8/16/10 Post

BUZZ: The End of American Optimism

News
The Fed Can't Solve Our Economic Woes
A policy of low interest rates is a textbook response of monetary authorities to the economic weakness brought on by deficient aggregate demand. While these effects are theoretically plausible, this textbook policy does not apply to our present situation.
China overtakes Japan in 2Q as No. 2 economy
Japan lost its place as the world's No. 2 economy to China in the second quarter as receding global growth sapped momentum and stunted a shaky recovery.
White House Under Fire for Unspent Infrastructure Cash
The Obama administration has paid out less than a third of the nearly $230 billion allocated to big infrastructure projects in the economic-stimulus program. Now Republicans are zeroing in on the unspent stimulus money in fresh attacks on the administration's economic policy.
Breaking down the $862 billion stimulus
See the full agency-by-agency breakdown of stimulus funds
appropriated, available and paid out.
Fed's Hoenig: Keeping Rates Too Low 'Dangerous Gamble'
The Federal Reserve is undertaking a "dangerous gamble" by keeping rates at near zero for so long, and must start raising rates or risk damaging the nascent U.S. recovery, Kansas City Reserve Bank President Thomas Hoenig said in the text of a speech to the Lincoln, Nebraska, Chamber of Commerce.
'Junk' Bonds Hit Record
U.S. companies issued risky "junk" bonds at a record clip this week, taking advantage of keen investor appetite for returns amid declining interest rates and tepid stock markets.
China Favors Euro Over Dollar as Bernanke Alters Path
China, whose $2.45 trillion in foreign-exchange reserves are the world’s largest, is turning bullish on Europe and Japan at the expense of the U.S.
Manufacturing in New York Area Expands Less Than Forecasted as Orders Slide
Manufacturing in the New York region expanded less than forecast in August as orders and sales declined for the first time in more than a year.
Homebuilder Index Hits Lowest Level in 17 Months
Homebuilder confidence dropped for the third straight month in August as the struggling economy and a flood of cheap foreclosed properties kept people from buying new homes.
Recession-Worn Seniors Tap Social Security Early
Saturday marked the 75th anniversary of Social Security, and many questions remain unanswered about its future.
Renewable energy: The government piggy-bank
Green jobs and renewable energy were boldly funded in the stimulus bill, yet whenever Congress and the Obama administration need to scare up capital to fund some other program, they chip away at the initial $37 billion allocated for climate and energy-related efforts.
Who will fix the economy? The Fed, Congress, shoppers and businesses all shrug
The Federal Reserve has little power left to lift the economy out of its rut. Congress, with an election looming, has no appetite for more stimulus. Shoppers are reluctant to spend, and businesses are slow to hire.
States avoid massive layoffs through $26B in federal aid, but bill only postpones hard choices
States are relieved that the $26 billion state aid bill was passed by Congress this week and has saved hundreds of thousands of jobs. But it might be the last time the federal government comes to the rescue.
Toomey Ignores Social Security Attack, Assails Spending
“Our strength does not come from bailouts and government spending, it comes from free enterprise system and the hard working honest citizens who make it run”.
Corker wants extension of Bush tax cuts
Sen. Bob Corker (R-Tenn.) advocated Sunday for an extension of the Bush tax cuts, pushing a message Republicans hope will benefit them in the coming midterm elections.
Obama helps governors to help himself
President Barack Obama will do more in two days this week for his party’s candidates for governor than he has done all year, wrapping his arm around several of the most highly touted gubernatorial hopefuls on the ballot in 2010.
Dems may use food stamp money to pay for Michelle Obama's nutrition initiative
Democrats who reluctantly slashed a food stamp program to fund a state aid bill may have to do so again to pay for a top priority of first lady Michelle Obama.

Blogs
The Automatic IRA: A Conservative Way to Build Retirement Security
With the introduction of new legislation to implement the Automatic IRA the effort to enable many more Americans to use a payroll deduction to build retirement security moves to a more active phase.
Obama’s Tax Hike: The Movie
Obama’s tax hike will have devastating effects on an economy already on the ropes.
Real or Fake: $3.2 Million Turtle Tunnels
The creative team at Bankrupting America has highlighted some other big government spending doozies and turned them into this hilarious but troubling video.
Death, Taxes and the Failure of Obamanomics
There is hope for the U.S. economy, but it doesn’t lie in more Obama stimulus spending. The answer is in the private sector, where billions of dollars in pent-up cash could be unleashed to fuel new investment and more jobs, if only Washington would get out of the way.
Free Markets for Free Parking
“High-cost-of-free-parking” arguments from UCLA urban planner Donald Shoup.
The Fed Declares War on America
Bond markets aren't as forward-looking as Wall Street may believe.
Weak economy and low yields are threat to retirement
Is the economy threatening retirement plans, or is less spending from those saving for retirement threatening the economy? Probably both ...
Idle Resources Don't Eliminate Inflation
One of the gravest sins of modern economics is its tendency to treat resources, both capital and labor, as essentially homogenous aggregates.
Presidents and the Economy
It's sad, but the economy makes presidents seem like geniuses or clowns more than it should.
Parking Spaces: What is the Free-Market Equilibrium?
Suppose there were no state provision of parking places. What would the equilibrium look like? Some possibilities:
My First Look at Strictly Confidential
The book doesn't disappoint on either inspiration or outrage.
Leave Us Alone
…the lack of government-mandated paid maternity leave in the United States is “a sign of how little our society values childrearing.
In a Funk Over Trade
Trade is mutually beneficial.
They Come Here to Acquire Wealth?? Horrors!
We should encourage such immigration rather than dismiss it on the grounds that the typical immigrant might be motivated by ideals no more lofty than those that prompt the typical American to rise from bed each morning in order to earn a living.
What Say You, Keynesians
One data point proves nothing – but It is suggestive that Germany’s economy is starting to boom while the US economy continues to sputter.
Momentum in Employment: Why it Matters
Suppose we are talking about the growth rate of GDP or the growth rate of employment. Broadly speaking, there are three ways that a macroeconomic variable can behave:
Harry & Teddy and High Inflation
A little economics goes a long way
Ignoring China’s Bad Debt, or, Business as Usual
You’d think the rolling over of a $46 billion bond, one which the issuing firm neither has the assets or income stream to repay and guaranteed by little more than a vaguely worded promise by the Finance Ministry to “support” repayments, should be met with howls of protests from the bondholders. Maybe elsewhere in the world, but this is China, which makes it business as usual.

Research, Reports & Studies
U.S. Funding of the United Nations Reaches All-Time High
The U.S. has been the largest financial supporter of the U.N. since the organization’s founding in 1945. The U.S. is currently assessed 22 percent of the U.N. regular budget and more than 27 percent of the U.N. peacekeeping budget.
Policy Basics: Social Security
See the top ten facts about social security.
Evidence of a Modest Price Decline in US Broadband Services
There is evidence of a quality adjusted price decline in U.S. broadband services between 2004-2009, but the evidence points towards a modest decline at most. Estimates of the price decline range from 3% to 10% in quality-adjusted terms for the five-year period, which is faster than the BLS estimates for the last three years. These modest price declines look nothing like other parts of electronics, such as computers or integrated circuits, which raises many questions.

Economists’ Comments & Opinions
Attacking Social Security
Social Security turned 75 last week. It should have been a joyous occasion, a time to celebrate a program that has brought dignity and decency to the lives of older Americans. But, the program is under attack.
The American Engine Still Can
The American economy is in serious trouble, and the remaining weapons we have available to prevent a double dip are few indeed
Deflation: Are We Heading for America’s ‘Lost Decade’?
As recently as this spring, everybody knew that the greatest economic risk on the horizon was inflation. The new nightmare scenario is the other “flation,” in which prices fall and dollars become scarcer and more valuable.
Did the Stimulus Stimulate?
It really should be no surprise that the stimulus bill has created far fewer jobs, dollar for dollar, than past stimulus measures. Our policy problem today is that the bill that was actually passed into law was both so expensive and so badly flawed that it gives the whole concept of macroeconomic stimulus a bad name.
Return of the Killer Trade Deficit
The world economy is falling back on very dangerous habits. The United States is tentatively emerging from recession but is still at risk of another dip. Yet trade statistics released last week indicate that American consumers are sucking in large quantities of imports as spending recovers, while weak demand in the rest of the world is crimping American exports.
Not Trusting the Voters
Now that a federal district court has struck down Proposition 8, California's voter-approved definition of marriage as the union of a man and a woman, speculation turns to whether the decision will hold up on appeal.
Obama Politicizes Gulf Oil Spill
With little to gain in Louisiana there's little chance of seeing Obama return there anytime soon. Despite the significant damage to the state's economy and ecosystem, Obama's actions suggest he's more interested in purely advancing his own political agenda.
Auto IRAs Can Shore Up Retirement Security
Enter the Automatic IRA, a private-sector, small-business retirement savings program with support from both the right and the left that would allow 90 percent of Americans to use the simplicity of a payroll deduction to save for retirement.
The Dodd-Frank Wall Street Reform and Consumer Protection Act: The Triumph of Crony Capitalism, Part 3
A continued look at the Act's provisions.
Is This a Bond Bubble?
Many people think that corporations will use their hoarded cash for investment or stock buybacks. I don't think so, at least not any time soon, given the "unusually uncertain" economic picture.
Why do I expect the unemployment rate to increase?
Here are a few reasons why I think the unemployment rate will increase

Graph of the Day
Border security push will boost 1,500 jobs
See: Another Threat to Economy: Boomers Cutting Back
NAHB Builder Confidence falls in August to lowest since March 2009

Book Excerpts
"NOTHING is more apt to surprise a foreigner, than the extreme liberty, which we enjoy in this country, of communicating whatever we please to the public, and of openly censuring every measure, entered into by the king or his ministers." –David Hume, Of the Liberty of the Press (1742)

"Did You Know"
"Some of the cattle cloned to boost food production in the US have been created from the cells of dead animals. JR Simplot Company is the leading US animal cloning company. The driving force behind the project is the head of the company, Scott Simplot, who firmly believes that cloning can be used to improve beef production. His stated aim is to raise the standard of the great American steak. "The notion behind what we are doing is to find that animal that created that great steak - and once we have it, we want to reproduce it," he said."