8/27/10 Post

BUZZ: GDP growth falls sharply in 2Q

News
Obama Administration Seeks to Tighten U.S. Trade Laws
The Obama administration, vowing to crack down on countries such as China that it says help subsidize exports of cheap goods to the U.S., introduced 14 measures to toughen enforcement of trade laws.
Bernanke may nod to weaker outlook, omit details
Federal Reserve Chairman Ben Bernanke will have to address a number of pressing issues in a speech on Friday as investors search for more clarity on how close the U.S. central bank might be to another asset-buying spree to support the flagging recovery.
What Biden didn't mention on stimulus
Vice President Joe Biden said this week that the Obama administration "hit the accelerator" toward spending $5 billion under the economic stimulus law to weatherize people's homes, create thousands of jobs, help consumers save money and put the nation on track for energy independence.
Weak GDP raises stakes for Obama, Fed
Growth figures are expected to show the economy is almost at a standstill, but the government is running out of options to rebuild momentum.
A stickier problem
The economy stopped shrinking a year ago, but America’s unemployment problem is as big as ever. The official jobless rate was 9.5% in July, and would be higher still had many people not given up searching for work. Some 45% of the unemployed have been out of a job for more than six months—the highest proportion since the 1930s.
US mortgage rates reach record low
The average rate for a 30-year fixed mortgage dropped to 4.36 per cent, down from 4.42 per cent the previous week, according to a survey by Freddie Mac, the US government-backed mortgage financier. It is the lowest level since the survey began in 1971.
To help or not to help
The parties wrestle over whether America can afford to create more jobs.
States Press Workers on Health Care
As state and local governments push to get employees to pick up more health care costs, some employees are pushing back.
Bad circulation
There is more to America’s stubbornly high unemployment rate than just weak demand.
Capital Makeover: Stimulus Fuels D.C. Construction
Work on the court building has been going on since 2003. Estimated cost: $122 million.
Killing them softly
International regulators are making progress on tackling too-big-to-fail banks.
Mortgage Picture Brightens, for Now
Fewer Borrowers Were Behind or in Foreclosure in the Second Quarter, but the Number of Newly Distressed Loans Grew.
DJIA Again Loses Its Grip on 10000
Summer Rally for Blue Chips Falters as Weak Data Accumulate; Waiting to Hear From Bernanke.
Pakistan Flood Sets Back Years of Gains on Infrastructure
One estimate, in a joint study from Ball State University and the University of Tennessee, put the total cost of the flood damage at $7.1 billion. That is nearly a fifth of Pakistan’s budget, and it exceeds the total cost of last year’s five-year aid package to Pakistan passed by Congress.
Energy use is way down - but wind surges
Energy use in the United States fell nearly 5% last year, marking the largest annual drop on record.
8 pro-biz Dems facing tough races
Democrats hold 30 "tossup" seats, representing some of the tightest races in the country. Eight of those highly contested seats are held by market-oriented New Democrats.
American job creation 101: stop fretting over Chinese investment
While Chinese firms see the U.S. as an attractive place to do business, executives also think it's an incredibly risky venture.
FCC appeals indecency rule strike-down
The FCC's complaint claimed that the decision keeps it from enforcing indecency violations because it cannot develop a policy that would be specific enough to satisfy the panel.
Gov’t Set to Confirm What Many Feel: Economy at a Standstill
Many analysts say the uncertainty surrounding the economy is holding back consumers from spending and companies from investing and hiring.
AP ENTERPRISE: Tax records show boom for some, bust for others in Gulf of Mexico oil cleanup
The worst offshore oil spill in U.S. history has spurred something of an economic boom in some communities where cleanup operations are based.
GOP plans wave of White House probes
If President Barack Obama needed any more incentive to go all out for Democrats this fall, here it is: Republicans are planning a wave of committee investigations targeting the White House and Democratic allies if they win back the majority.

Blogs
Investing Other People’s Money
If ZBB Energy’s future really is as bright as Mr. Apfelbach says it is, private investors would commit sufficient funds to keep it growing. The fact that private investors aren’t doing so is strong evidence that ZBB Energy’s future is dimmer than Mr. Apfelbach thinks.
Something Else for Government Bondholders To Worry About [Government debt as a percent of GDP] doesn’t compare debt to a government’s ability — or willingness — to pay. When measured against government revenue, the U.S. debt position, for instance, is worse than Greece’s.
Why Won't the Fed Inflate?
Ben Bernanke probably doesn't want to end up having to do the humiliating round of mea culpas that Greenspan had to. That's probably going to give him, and the other members of the open market committee, a slightly deflationary bias.
For Workers Who Find Jobs, Lower Wages
Of the 6.9 million workers who lost jobs during the recession that they’d held for at least three years, only about half were reemployed by January 2010. And 55% of those who did find work were earning less than before.
Would more planned savings be good? How can we lower perceived risk premia?
Both the long-run and short-run conditions require partial resolution, at the same time, and yet the long- and short-run conditions point in some different directions.
Secondary Sources: Lower vs. Higher Rates, Fed Options, China and India
A roundup of economic news from around the Web.
Commercial Real Estate Borrowers Joint the Ranks of Strategic Defaulters
It should be a lot easier for bankers to weed out strategic defaulters in business than in the individual market; the cash flows are much more transparent. One hopes they do. Meanwhile, the problems with securitization become ever more apparent.
Believe Me or Your Own Lying Eyes?
"...because the government has used the cash from the trust fund surpluses to finance other current activities rather than saving the cash by running unified budget surpluses, the government as a whole has not been truly prefunding Medicare benefits."
Secretary Duncan’s Race to Waste Your Education Dollars
“As I have said many times before, this isn’t just about the money — this is about working together and putting the needs of children ahead of everyone else.”
Mexican Massacres, Immigration Control, and the Obama Administration
The cold blooded murder of 72 illegal migrants by members of Mexico’s notorious Zeta cartel in the state of Tamaulipas is another stark and gruesome reminder of the current criminal and drug-related turmoil in Mexico.
Yes, the Founding Fathers Have Foreign Policy First Principles
The Founding Fathers created the United States as a sovereign nation. That in itself is directly and obviously relevant to the conduct of American foreign policy, both because it is what enable us to have a foreign policy in the first place, and because it emphasizes the value the Founders placed on sovereignty.
The Great Deleveraging Lie
The storyline is that consumers, corporations are paying off debts. But consumer spending has been entirely propped up by an ever increasing level of debt.

Research, Reports & Studies
CH7: Postwar British Socialism and the Fabian Society
The shift from the doctrine of free markets and free trade to the doctrine of extensive government control was partly caused by the influences of the Fabian Society in Great Britain.
Automatic Stabilizers and Economic Crisis: US vs. Europe
This paper analyzes the effectiveness of the tax and transfer systems in the European Union and the US to act as an automatic stabilizer in the current economic crisis.
Obama Administration Must Enforce America’s Immigration Laws
Instead of constantly seeking ways to evade, skirt, and ignore the immigration laws that are on the books, the Obama Administration needs to simply execute the laws while looking to solve the immigration problem in a way that discourages more illegal immigration, maintains security, and promotes the economy.
Obama Tax Hikes Defended by Myths and Straw Men
President Obama has called for a huge tax increase to take effect on January 1, 2011. Instead of reducing spending, he proposes to raise taxes on a wide swath of taxpayers—including small businesses—despite the weak economic recovery.
Returning More Power to the States Is the Natural Evolution in Homeland Security
The key to returning power to the states and localities is: Making sure those entities have a better seat at the table when national policy is created, discussed, and finalized; and Decreasing the federalization of disaster response that began in 1993. These two reforms would ensure that the power within the homeland security enterprise gravitates down closer to the people.

Economists’ Comments & Opinions
Public Pensions and Our Fiscal Future
Few Californians in the private sector have $1 million in savings, but that's effectively the retirement account they guarantee to many government employees.
FDR and the Lessons of the Depression
Higher taxes on capital and increased union power led to the 1937 economic slide.
The Most Fiscally Irresponsible Government in U.S. History
Current federal budget trends are capable of destroying this country.
COLE: Obama's next big bank bailout
Fine print says taxpayers are still on the hook.
The Dangers of Big Government Debt
On Thursday, Standard & Poor's said action is needed soon if the U.S. is to keep the much-coveted AAA bond rating that lets the government borrow in global markets at the lowest rates possible.
Ask Not Whether Governments Will Default, but How
The sovereign debt crisis is not European: it is global. And it is not over.
The New American Corporate State
A troika of big government, big business and big labor is attempting to run the country to its own advantage.
Clean Slate Time
How about this for a tax plan: cut most people’s taxes by half, eliminate the need to file returns, and provide the Treasury with a better way to reduce the deficit.
Prices drop, but hopes never do
Not even a 30 percent drop in housing prices can shake the idea that prices always go up.
Meaningless Multipliers Sank the Recovery Act, Part 2
Keynesian multipliers allow economists to ignore reality by making up jobs that can't be found on actual payrolls.
Primal Fears of a Double Dip Could Create Opportunities
People's innate tendency toward dichotomous thinking -- and its associated panic impulse -- could soon provide a chance to purchase stocks at extraordinary long term values.

Graph of the Day
Confronting the Unsustainable Growth of Welfare Entitlements
The Next Generation's Debt Burden
See: New Unemployment Benefits Claims
See: Floods in Pakistan - Maps, Graphs and Key Data
See also: The Cost of the Protected Class

Book Excerpts
"Signs are not wanting that some of those who are largely responsible for the present craze for planning are beginning to be uneasy about the forces they have loosened, and to feel a little like the sorcerer’s apprentice who cannot lay the ghosts he has raised. Once prices or incomes are guaranteed to some producers, there is little ground left for refusing the same to any others… If you argue for a particular purpose that “individuals have no machinery for limiting imports to the level of exports” you must not be surprised if your disciples insist that the Government should individually match each item of imports with a corresponding item of exports. And if you generally denounce the “humbug of finance” you must not expect the people to respect the particular piece of financial machinery of your own design." –F.A. Hayek, “Genius for Compromise,” (1945)

Did You Know
"New York Gov. David Paterson on Thursday promised to finally start collecting taxes on cigarettes sold by Native American stores, despite state police warnings that such enforcement could result in "violence and death." The state plans to collect a $4.35-per-pack sales tax on cigarettes sold by Native American retailers to non-Indian customers beginning next Wednesday.

Tribes have refused to collect the tax, citing their sovereignty and treaties dating to 1794. The last time the state tried to collect the tax, in 1997, protests erupted and tires were burned on the Thruway, shutting down a 30-mile stretch."