Unanswered Questions
Economists and others weigh in on the European stress tests.
Mark Thoma Doesn't Get It
What he has not shown us and, more upsetting, what so few advocates of government intervention even try to show us, is how a government regulator will have the right incentive to do the right thing.

Research, Reports & Studies
How the Death Tax Kills Small Businesses, Communities—and Civil Society
What does the death tax kill? The best of American life and civil society itself. The death tax is simply antithetical to the core of the American dream.
Wells Fargo Economics Group: New Home Sales Bounce Off Their Revised May Low
New home sales rose 23.6 percent in June but the increase came with substantial net revisions to the previously published data. Total June sales net of revisions would have been just 268,000.
CBO: Federal Debt and the Risk of a Fiscal Crisis
Over the past few years, U.S. government debt held by the public has grown rapidly—to the point that, compared with the total output of the economy, it is now higher than it has ever been except during the period around World War II.
The Evolution of Rule of Law in Hayek's Thought, 1935-1955
Friedrich Hayek‘s interest in the ideal of rule of law as the centerpiece of a free society grew out of his analysis of the nature of centralized economic planning. This paper traces the development of rule of law in Hayek‘s thought from his early studies on economic planning through his political analysis of economics and political life as contained in The Road to Serfdom to his lectures on The Political Ideal of the Rule of Law delivered in Cairo in 1955.

Economists’ Comments & Opinions
On The Way: Job-Killing Tax Hikes
The top 5% who will be targeted for tax hikes by the Obama administration at year-end are the nation's premier small business creators and entrepreneurs. The tax hike against the "rich" is in fact a tax hike on small businesses.
Economists dispute effect of US stimulus
Robert Barro of Harvard University argues that they find big effects for stimulus because they assume that higher government spending causes higher output, whereas it might be the other way around.
Financial Reform Bill: Don’t Bank on Government Regulation
Our faith in government to make things worse has yet again been vindicated. Government tends to create problems, and then respond by developing new rules that cause even more harm.
Obama's Soft-Core Socialism
A comedian or satirist could not have come up with the recent scenario of Treasury Chief Timothy Geithner and other Administration officials suddenly trying to reassure corporate chieftains that the Obama Administration is pro business and loves free enterprise.
Section in Health-care law puts serious accounting strain on small businesses
During the heat of the debate over heath care reform, House Speaker Nancy Pelosi famously told the American people, “we have to pass the bill so that you can find out what is in it.” It seems that small businesses are now doing just that, focusing in on a mandate that will raise business expenses and bury them in paperwork.
Why Jobs, Not Housing Data, Is the Key
...the key figure this week won't be in the spate of housing reports but rather in Thursday's weekly tally of new claims for unemployment benefits. The best hope to reduce those stubbornly high numbers isn't for more government intervention, but for companies, fueled by more strong earnings, finally to start rehiring.

Graph of the Day
The debt continues to grow
See: How Much Money Will You Earn in Your Lifetime?
VIDEO: Financial regulation reform is now law: what’s next?
See also:New Calculator Shows How Much More Taxes Will You Pay Next Year

Promoting a Clean Energy Economy Hearing

"To observe our Administration's energy decisions is to wonder whether it has any comprehension of the future energy supply challenges our nation faces.

The drilling moratorium is already killing well paying American energy jobs, sending rigs overseas and with them our workers, equipment, capital and eventually America's traditional energy infrastructure. Given the global nature of energy production, these rigs won't be returning anytime soon.

According to a recent IHS Global Insight study, if policies were adopted by Congress or White House that effectively prevent independent oil companies from participating in future Gulf offshore development the employment loss would reach 300,000 jobs and the loss of local state and federal revenues would total $147 bilion over the next decade.

Our national economy, already suffering with 9.5% unemployment and a subpar recover, cannot be harmed further with a devastating drilling moratorium and hasty legislation that kills jobs and makes us more dependent on foreign oil.

By all means, let's help renewable energy develop its potential, but let's not foolishly thwart the growth potential of our establisthed energy industry which provides the affordable bridge to America's green future."

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

Book Excerpts
"To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely to our liking, knowledge which in fact we do not possess, is likely to make us do much harm." –F.A. Hayek, The Pretence of Knowledge (1974)

Did You Know
The number of households that moved in the past year because they were evicted soared 127% to 191,000. 3.1 million households, or 18% of those who moved in the past year, said they're in a worse home, up 10% from 2007; 2.3 million, or 13%, said they're in a worse neighborhood, a 12% increase. Houses continue to shrink as the number of homes that are 4,000 square feet or larger dropped 14%.