Wednesday, August 18, 2010

8/18/10 Post


News
Debate on taxes affects the savers
The nation's highest income groups predictably did better during the recession and socked away their money, new government figures show, but wealthier Americans' newfound penchant for savings is already driving Democratic calls to raise taxes on them this fall.
US Says Bankruptcies Reach Nearly 5-Year High
U.S. bankruptcy filings have reached the highest level since 2005, government data released on Tuesday show, as the economy slows and the unemployment rate hovers just below double digits.
Mortgage Role for U.S. Is Affirmed
The Obama administration has been barraged with ideas for reworking the government’s role in housing finance, spanning the spectrum from guaranteeing all mortgage loans to eliminating all federal subsidies for homeownership.
Given Money, Schools Wait on Rehiring Teachers
As schools handed out pink slips to teachers this spring, states made a beeline to Washington to plead for money for their ravaged education budgets. But now that the federal government has come through with $10 billion, some of the nation’s biggest school districts are balking at using their share of the money to hire teachers right away.
Democrat Frank says abolish Freddie and Fannie
Fannie Mae and Freddie Mac should be abolished rather than reformed as part of the Obama administration's planned overhaul of the government's role in housing finance, Rep. Barney Frank, chairman of the House Financial Services committee, said on Tuesday.
Obama at new low for handling economy
President Barack Obama earned his lowest marks ever on his handling of the economy in a new Associated Press-GfK poll, which also found that an overwhelming majority of Americans now describe the nation's financial outlook as poor.
Retailers Are Sold on Frugality
American retailers are becoming as frugal as their shoppers, cutting expenses to maintain stable profits through what is increasingly looking like another challenging holiday season.
'Economic Benefits' From Tighter Bank Regulation
The global economy won't suffer if banks are forced to adopt tighter standards on capital and liquidity, the Financial Stability Board and Basel Committee for Banking Supervision said in a joint statement Wednesday.
What's costlier than a government run prison? A private one
According to the Bureau of Justice Statistics, between 2000 and 2007, the number of federal inmates housed in private facilities jumped nearly 14% between 2000 and 2007, and nearly 6% between 2007 and 2008.
22 cities in danger of a double-dip recession
The chance of a national double-dip recession is hotly debated amid an increasing number of signs that the economic recovery is losing pace, but the risk is particularly troublesome on a local level.
The big payback: Americans pare debt
Total consumer debt was $11.7 trillion as of June 30. That's down 1.5%, or $178 million, from $12.1 trillion at the end of March. After hitting a record high in September 2008, consumer debt has dropped 6.5% over the last six quarters.
Refinancing applications at 15-month high
The refinance index surged 17.1% in the week ended Aug. 13. As a result, the index reached its highest point since the week ended May 15, 2009.
Fixing Fannie Mae and Freddie Mac: The Debate Begins
The Obama administration acknowledged Tuesday that major changes must be made to mortgage giants Fannie Mae and Freddie Mac, but indicated that it supports continuing government guarantees in the mortgage sector.
Major stores report profits, but sometimes even deep discounts aren't enough
Even deep discounts on everyday items don't seem to be enough to get Walmart shoppers to bite these days, and other chains are worried Americans won't be in the mood to spend in the months ahead, which are critical for those companies.
Yellowstone Club collapse pinned on founder, judge says Blixseth must repay most creditors
U.S. Bankruptcy Judge Ralph Kirscher says in a 135-page ruling issued Monday that Blixseth siphoned hundreds of millions of dollars from the private Montana ski club that counts Microsoft's Bill Gates among its membership.
Federal Role In Housing Drives Debate
Panelists at an Obama administration conference to determine the future of the nation's housing finance system agreed the federal government should continue to play a role in the $11 trillion sector.

Blogs
The Seasonal Job Surge: Supply or Demand?
Keynesian economists designed a fiscal stimulus law that targets aggregate demand and runs roughshod over supply incentives. Evidence on the seasonal labor market shows why their stimulus was ultimately self-defeating.
Why isn't the Fed acting?
One question a number of economic writers have obsessed over is just why the Fed has been reluctant to act in a more aggressive fashion as recent economic data have deteriorated. There are a number of possible explanations to explain this.
End Crony Capitalism
Last December, the Federal Housing Administration loosened its financing rules so that U.S. taxpayers would have the honor of backing loans with down payments as low as 3.5%. Now rich Manhattanites, can better afford condos in buildings with pet spas, concierges and rooftop lounges, all on the taxpayers’ dime.
Deepwater Drilling Gets Tougher, Time to Get NEPA Right
The government should use this time to enact smarter regulations, not unnecessary regulations that make it too costly for projects to move forward.
China Hiding Treasury Purchases
China’s reported holdings of U.S. Treasury bonds fell sharply again in June and are now almost $100 billion lower than they were in July 2009. The press reports this as meaningful and important. It isn’t.
The Back-to-School Supply Tax
Many states offer “tax holidays” for shoppers during the back-to-school season, but families everywhere still pay extra at the checkout counter due to hidden import taxes that increase the price of everything from sneakers to baseball caps.
Side Effects: Obamacare Puts States Between a Rock and a Hard Place
Obamacare creates a host of new federal requirements billed as consumer protections. But enacting these policies falls not on the feds, but on the states.
Beyond Toleration: George Washington’s View of Liberty
Participants in various current controversies would do well to settle into a comfortable chair and ponder these words of George Washington, sent to the Hebrew Congregation of Newport, R.I., 220 years ago today:
Seeking Solutions in an Uncertain World
Is it time for traders to stay and play, or run away?
The Fed Engineers Another Bubble
The biggest money-printing machine in history listed a week in advance exactly what and how much it was going to buy.
Housing Starts and the Unemployment Rate
Usually housing starts and residential construction employment lead the economy out of a recession, but not this time because of the huge overhang of existing housing units.
Declines in demand and how to disaggregate them
Let's say that housing and equity values fall and suddenly people realize they are less wealthy for the foreseeable future. The downward shift of demand will bundle together a few factors:
Lawn Economics
Never mind that lawns are attractive and that they provide safe havens for children to play in. Do suburbanites unthinkingly overvalue these benefits?
Deficient Economics
The U.S. trade deficit rises whenever the amount of dollars foreigners invest in America rises relative to the amount of dollars foreigners spend on American exports.
The Government Mortgage Subsidy
The standard estimate in the literature is that Fannie and Freddie reduce mortgage rates by 25 basis points or less.

Research, Reports & Studies
State Spending Restraint:
State and local government spending has grown at a remarkable clip over the last half-century. Since the close of World War II, aggregate state and local spending grew 34 percent faster than the private sector and 37 percent faster than federal government spending.
Re-embracing Federalism
In the American plan of constitutional government, the national government was never supposed to have all of the power or make all of the decisions.
Education Reform
American education is at a crossroads. The federal government’s role in education has grown significantly over the past half-century, infringing on our long-held principle of federalism in education.
Getting Health Care Reform Right
The health care system needs reform, but not the types of changes enacted under the new health care law.
The Federalization of Homeland Security
In the years since it was created, the Department of Homeland Security has spent more than $250 billion, yet many key homeland security areas continue to produce weak outcomes as more programs federalize traditional state and local activities
Uneven Recoveries (Like the Current One) are Normal
Many economists continue to fret about the state of the U.S. economy– about whether it’s still mired in recession– or why, if there’s a recovery, it seems to be weakening– or whether the weakening foretells another recession. Every economic recovery in modern history seems, however, is riddled with complaints about how tentative and prolonged it is, and with so little job creation— even though that’s the norm.

Economists’ Comments & Opinions
Fixing Social Security
So, President Obama believes that Republican leaders are "pushing to make privatizing Social Security a key part of their legislative agenda if they win a majority in Congress this fall." To which one responds, "If only!"
ObamaCare: the Burden on Small Business
How will ObamaCare affect a small business owner who's married with two kids? For one thing, he and his business will pay higher health premiums beginning this year.
Big Government Forgets How to Build Big Projects
The Pentagon took 18 months to construct in the early 1940s, while it is estimated that the currently under-construction Humpback Bridge over the Potomac River will take 42 months to complete. Why this time difference? A major reason is that there is much more government bureaucracy that must be navigated in order to complete a major construction project today.
Pakistan: A Trade Deal to Help Rebuild
One of the best long-term ways to help Pakistan — and improve America’s image there — is to help Pakistanis help themselves.
The U.S. Isn't Greece, and That's a Problem
Our creditors are naive for accepting low returns on Treasury bonds because America is running the risk of being hit with a debt crisis similar to what happened in Greece.
Tax Cuts Are Only Way to Economic Growth
The so-called Bush tax cuts, which are scheduled to expire at the end of the year, should be extended as soon as possible
From the Ashes
As the world continues to recover from the Great Recession, governments and businesses are focused on how to spur economic growth. But if they really want to create jobs, raise incomes, and lift living standards, they should devote more energy to figuring out how to generate economic dynamism over the long term.
U.S. Debt Load Among World's Worst
This year, the U.S. public debt is projected to reach 62 percent of the economy—up from 40 percent in 2008 and nearly double the historical average, according to recent Congressional Budget Office (CBO) estimates. The financial crisis and recession drove much of this debt swing, yet larger problems loom in the future.
Cap-and-Trade Bill Would Make Housing Less Affordable
In addition to the devastating economic effects of cap and trade, the Clean Energy Jobs and American Power Act (S. 1733)—introduced by Senators Kerry Lieberman—would likely lead to the same conditions that caused the housing bubble of a few years ago.
The Great American Bond Bubble
Ten years ago we experienced the biggest bubble in U.S. stock market history—the Internet and technology mania. A similar bubble is expanding today that may have far more serious consequences for investors. It is in bonds, particularly U.S. Treasury bonds.
Let’s get our priorities straight
First, let’s be clear what we’re talking about here. As far as I understand it, net neutrality regulation would apply to communications over the internet, not simply to communications that happen to use internet protocol.
A way forward on gay marriage
The recent sweeping federal court ruling striking down California’s gay marriage ban as unconstitutional provides President Barack Obama, with an important opportunity to shift his views on same-sex marriage.
Frank Rips White House’s ’09 Unemployment Prediction
It was “dumb” of President Barack Obama to predict that unemployment would not top 8 percent if Congress passed the stimulus bill in 2009.
Free Market Reform for Fannie and Freddie
We do need to end the GSEs without replacing them. And we need stable housing recovery, no matter how politically unpalatable.

Graph of the Day
Higher taxes for the rich: What they'll pay
State and Local vs Private Sector Spending

Book Excerpts
“ If every person has the right to defend even by force—his person, his liberty, and his property, then it follows that a group of men have the right to organize and support a common force to protect these rights constantly. Thus the principle of collective right—its reason for existing, its lawfulness—is based on individual right. And the common force that protects this collective right cannot logically have any other purpose or any other mission than that for which it acts as a substitute.” –Frédéric Bastiat,The Law (1850)

Did You Know
A recent study found the U.S. ranks only 12th in the world in the percentage of adults aged 25 to 34 who hold college associate degrees or higher. Canada is ranked number one, followed by South Korea.