Thursday, August 26, 2010

8/26/10 Post

White House claims for stimulus rely on rosy assumptions, best-case scenarios
The Obama administration claimed this week that $100 billion invested in innovative technologies under the economic stimulus law is "transforming the American economy." But an examination of details in the 50-page report unveiled Tuesday by Vice President Joe Biden reveals something a bit different: a collection of rosy projections that ignore many of the challenges, pitfalls and economic realities in all those areas.
Ford to expand presence in Asia
Ford Motor Co. announced on Thursday that it will ramp up its presence in the fast-growing Asian and African markets.
One in 10 mortgage holders faces foreclosure
One in 10 American households with a mortgage was at risk of foreclosure this summer as the government's efforts to help have had little impact stemming the housing crisis.
How the Stimulus Is Changing America
The American Recovery and Reinvestment Act of 2009 — President Obama's $787 billion stimulus — has been marketed as a jobs bill, and that's how it's been judged. The White House says it has saved or created about 3 million jobs, helping avoid a depression and end a recession. Republicans mock it as a Big Government boondoggle that has failed to prevent rampant unemployment despite a massive expansion of the deficit. Liberals complain that it wasn't massive enough.
Slower U.S. Capital Investment May Reach Job Market
A slowdown in U.S. business investment may soon hit the job market, further hindering a recovery in the world’s largest economy.
Housing's a wreck. Builders rally. Huh?
Existing home sales plummeted in July. New home sales sunk as well, hitting a record low. But luxury homebuilder Toll Brothers reported a surprise quarterly profit Wednesday.
Co-chair of Obama debt panel under fire for remarks
Reforming Social Security has always been a political lightning rod, and none more so than this mid-term election year. Simpson's remarks could further inflame an already divisive debate and complicate the task of the bipartisan commission, which is attempting to broker solutions that both sides of the aisle can support.
Pressure mounts for 'Sheriff' Elizabeth Warren
Pressure continues to mount on President Obama to select Elizabeth Warren as the nation's first consumer financial protection regulator.
That sinking feeling: More bad news for the economy has people talking recession again
Businesses are ordering fewer goods. Home sales are the slowest in decades. Jobs are scarce, and unemployment claims are rising. Perhaps most worrisome, manufacturing activity, which had been one of the economy's few bright spots, is faltering.
SEC Gives Big Investors More Say Over Corporate Boards
The Securities and Exchange Commission voted to give shareholders greater power to nominate candidates to the boards of public companies, handing unions and institutional investors a win in their campaign to have more say over corporate policies.
Democrats privately fear House prospects worsening
Top Democrats are growing markedly more pessimistic about holding the House, privately conceding that the summertime economic and political recovery they were banking on will not likely materialize by Election Day.
Taxing Times for U.S. Investors
Another uncertainty facing U.S. investors: impending tax-law changes.
US tax swoop faces banking backlash
The rules could drive smaller financial institutions out of the US market to escape the impact of the withholding tax, say industry groups.
Not Cash to Burn, but Money in the Bank
The nation's money stock, which includes currency plus bank deposits and households' money-market fund holdings, grew to about $8.64 trillion as of Aug. 9, from $8.48 trillion at the start of the year, according to the Federal Reserve.
Senate tax duel centers on small business
Both parties point to jobs.
Orders and Home Sales Underscore Slowdown
Weakness in durable-goods orders and a drop in new-home sales to historic lows offered more signs that the economy is losing momentum.
Stimulus Assessments Overly Optimistic examination of details in the 50-page report unveiled Tuesday by Vice President Joe Biden reveals something a bit different: a collection of rosy projections that ignore many of the challenges, pitfalls and economic realities in all those areas.

Or a Program That Was Actually Going to Work
Obama hasn’t been as successful selling his economic program as Reagan was.
Government’s Unwelcome Economic Distortions
Many of the “seeds” for the recession were planted by government. Regardless, the average citizen reflexively looked toward Washington to quickly fix the economy.
The Report on Stimulus CBO Wishes Would Go Away
As part of the stimulus legislation, Congress mandated CBO report regularly on how well the stimulus is doing. Money spent, economy faltering, Congress wants happy news about their stimulus, and in response all CBO can do is continue to run their antiquated models telling us that down is up and slow is fast.
Liberalism is Failing
…there is no such thing as a free lunch.
Slicing the Bagel Reveals VAT Flaws
Under the tax laws extant in the Big Apple, if a bagel is sold whole, then it is, well, a bagel. But if the bagel is sliced before it is sold, then it falls under the category of “processed foods.” And processed foods are subject to a higher tax—a nine cent higher tax, to be specific.
Side Effects: College Students May Lose Health Care Option Under Obamacare
What about kids without parental coverage? The new law’s requirement that insurance cover children up to age 26 won’t make any difference.
There’s No Such Thing as a Free Energy Audit
D.C.’s Department of the Environment (DDOE) teamed up with Patuxent Environmental Group (PEG) and other contractors to provide “free” energy audits, of course it didn’t end well for the consumer. But most residents didn’t realize that PEG would place liens on their houses for not paying for the audit.
Economy Getting Sicker by the Day, But What It Really Needs Is a Fever
The only cure for the global economy is to eliminate all this government intervention and waste, and then eliminate the artificial excesses coming from the Fed.
New Fed Proposal to Bankrupt America: Government Guarantee of Entire ABS Market
In essence, some economists are saying that bureaucrats are capable of managing the insurance of markets that may exceed $20 trillion.
How An Even Slower Recovery Would Feel
After some improvement in the data over the spring and early summer, the recent news is describing an economy growing below 2%. While technically not a double-dip recession, the recovery could be so weak it will feel like another downturn.
Spending vs. PSST
I would like to see less emphasis on measuring economic activity as spending. I would like to see more effort put into understanding economic activity as patterns of sustainable specialization and trade.
Why were the measured productivity gains so high in 2009?
...interpret the "high productivity innovation" as the decision to lay the workers off, and the selection of workers, not the sudden advent and withdrawal of some new high productivity technology.
CBO Report: We're Still Using the Same Stimulus Model, and It Still Says the Same Thing
Every few months, this comes out, and every few months, a bunch of commentators treat this as if this were an empirical analysis, rather than a case of the CBO sticking the numbers back into the same model, re-running them, and conclusively proving that . . . their model still generates the same results.
Gridlock is Great for Stock Market Returns
Unified governments spend far more, and more quickly, and expand regulation much more than split governments do.
Regime Uncertainty: Are Interest-Rate Movements Consistent with the Hypothesis?
If mainstream analysts continue to disregard the role of regime uncertainty in the major depressions of the modern era, especially in accounting for their extraordinary duration, then they will only demonstrate the poverty of their own mode of analysis.
Fannie, Freddie and Mortgage Addiction
The key is to sell the accumulated mortgages slowly, in small increments. This will take years— after all, it took decades for the government to create the mess.
The Role of Regulation
Matt Yglesias has been fighting a good fight against occupational licensing regimes that mostly serve to restrict entry.
Biden’s Fatal Conceit
Biden repeatedly stated that the “government plants the seed and the private sector makes it grow.” Because the government possesses no “seeds” that it didn’t first confiscate from the private sector, what the vice president is advocating is the redistribution of capital according to the dictates of the Beltway.
The stimulus is working … just not for you
Had we wanted to stimulate the entire economy we would have seen tax cuts for all employers and employees, a sure-fire way to put money in the pockets of everybody.
Is That the Most They Can Say in Stimulus Spending’s Defense?
If a job exists only because of the existence of government dollars, then the job will go away when the government dollars go away.
All This Talk About Deficits Is Getting In the Way Of Preserving and Expanding Our Entitlement Spending
Newly minted White House budget director Jacob Lew said essentially the same thing a decade ago when he told Congress that “fiscal discipline is essential to protect Social Security and strengthen Medicare, so that both will be there in the years ahead.” In this view, fiscal responsibility is useful insofar as it allows for the expansion of government.
The Fed Should Exit Its Low-Rate Policy
...this solution is not sustainable in the long term: The cost is exorbitant, and the short-term and long-term distortions would be devastating.

Research, Reports & Studies
RCM: Wells Fargo Economics Group: New Home Sales Drop to a New Record Low
New home sales fell 12.4 percent in July, which was well below the consensus estimate. Prior months’ data were revised downward. The absolute level of sales dropped to a 276,000-unit pace, which is a record low.
Another Presidential Rescue Mission in North Korea
August has become the month when former U.S. Presidents fly to Pyongyang to gain the release of U.S. citizens incarcerated for illegally entering North Korea.
Cyber Security: A Complex "Web" of Problems
Today, as it pertains to cyber security, America still needs clearer lines of authority within the federal government and a more coherent structure of public–private interaction to allow for effective action.

Economists’ Comments & Opinions
Ask Unemployed How the Stimulus is Working
When the stimulus package was enacted in February 2009, the labor force participation rate, the percentage of Americans who say they are working or looking for work, stood at 65.6%. Last month it was 64.6%, a full percentage point lower.
No Need To Over-Regulate Banker Compensation
Dodd-Frank strengthened shareholder power. Now give bank shareholders the right incentives and let compensation reform itself.
Fed to Savers: Drop Dead
Thoughts while pondering the 43 cents of interest I earned on my savings.
Honey, I Shrunk My Approval Ratings
The White House is having a disastrous 'summer of recovery.'
Where Are the New Jobs?
The statisticians at the National Bureau of Economic Research declared the Great Recession over -- but tell that to people who can't find jobs.
The Fed Is Running Low on Ammo
It still has options if more monetary easing is needed. But they're not very effective.
Harsanyi: Gridlock: our greatest hope
There is no greater check on power in Washington than two strong political parties.
The IRS Targets Incompetent Tax Preparers
That's good news. But the agency is going overboard.
VENABLE: Texas fights global-warming power grab
Lone Star state won't participate in Obama's lawless policy.
ObamaCare: It Is Here
While many of Obama Care's major pieces won't kick in until 2014, a few big changes are already under way--and offering an early taste of what's in store for American health care. It ain't pretty.
Why we're not Greece - yet
The U.S. is not Greece. But this does not mean we cannot learn lessons from a nation that is marked by both great beauty and regular bouts of fiscal madness.
Dow plunge is wake-up call to deal with debt
The market could be in for a very bumpy ride in the coming months -- except it won't have technical glitches to blame. U.S. debts, more likely than not, could be an underlying culprit.
Meaningless Multipliers Sank the Recovery Act, Part 1
Keynesian economists never have to "find" the jobs created; they simply make them up with multipliers.
We're All in a Race to the Bottom
There will be no winners in this economy as the government solves debt with more debt and fears of deflation increase.

Graph of the Day
Jobless claims slide more than expected
See: No Visa Required
See: Existing Home Sales
See also: Future of the Bush Tax Cuts
VIDEO: Public Pulse: how the American public views its government

Book Excerpts
"We shall find too that such current notions as that society ‘acts’ or that it ‘treats’, ‘rewards’, or ‘remunerates’ persons, or that it ‘values’ or ‘owns’ or ‘controls’ objects or services, or is ‘responsible for’ or ‘guilty of’ something, or that it has a ‘will’ or ‘purpose’, can be ‘just’ or ‘unjust’, or that the economy ‘distributes’ or ‘allocates’ resources, all suggest a false intentionalist or constructivist interpretation of words which might have been used without such connotation, but which almost invariably lead the user to illegitimate conclusions. We shall see that such confusions are at the root of the basic conceptions of highly influential schools of thought which have wholly succumbed to the belief that all rules or laws must have been invented or explicitly agreed upon by somebody. Only when it is wrongly assumed that all rules of just conduct have deliberately been made by somebody do such sophisms become plausible as that all power of making laws must be arbitrary, or that there must always exist an ultimate ‘sovereign’ source of power from which all law derives." –F.A. Hayek, Law, Legislation, and Liberty (1982)

Did You Know
Any way you slice your bagel, if you slice it in New York, it's going to cost you more. New York State tax officials are enforcing a sales tax for sliced or prepared bagels, the tax on a sliced bagel is roughly 8 cents. In 2009 2,732 restaurants were audited state-wide. That year, 646 restaurants were audited for bagel malfeasance in New York City alone. In 2010 that number jumped to 1,077.