8/13/10 Post

BUZZ: Economists Want Policy Makers to Back Off Now

News
U.S. Retail Sales Rise Less Than Economists Estimated
Sales at U.S. retailers rose less than forecast in July, indicating a lack of jobs is prompting Americans to hold back on spending.
Fiscal fundamentalists
By most people’s standards, George Osborne, Britain’s 39-year-old chancellor of the exchequer, is a fiscal hawk. In his first budget, announced in June, he promised to raise taxes and cut spending without flinching. As a result, Britain’s net public debt should peak at about 70% of GDP in March 2014.
Consumer Prices Rise in U.S., Easing Deflation Risk
The cost of living in the U.S. climbed in July for the first time in four months, pointing to a stabilization that may ease concern a slowdown in growth will spur deflation.
German economy surges 2.2% in quarter
Germany on Friday reasserted itself as the economic growth engine of the eurozone, after gross domestic product expanded at a stellar 2.2 percent rate in the second quarter compared with the previous three months.
The world's best stock market
Which country's stock market has been the best performer in the world -- not just over the past year or decade, but over the last 110 years? It's Australia, which stands above all others in its combination of higher returns and lower volatility.
Tale of the Totem: $23G Census Project to Thaw Alaska Hearts and Minds Questioned
The Census Bureau spent $20,000 on a totem pole art project in a effort to try to the disparate and hard-to-count communities of America's largest state.
Dow's Losing Streak: 3 Days
Stocks declined for a third straight session as economic warnings from weekly jobs data and Cisco Systems added to investors' concerns about a possible double-dip recession.
Stocks look to extend losses as investors wait for government's July retail sales report
Stocks appear headed for their fourth straight day of losses as investors wait for the latest readings on consumers and how confident they feel about spending.
Progressives: Don't Touch Social Security
The leaders of the Progressive Caucus today wrote to the co-chairmen of the president's deficit commission urging them not to seek savings by cutting Social Security.
Obama Plans Coast-to-Coast Dash for Democrats
President Obama swings into full campaign mode next week crisscrossing the country for a string of fundraisers aimed at boosting Democrats before the November elections.
Hong Kong Lifts GDP Forecast
The government raised its full-year GDP growth forecast to 5%-6% from 4%-5% and maintained its forecast of a 2.3% rise in the consumer price index this year, up from last year's 0.5% increase.
Money can't always buy them love
Along with conveying their distinct dislike of career politicians, voters seem increasingly intent on delivering another pointed message to candidates: They’re not necessarily impressed with wealthy businesspeople-turned-politicians, either.
Greek Recession Deepens
The national statics service Ellsta said Thursday that second-quarter gross domestic product fell 1.5% on a quarterly basis, weaker than forecasts of a 1% drop and the 0.8% fall in the first quarter.
Senate passes $600M border bill
The Senate briefly suspended its month-long summer recess to give final approval to a $600 million border security bill Thursday.

Blogs
More Nonsense about the Trade Deficit
Contrary to the conventional wisdom reflected in this morning’s headlines, that an expanding trade deficit does not appear to be a drag on growth. In fact, the plain evidence is that an expanding trade deficit is more often than not a signal of stronger growth.
Time to Reclaim Our Economic Future
Now that the congressional money tree has bloomed again, this time in the form of new stimulus money for the states, we are faced with the question of whether the federal government will ever learn self-control.
The Gulf Recovery Obama Does Not Want to See
Next week, for the fifth time since July, the first family will board Air Force One for yet another luxury vacation. If the President really wanted to see the economic damage his policies are causing in the Gulf, he could first stop in Pascagoula, Miss.
Latest Bailout Paid for Only in Fantasyland
The newest bailout spends $10 billion for education funding in the states. This money is on top of the $100 billion in education funding the states got from the stimulus. The remaining $16 billion will bailout states’ bankrupt Medicaid programs.
No Hope and Little Change
Unrealistic expectations of the Obama presidency lie at the heart of the problem, raised mainly by the President himself, first during the presidential campaign and then in the first six months of his presidency.
Another Recession, Already?
There’s not much Washington policymakers can do at this point to address many of these economic forces, but they can do a lot to begin to restore some confidence in America’s economic future.
The Self-Destructive Path of Growing Public Sector Employment
We're currently headed in the wrong direction, needing instead to grow the private sector, lower tax rates, and fix the pension system.
The Dodd-Frank Wall Street Reform and Consumer Protection Act: The Triumph of Crony Capitalism, Part 2
The Financial Stability Oversight Council has the power to do almost anything and there's very limited judicial review of their decisions.
Economists React: Consumer Can’t Drive Recovery
Economists and others weigh in on the increase in retail sales.
How much border security does $600 million buy?
Short answer: Not too much.
After the Tape: What’s Really Going on With CPI?
Deflation? Apparently not in the consumer-price index, which posted its first increase in four months in July. Yet that may be a somewhat misleading result.
Does it Matter Where the Laffer Curve Bends?
So the right question to me is not "where do we maximize revenue", but "where do we maximize utility?" Obviously, that's not an easy question to answer. But when you add in deadweight loss, and the long-run drag on economic growth it implies, I think it's pretty clear that the right answer is well short of the rate where we collect the most taxes.
Secondary Sources: Deficit Questions, Manufacturing, Germany
A roundup of economic news from around the Web.
Reuters University of Michigan's Consumer Sentiment increases slightly in August
This was a big story last month when consumer sentiment collapsed to the lowest level since late 2009. Even with the slight increase, this is still at the levels of late last year.
What Does Seasonal Employment Show About Nominal Rigidity?
What we learn from seasonal employment, in short, is that if all workers were like temporary workers, there wouldn't be much of an unemployment problem. Unfortunately, most workers aren't like temporary workers, and the unemployment problem is very real.
Dallas Fed Research Questions Stimulus
The 2009 fiscal stimulus plan enabled the economy to grow in the short term, but it is unclear how large the boost has been, the latest issue of the Federal Reserve Bank of Dallas’ Economic Letter suggests.
Seasonal Employment (Not Wonkish)
In any event, this seasonality has become less pronounced over the years. I suspect that as we have become a Garett Jones economy, we have moved some of the Christmas seasonality offshore.

Research, Reports & Studies
The Second World War and Hayek’s Road to Serfdom
Free choice meant ―that in the ordering of our affairs we should make as much use as possible of the spontaneous forces of society, and resort as little as possible to coercion.
Social Security Keeps 20 Million Americans Out of Poverty:
A State-By-State Analysis

Economists’ Comments & Opinions
Say Goodbye to Fannie and Freddie
Can the home mortgage market stand on its own, without support from federally sponsored mortgage companies? Experience tells us that the answer is an unambiguous yes.
Financial Repression
Although the large banks are in no immediate danger, there are warning signs that the banking sector is more fragile than commonly understood.
Don't blame the consumer
The economy appears locked in a self-defeating cycle, where consumers won't spend more unless the jobless rate improves and companies won't hire more until GDP growth steadily recovers -- like two gunslingers, both waiting for the other to draw first.
EDITORIAL: Obama's economic tragedy
U.S. fiscal gap makes Greece look responsible.
Market Compass Goes Awry When Governments Steal: Mark Gilbert
...it looks like the U.S. plans to tweak the rules governing Fannie Mae and Freddie Mac to enhance the pace of mortgage forgiveness. In other words, it will force the now government-controlled agencies to let debtors keep their houses without making all of their debt payments.
America: A new way forward
...the economic focus of Wichita – population 366,000 – is very different from the emphasis on services and consumer demand typical of 21st-century America. According to a study published late last month by the Brookings Institution, a Washington think-tank, nearly 28 per cent of the city’s gross metropolitan product is sold abroad.
Taxes No Longer So Certain
United States taxes may soar next year, or they may not.
A Small Price For Jobs
A new study from the Democratic Congress claims that keeping the Bush tax cuts is too expensive. What's too costly, though, is the economic price of adding to the tax burden of job creators.
Are We Headed for a Lost Economic Decade?
Not if we embrace pro-growth fiscal policies. A good start would be the bipartisan Wyden-Gregg tax reform bill.

Graph of the Day
President Obama says he wants to “invest in our people without leaving them a mountain of debt.” CBO's debt projections paint a different picture
See: Forgotten Men
See: Race to the Bottom
See also: July Retail Sales

Book Excerpts
"I genuinely do not know whether we will or will not ultimately survive the desperate damage our government has done to our economy. The potential power of the economy is immense, and its regenerative power in freedom is incalculably great. I am prepared to say, however, that a financial collapse is not only possible but probable unless we reverse almost half a century of irrational and unrealistic policies." –Former Treasury Secretary William E. Simon, A Time for Truth (1978)

"Did You Know"
"As a public service, British researchers are proposing that fast-food eateries dole out complimentary cholesterol-lowering statin drugs to offset the hazardous glories of their fatty cuisines."