Monday, August 2, 2010

8/2/10 Post

House approves bill to crack down on offshore drilling
The legislation, which passed 209-193, has yet to be taken up in the Senate, where partisan disagreements will likely delay final consideration of a joint House-Senate bill until after the August congressional recess.
Those predicting a double dip recession may be helping to cause one by raising consumer anxiety
Most mainstream economists agree the recovery road will be long and bumpy, but probably without leading into double-dip territory. But there are plenty of other voices warning of grimmer times ahead.
Former Federal Reserve chief Alan Greenspan says economic recovery is modest but 'in a pause' Greenspan says long-term unemployment is pulling the economy apart even though large banks are doing much better and large companies are in excellent shape.
Why fears of hyperinflation won't die
Deflation may be on Federal Reserve Chairman Ben Bernanke's tongue, but inflation is wagging in at least one corner of the economy.
China manufacturing growth slows
China's manufacturing sector is still growing, but the pace is starting to slow. That could set off some alarm bells in the financial markets about the state of the global economy.
The red-hot debate over raising the retirement age
Of all the flash points in the debate over Social Security, few generate as much heat as raising the retirement age. It's time to lay bare the arguments.
Manufacturing expands in July, but at slower pace
The Institute for Supply Management (ISM) index of U.S. manufacturing dropped to 55.5 in July from 56.2 in June. Any score above 50 indicates growth in the manufacturing sector.
Economy Gets Healthier as Company Yields Narrow to Treasuries
For all the concern about another recession, the outlook for America’s economy is looking brighter in the bond market, where investors are accepting the lowest yields since 2004 to lend companies money.
Little improvement in labor market seen in July
The U.S. economy likely added about 100,000 private sector jobs in July. This will be slightly above the 83,000 private sector jobs added in June.
Bernanke says states should build bigger buffers
Federal Reserve Chairman Ben Bernanke on Monday called for states to build up larger rainy-day funds as he said consumer spending is set to sustain the economic recovery.
Geithner: Bank reform cannot move at 'glacial' pace
Treasury Secretary Timothy Geithner said that Bank and securities regulators need to move quickly to write rules based on sweeping bank reform legislation approved in the wake of the financial crisis.
Hopes for a Rebound Show a Modest Increase
Executives at U.S. Companies Expect Improvements in Revenue in Next 12 Months, but Hiring Is Tentative, Survey Says.
Hurdles Deter Obama’s Pledge to Double Exports
in hundreds of pages of comments filed last week with the Commerce Department, industries as varied as winemaking and long-haul trucking identified dozens of smaller hurdles — including regulatory barriers and a shortage of customs officers — that they claim hinder trade.
Investors on Defense as Fed Considers New Game Plan
The combination of a lower growth rate and a downward trajectory puts the economy on a worrisome path. The Conference Board, a New York-based consultancy, expects GDP growth will slow to a 1.6% pace in the second half of this year.
Prime Numbers: State Woes Threaten National Economy
Nearly two-thirds of 42 economists surveyed by the Associated Press viewed the intense pressure on state and local finances as either a “significant” or “severe” threat to the national economy.
Dollar Could Lose if U.S. Economy Slips More
...if data continue to point to a slowing U.S. economy, the dollar should also weaken against the yen, against which the dollar dropped to an eight-month low on Friday.
Economic Reports This Week
Data this week includes the Institute for Supply Management manufacturing index for July and construction spending for June (Monday); personal income and spending for June, pending home sales for June and factory orders for June (Tuesday); ADP employment for July and the I.S.M. service index for July (Wednesday); weekly jobless claims (Thursday); and unemployment for July and consumer credit for June (Friday).
Business Tax Surprise in Health Care Law
Tucked into the new health care law is a requirement that could become a paperwork nightmare for nearly 40 million businesses. They must file tax forms for every vendor that sells them more than $600 in goods. The goal is to prevent vendors from underreporting their income to the Internal Revenue Service. The government must think vendors are omitting a lot because the filing requirement is estimated to bring in $19 billion over the next decade.
Rep. Ryan pushes budget reform, and his party winces
He is determined to persuade colleagues to get serious about eliminating the national debt, even if it means openly broaching overhauls of Medicare and Social Security.
Bernanke faces US growth mysteries
There are two ways to read the revisions. One is that the economy is even further from using its full capacity than previously believed – an argument for more easing by the Fed. The other is that the economy’s capacity to grow is less than thought.
Turbines Too Loud? Here, Take $5,000
Patricia Pilz of Caithness Energy, a big company from New York that is helping make this part of Eastern Oregon one of the fastest-growing wind power regions in the country, is making a tempting offer: sign a waiver saying you will not complain about excessive noise from the turning turbines — the whoosh, whoosh, whoosh of the future, advocates say — and she will cut you a check for $5,000.

Welfare in the Bronx: Personal Responsibility Is Still the Key
Remarkably, the amount government spends on means-tested welfare is four times what would be necessary to lift every poor person out of poverty.
It’s About the Spending, Speaker
The solution to our economic troubles is not higher taxes, it is less spending: If the federal government managed to return to the per-household spending level of the Reagan administration, the budget would be balanced by 2012 without any tax hikes.
Federal Judge Denies Obama Administration’s Motion to Dismiss Virginia’s ObamaCare Lawsuit
Virginia’s lawsuit challenging the Obama administration’s health care reform law has cleared its first legal hurdle.
With Tax Increases Looming, CBO Does About-Face and Frets about Deficits and Debt
Now that tax increases are the main top the CBO has done a 180-degree turn and has published a document discussing the negative consequences of too much deficits and debt.
Secondary Sources: Middle Class Crisis, Government Jobs, Resilient Texas
A roundup of economic news from around the Web.
Health care and revenue competition in Britain
...although full details are not yet clear, it seems doctors will be much more in charge, in a decentralized manner.
Number of the Week: Default Repercussions
25%: The share of Americans with a credit score of less than 600.
Negative Equity in Underwater Homes
"There are 14.75 million underwater homes and 4.1 million of these have more than 50% negative equity (the homeowners owe 50%+ more than their homes are worth)."
Q&A: Romer Reacts to GDP Data
Christina Romer, who chairs the president’s Council of Economic Advisers, spoke with the Journal about the report. She said that there is room for the government to do more to promote economic growth and jobs, and noted some encouraging signals, including a higher savings rate that indicates much of the necessary consumer retrenchment may be past.
Ending Austerity in the Austerity Debate
What is particularly interesting about this work is that it shows that important distortions can be produced by excessively low interest rates before either “full employment” is reached or the price level begins to rise at all.
Democracy as Cure to Resource Curse
...two International Monetary Fund economists, Rabah Arezki and Markus Bruckner, parse the data to find an intriguing difference among 30 commodity-exporting developing countries, between 1997 and 2007. Those that were democracies flourished during price boons; those that were autocratic didn’t.
Weekly Summary and Schedule, August 1st
The key economic report this week will be the July Employment Report to be released on Friday. It will be a busy week ...
Weak Labor Cost Data Darken Consumer Outlook
Compensation is barely growing and that highlights an obstacle to growth: consumers–even those with jobs–are strapped for cash. Without household spending rising at a healthy clip, the recovery will struggle to gain traction.
Blunt opinions, supported elsewhere but not here
I don't trust stimulus analyses which fail to assign a central role to confidence and confidence is hard to model.
Greenspan: A ‘Quasi-Recession’
The U.S. is in the midst of “a pause” in a “modest recovery” that feels like a “quasi-recession,” Greenspan said on NBC’s “Meet the Press” television program.
Growth of Problem Banks (Unofficial)
...the number of institutions on the unofficial problem bank list now over 800...
“Measuring” the impact of the stimulus
...we don’t have a reliable model of the economy in its current state. The CBO concludes that we should instead look at previously estimated relationships in the economy (holding everything else constant) and that’s the best we can do. I conclude we’re incapable of holding everything else constant and therefore the CBO’s results are fake science.
Banks, Private Benefits, and Social Benefits
...when one financial intermediary competes with another, the ability to use high leverage makes a large difference in market share and profits, even though it makes only a small difference in the ultimate cost to the the users of the intermediary's services. The ability to achieve high leverage creates private competitive benefits that far exceed the social benefits.
Estimate of July Decennial Census impact on payroll employment: minus 144,000
The employment report will be released on August 6th, and the headline number for July - including Census numbers - will probably be negative again.
Plagiarism 2.0
The mash-up culture is not a culture of plagiarism. Those who copy music, lift riffs, or appropriate images don’t usually claim authorship of the original source material or claim it as their own. They use this material in works of their own, while freely acknowledging its provenance. The creativity and originality comes from finding the right source material and putting it to good use, not from denying the original source. Whether such copying and appropriation should be legal, it’s not the same as plagiarism, as it’s sourced.

Research, Reports & Studies
We Do Not Have Liftoff
The sharp loss of demand growth will mean a substantially weaker second half of 2010 for the U.S. economy, with the possibility of negative growth by the fourth quarter.
Obamacare Only Gets Worse Upon Further Review
Based on the administration's own numbers, as many as 117 million people might have to change their health plans by 2013.
Voters Want Supersized Government To Go on a Crash Diet
Government has grown vastly more expensive but has not acted with the speed and suppleness that it did under Franklin Roosevelt in the 1930s.
Utah’s Defined-Contribution Option: Patient-Centered Health Care
The state of Utah has addressed many of the problematic issues of health care, by the creation of a defined-contribution option for employer-sponsored health insurance administered by a state health insurance exchange.
Who Decides on Health Care Value?
Bureaucrats now have the power to force private health plans to make business decisions based on regulations rather than on what is best for company or customer health.
Hudson Institute Economic Report
This week’s major news is that GDP growth slowed more than forecast in the second quarter, as consumers cut back on spending out of concern for future economic conditions.
Spending Beyond Our Means
The U.S. fiscal picture is shaping up to be a category 3 hurricane of red ink. Unless Congress takes action immediately to reduce the deficit, the deficit will inflict devastating damage on our economy.
Privatization and Nationalization Cycles
...national ownership results in more redistribution of income and more equality, but undermines incentives for effort.
Wells Fargo Economics Group: Weekly Economic & Financial Commentary
The Second Quarter Ended on a Soft Note.

Economists’ Comments & Opinions
The New Credit-Card Tricks
Just months after historic legislation banned certain billing practices, card issuers have dreamed up new ones designed to trip up consumers.
High prices will fix what politicians cannot
The fact that high oil prices survived the crisis excises the ghosts of the 1980s, and gives entrepreneurs and investors confidence to support cleaner vehicles and develop alternative fuels.
Jerry Brown's Pension Punt
This year, the Golden State is running a $19 billion deficit, at least $6.2 billion of which is owed for retiree pension and benefit payments. That number is expected to nearly triple in the next decade as the pension tsunami gains speed. All told, California's unfunded pension liability is scored at more than $120 billion, with some estimates rising to $500 billion.
Soaking the Rich
The key lesson is that higher tax rates on entrepreneurs and investors are misguided.
The Stimulus: The Government Job Creation Myth
Policymakers today have no choice but to drastically reduce spending if we are to head off the looming fiscal train wreck.
Testimony of Dr. Anthony B. Sanders Before the House of Representatives Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises
Topic: “The Future of Housing Finance: The Role of Private Mortgage Insurance”
How Texas Is Dominating the Recession
Maybe it's the lack of a state income or capital gains tax. Or the dearth of union workers. Or the plentiful labor supply on the border of Mexico, or the lower wages, or the stable and lean regulations. There's something about Texas that makes it the most popular place for business to do its business, as CEO Magazine and CNBC both found the last year. As Brooke Rollins, president of the Texas Public Policy Foundation, told me: "Our research shows that the more tax incentives and less regulation you have, and the less likely businesses are to get sued, the more likely it is they'll want to come and prosper in your state."

The wage equals the marginal product of labor, but the MPL depends on the marginal production function. -Garett Jones, Twitter

Graph of the Day
Mercatus: Companies Reluctant to Spend in Uncertain Regulatory Environment
VIDEO: The Decline: The Geography of a Recession
See: Federal Debt Held by Public
See also: A Clear Picture of the Class Program

Book Excerpts
"Tax reduction thus sets off a process that can bring gains for everyone, gains won by marshalling resources that would otherwise stand idle—workers without jobs and farm and factory capacity without markets. Yet many taxpayers seemed prepared to deny the nation the fruits of tax reduction because they question the financial soundness of reducing taxes when the federal budget is already in deficit. Let me make clear why, in today's economy, fiscal prudence and responsibility call for tax reduction even if it temporarily enlarged the federal deficit—why reducing taxes is the best way open to us to increase revenues." –President John F. Kennedy, Economic Report of the President (1963)

Did You Know
Illinois will offer tax-free shopping this month for the first time, bringing to 18 the number of states that suspend sales tax on designated days, up from 16 states in 2009 and seven in 2000. The end of summer is the most popular time for tax holidays: 15 states will suspend sales taxes this month.