9/2/10 Post

BUZZ: Summer of Economic Discontent

News
Small business owners to Fed: 'Get out of our way'
Some polls out this week tell us that small business owners are becoming more cautious.
Factory Growth Buoys Markets
The Institute for Supply Management, which surveys U.S. purchasing managers, said Wednesday its manufacturing index rose to 56.3 in August from 55.5 the prior month.
Boxer, Fiorina debate: California economy is center stage
Sen. Barbara Boxer and GOP challenger Carly Fiorina faced off Wednesday night, drawing sharp distinctions between them.
Economy Avoids Recession Relapse as Data Can't Get Much Worse
The U.S. economy is so bad that the chance of avoiding a double dip back into recession may actually be pretty good.
Condolences to the currency professionals
Currency markets appear vibrant, but don't trust the illusion: this is their last gasp.
With Jobs in U.S. Scarce, Illegal Immigration Slides
The influx of illegal immigrants plunged to an estimated 300,000 annually between March 2007 and 2009, from 850,000 a year between March 2000 and March 2005, according to new study released Wednesday by the Pew Hispanic Center, a nonpartisan research group.
The summer the recovery went missing
The Fed has used every tool at its disposal, but can't jump-start the stalled economy.
Low interest rates squeezing pension funds
Thanks to stock market gyrations and the lowest interest rates in 60 years, millions of Americans are struggling to keep their retirement savings intact and secure their future.
Productivity falls in the spring by largest amount in nearly 4 years while labor costs rise
Productivity in the spring fell by the largest amount in nearly four years while labor costs rose, signals that companies may have reached the limits of squeezing more work out of fewer workers.
Top Obama adviser wants more stimulus spending
President Obama's top economist, in her final speech before stepping down Friday, urged Congress to "find the will and wisdom" to spend more money to create jobs — even though lawmakers' appetite for new government spending has waned ahead of November's elections.
Bernanke Meets Buffett in Role Conceived to Protect Markets
In November 2009, Senate Banking Committee Chairman Christopher Dodd advanced a radical proposal: to create a super-regulator that would take over most of the bank supervision that had been done by the Federal Reserve System, the Federal Deposit Insurance Corp. and other agencies.
Bernanke: Shut down banks if they threaten system
Federal Reserve Chairman Ben Bernanke told a panel investigating the financial crisis that regulators must be ready to shutter the largest institutions if they threaten to bring down the financial system.
Outsourcers warn US producing too few engineers
US universities are producing too few engineers to meet industry demand, Indian outsourcing companies say, leaving such businesses little choice but to hire foreign skilled workers to fill jobs in America.
Unemployment claims drop for second straight week
The number of people requesting unemployment benefits declined for the second straight week, suggesting that the slowing economy isn't prompting widespread job cuts.
Corporate cards for consumers?
Sen. Charles Schumer, D-N.Y., is worried that credit card issuers are making it too easy for consumers to get corporate cards, which are exempt from tougher new laws.
Americans in the dark about energy use
Americans aren't known for their energy-thrift ways. Maybe that's because they have little idea as to how much energy things use.
IMF Warns Countries of Debt Risks, Dismisses Idea of Greek Default
According to the IMF analysis of 23 wealthy countries, Greece, Iceland, Italy, Portugal and Japan are very close to that point, while Ireland, the U.S., Britain and Spain are moving into dangerous territory.
Good grades for back to school sales
Retailers reported surprisingly strong August same-store sales as many consumers braved scorching summer temperatures to bag juicy discounts on school-related products.
Cash-strapped schools turn to volunteers to fill budget gaps
As state and local funding for education dries up, schools around the nation are asking their communities to help them maintain their services and programming.
U.S. Auto Sales Dive in August
Auto sales, once a bright spot in the economic recovery, grew fainter last month. Buyers who are nervous about the economy's health stayed away from showrooms, a worrisome sign since August is typically a strong month.
Bernanke, Bair presenting views of crisis, 'too big to fail' to inquiry panel
Productivity in the spring fell by the largest amount in nearly four years while labor costs rose. Productivity dropped at an annual rate of 1.8 percent in the April-to-June quarter, double the 0.9 percent decline originally reported a month ago.
Ben Bernanke defends bailout
Federal Reserve Chairman Ben Bernanke says the 2008 bank bailout worked, reiterating a long-held contention that federal action averted a much greater crisis for the U.S. economy.
Burger King to be bought
Burger King said Thursday that it has agreed to be acquired by investment firm 3G Capital in a deal valued at $4 billion.
Harrisburg, Pa., defaulting on its bonds
The capital city Pennsylvania is broke and will be skipping this month's multi-million dollar bond payment.
Family insurance costs skyrocket 14%
The spike comes even as premiums for family coverage rose only 3%. This discrepancy is a result of cost-conscious companies shifting more of the insurance burden onto employees.

Blogs
Why a civil society extends unemployment benefits
Do unemployment benefits encourage the jobless to stay jobless? If we got rid of lifeguards and let more swimmers drown, fewer people would venture into the water.
What’s Behind the Decline in Illegal Immigration? It’s the Economy, Stupid
A Pew Hispanic Center report released today confirms what has been widely known, that the number of illegal immigrants in the United States has dropped sharply since 2007. The real argument is over what’s behind the decline.
More Arguments against a Value-Added Tax
The biggest threat to fiscal responsibility is a value added tax.
CBO analysis confuses 'assumption' with 'conclusion'
Did Obama's stimulus actually stimulate the economy? The CBO analysis saying so actually used a model that with that assumption built in.
Business Start-Ups Creating Job
Half of the startups go out of business within five years; but overall they are still the ones that lead the charge in employment creation.
Do You Wish You Could Choose Your Child’s Teacher?
As important as this their influence is, most Americans have no say in choosing their child’s teacher. Parents don’t have a choice when it comes to their child’s education, despite the fact their tax dollars pay for the public schools, and their children’s futures are at stake.
The Medicare Bureaucracy: Ready To Disrupt Seniors’ Drug Coverage
Despite all the promises, a new report from Avalere Health shows that, in addition to the upheaval caused by Obamacare, the Medicare bureaucracy is taking administrative steps to change the Medicare drug program that will have adverse impact on seniors’ choices.
EPA’s New Rating System Encourages Poor Decisions
The EPA recently proposed a new grading requirement for new car stickers. The A–D grading system would rank cars according to their fuel efficiency and carbon dioxide emissions to help consumers make better choices.
The Grades Are In: Only 2% of Colleges get an “A”
Of the 719 colleges and universities analyzed in this report, only 16 institutions of higher education provide a coherent, content-rich general education or core curriculum.
Secondary Sources: Climate Change, Home Ownership, Jobs
A roundup of economic news from around the Web.
Unchecked and Unbalanced Watch
The problem with the whig-history story is that it assumes that government takes care of the problem that it is supposed to solve. But it might not. It might be the case that individuals or small organizations solve the problem better.
The New Normal for Jobless Claims?
The problem is that the number of new unemployment claims is becoming flat at a level far higher than the average 318,000 level that was typical during the full-employment, low-unemployment years of 2006 and 2007.
The Small Schools Myth
The problem is that because small school don't have a lot of students, scores are much more variable. If for random reasons a few geniuses happen to enroll one year in a small school scores jump up and if a few extra dullards enroll the next year scores fall.
The Great Micro Turbulence Amidst the Great Macro Moderation
"The main thing that concerns me is the threat of persistent high unemployment, and here the European experience of the last three decades fills me with dread."
Lawrence Lindsey Vs. Christy Romer
...I get the impression that serving as a policy adviser for an Administration tends to undermine one's ability to be objective. Advisers seem to get inordinately attached and committed to the policies they work on. Herbert Stein was a notable exception.
Progress
So [the Apple nano] is cheaper (even without accounting for inflation), weighs 1/15th as much, and holds about 40 times more music of higher quality [than the 1979 Sony Walkman].

Research, Reports & Studies
Reforming Indigent Defense: How Free Market Principles Can Help to Fix a Broken System
Public defender offices around the country face crushing caseloads that necessarily compromise the quality of the legal representation they provide. The inadequacy of existing methods for serving the indigent is widely acknowledged, and President Obama has recently taken steps to give the problem a higher priority on the national agenda.
RCM: Wells Fargo Economics Group: ISM: Growth Steady with a Positive Surprise: Orders, Jobs OK
August ISM rose to 56.3, which was better than expected. Production and employment showed gains, while
orders moderated. Firms appear to have adjusted their operations to match a slower growing economy.
The Postwar German “Wonder Economy” and Ordoliberalism
The Ordoliberals focused on finding appropriate “rules of the game” for the market order, asking: what constitutional structure and legal framework best preserves a free society and economy?

Economists’ Comments & Opinions
A "Recovery In Name Only"
To the eight million Americans who have lost their jobs during the “Great Recession,” the so-called recovery our nation is currently experiencing hasn’t been very “stimulating.”
Out of the Frying Pan and Into the Fire?
It seems the only uniformity is the trend for panic buying days and panic selling days to go tit for tat. So does that mean Friday will give us another panic selling day?
Fact, Fiction, Fantasy and Foolishness
And it is apparent to all, except for the academics that populate the Obama administration and the Federal Reserve Board that low interest rates, free money, ongoing bailouts and obeisance to political constituencies solve nothing.
Deficits and the War
Now, I am interested to hear how the president, who claimed yesterday that it’s “time to turn the page” and end “the American combat mission in Iraq,” will account in the budget for the 50,000 troops who will still be in Iraq and for the number of security contractors, which is supposed to double over the next few months.
Why Saving Is Right and Economists Are Wrong
Consumer spending is not the way to recovery, and to understand why, we must ask ourselves why we continue to have boom and bust cycles.
Why America Isn’t Working
The honest answer – but one that few voters want to hear – is that there is no magic bullet. It took more than a decade to dig today’s hole, and climbing out of it will take a while, too.

Graph of the Day
Auto sales: Worst August since 1983
See: Population Growth Rates in Selected Countries

Book Excerpts
"One would think that with at least 250 sovereign external default episodes during 1800-2009 and a least 68 cases of default on domestic public debt, it would be relatively straightforward to find a comprehensive long-range time series on public sector debt. Yet this is not the case; far from it. Government debt is among the most elusive of economic time series." –Carmen M. Reinhart and Kenneth S. Rogoff, This Time Is Different (2009)

Did You Know
Health care spending this year has grown at its slowest rate in a half-century, a sign that people are forgoing medical care during the recession. Spending on doctors, hospitals, drugs and other medical care climbed at a 2.7% annual rate per person in the first half of 2010, the smallest increase since the Bureau of Economic Analysis began tracking medical care in 1959. When inflation is taken into account, spending per person actually fell 0.2% in the first six months of the year. That's the first decline since the government began adjusting for inflation in 1995.