Thursday, September 16, 2010

9/16/10 Post

Jobless Claims in U.S. Unexpectedly Fell Last Week to 450,000
Initial jobless claims dropped by 3,000 to 450,000 in the week ended Sept. 11, Labor Department figures showed today in Washington.
Geithner says U.S. economic recovery not fast enough
Treasury Secretary Timothy Geithner said on Monday the U.S. economy was recovering but not fast enough and Washington needed to do more to boost growth and create jobs.
A Bitter Pill For Mortgage Borrowers
Top banking executives said this week that it may take years for the country to see a full-fledged housing recovery -- and that a government rescue program may actually be hindering progress.
Foreclosures Rise; Repossessions Set Record
Bank repossessions, often the final step in the foreclosure process after a home fails to sell at auction, inc. about 3 percent from the month before to 95,364, a record high.
Gold hits record high near $1,278
Gold hit a record 1,277.90 dollars an ounce at 12:30 pm (1130 GMT) on the London Bullion Market.
More Democrats break with Obama on tax cuts
Thirty-one House Democrats, most of whom face tough re-election bids this fall, have signed a letter to House Speaker Nancy Pelosi and House Majority Leader Steny Hoyer urging them to extend expiring tax breaks for all income levels, including the wealthy.
Senate to end debate, vote on small-business aid bill
The Senate is scheduled to vote Thursday on ending a debate on a bill that it says will aid small businesses and result in the creation of 500,000 jobs.
Many say poverty rate is a poor measure
The latest national poverty rate data are scheduled to be released Thursday, and that means there’s finally one thing both liberals and conservatives can agree on: The way we measure poverty is flawed.
Japan intervenes in currency market to weaken yen
Japan waded into the currency market Wednesday for the first time in six years, buying dollars to weaken the surging yen, which is battering famed Japanese manufacturers like Toyota and Sony after spiking to 15-year highs.
Budget chief nominee: Crucial times ahead
President Obama's pick to run the Office of Management and Budget told lawmakers Thursday that the coming months may be the most critical time for U.S. fiscal policy in recent memory.
Warren to Be Adviser to Consumer Watchdog Agency
The development means that the White House has decided not to nominate Ms. Warren as the first director of the agency, a move that Mr. Obama to avoid a likely grueling confirmation battle in the Senate.
Bank bailout: Don't bet on another one
The perception that a $700 billion bailout aided financial institutions more than consumers could make it harder to do something similar in another crisis.
Wholesale Prices Jump
The index of producer prices, which measures how much manufacturers and wholesalers pay for goods and materials, rose a seasonally-adjusted 0.4% for finished goods in August from July, a Labor Department report showed Thursday. In July, wholesale prices were up 0.2%.
FedEx: Economy improving but cutting 1,700 jobs
The outlook for a global economic recovery is still clouded by uncertainty, the FedEx Corp. expects "moderate growth" in the global economy going forward, it also plans to cut 1,700 full-time employees and close about 100 facilities as it consolidates two of its divisions.
Watchdog panel says Treasury's secrecy, missteps make it harder to respond to future crises
Unless the government can show a recession-weary public that the program worked, Congress will not approve another such measure when faced with financial threats. "The greatest consequence of (the bailout) may be that the government has lost some of its ability to respond to financial crises."
Room to Maneuver on Tax Cuts
House Majority Leader Steny H. Hoyer is leaving room for discussions with Republicans and moderate Democrats on the extension of expiring tax cuts.
Battleground Poll: Voters see November GOP takeover of the House and Senate
Voters, by a 9-point margin, believe Republicans will pick up both the House and the Senate, even though they are evenly divided over whom they intend to back in six weeks, according to a new POLITICO/George Washington University Battleground Poll.
Rebel Jim DeMint sparks GOP Senate civil war
DeMint’s philosophy is that it’s time for the GOP to return to its roots of limited government and fiscal responsibility, arguing that there’s little point in nominating Republicans who might vote with Democrats on fiscal issues.

What Is Missed in Poverty Measures
Perhaps the biggest problem is that the official poverty rate — which rose to 13.2% in 2008, the highest since 1997 — doesn’t account for the lion’s share of antipoverty measures such as subsidized housing and the earned income tax credit. It also tends to overstate inflation.
Pragmatic Road to Bankruptcy
Who could have predicted the long-term consequences of case-by-case pragmatic problem solving? I suggest Herbert Spencer, Ludwig von Mises, and Friedrich Hayek.
Philly Fed Index Shows Contracting Manufacturing in Mid-Atlantic Region
The Federal Reserve Bank of Philadelphia reported Thursday that its index of general business activity for factories in its district moved to -0.7, from -7.7 in August, after having stood at 5.1 in July.
Weekly initial unemployment claims decline slightly
"In the week ending Sept. 11, the advance figure for seasonally adjusted initial claims was 450,000, a decrease of 3,000 from the previous week's revised figure of 453,000 [revised up from 451,000]. The 4-week moving average was 464,750, a decrease of 13,500 from the previous week's revised average of 478,250."
Secondary Sources: Fixing Economy, Boomer Bequest, Razors and Blades
A roundup of economic news from around the Web.
How much would the President raise the top tax rate?
Take into account state income taxes, and the top rate will be about 50 percent.
Localities Ramp Up Incentives, Credits To Attract Jobs
Facing high joblessness and lackluster economies, local governments are competing more aggressively with tax breaks and other incentives to lure companies to relocate to their regions.
The voice of reason vs. the voice of insanity
It was bad enough when we subsidized home ownership in the past. But to persist in these policies in the face of what has happened boggles the mind. Doing the same thing and expecting a different result is a measure of insanity.
Germany’s Anti-Deflation Weapon? Oktoberfest
Last year, over 6.6 million liters of beer were sold (and presumably consumed) at Munich’s Oktoberfest. That was in the early days of Germany’s recovery from a severe recession, and consumption was up smartly from 2008, though still considerably below 2007’s record of nearly seven million liters.
Do we need a new economics?
Paul Gregory says no. He says we just have to remember what we once knew. Very much worth reading.
Greenspan: Fiscal Stimulus Worked Far Less Than Expected
“We have to find a way to simmer down the extent of activism that is going on” with government stimulus spending “and allow the economy to heal” itself, former Fed Chairman Alan Greenspan told a gathering held at the Council on Foreign Relations in New York on Wednesday.
Christie’s Pensions Reforms: Significant and Bold
He proposes to freeze the COLA, roll back the 9 percent benefit enhancement passed in 2001, increase the size of the contribution made by workers to their pensions and their health care benefits.
The Something-for-nothing Quandary
Most of the debate over extending the Bush tax cuts has focused on whether to extend slightly lower marginal rates for higher earners who already bear a huge burden. But at the other end of the income spectrum, a growing share of Americans don’t pay income taxes. Indeed, the Bush tax cuts increased the share of U.S. households that pay no income taxes.
Rising Retail Sales Give False Hope of Recovery
US retail and food services sales for August rose 0.4% but the Census Bureau's data are off; renewed consumer slowdown is what's actually happening.
What to Do With Fannie and Freddie?
The need for reform is obvious and a return of private securitization may be the only option.

The New START Rubberstamp Threat to National Security
New START is so deeply flawed on the issues of missile defense and verification that amendment to the treaty is the best possible route for protecting our national security.
Mexico’s Bicentennial: The Unending Fight Against Tyranny
Two centuries ago in Mexico a powerful advocate proposed New World freedoms and liberty as the answer to Old World tyranny
Side Effects: More Americans Will Feel the Pain of Medicaid’s Shortcomings
The new law does this by expanding Medicaid’s eligibility to cover an additional 16 million Americans by 2019, according to the Congressional Budget Office (CBO). However, recent analysis from former CBO director Douglas Holtz-Eakin and American Action Forum analyst Michael Ramlet shows this strategy exacerbates existing problems within the health care system.
More Americans Receiving Government Benefits While Fewer Pay In
Simply put, the federal government is spending an increasing amount on benefits in the form of entitlements while simultaneously trimming the number of taxpayers paying the bill.
Tax Hikers Senselessly Stuck on Saving
Tax-hike advocates have erected yet another straw man to protect their high-tax policy, now arguing that little economic harm would be done if Congress and the president were to raise taxes on higher earners because these high-tax sufferers would have saved the money anyway.

Research, Reports & Studies
CENSUS: Income, Poverty, and Health Insurance Coverage in the United States: 2009
This report presents data on income, poverty, and health insurance coverage in the United States based on information collected in the 2010 and earlier Current Population Survey Annual Social and Economic Supplements (CPS ASEC) conducted by the U.S. Census Bureau.
RCM: Wells Fargo Economics Group: Industrial Production Up, Slow Factory Growth From Here
U.S. industrial production grew 0.2 percent in August. It was the 13th time in the last 14 months that output has expanded, but the previously reported 1.0 percent gain last month was revised to a 0.6 percent increase.
What Every American Needs to Know about Government-Entitlement Reform
The long-term budget challenge can be summarized in one word: entitlements. Without Social Security, Medicare, and Medicaid, the budget would be roughly in balance over the coming decades. Left unreformed, however, entitlement costs will become so wildly out of step with revenues that a fiscal crisis will be inevitable.
Euro Will Unravel, and Soon
The outbreak of a sovereign-debt crisis in the eurozone’s peripheral economies has been among the more important developments in the global economy in 2010. Sadly, this crisis will likely intensify in the months ahead. Such intensification will affect Europe’s already-troubled banking system, seriously threatening both the European and the global economic recovery.
Advice and Consent? The Senate Should START with Advice
There are no easy solutions to fixing the problems of the flawed New START treaty. Foremost, the Senate should avoid rubberstamping the treaty. The new strategic environment requires the U.S. to possess robust missile defenses and a range of conventional and non-conventional capabilities to prevent and deter attacks. The very survival of the U.S. may be at stake in these issues.

Economists’ Comments & Opinions
The Best Argument for the Extension of the Bush Tax Cuts for Top Earners
If policymakers’ main goal is to create new jobs, it doesn’t make sense to favor small firms over large or vice versa. New jobs come from small and big businesses. Small businesses — firms with fewer than 500 employees, according to the official definition — make up 99.7 percent of all employer firms and account for about half of the country’s total employment. Companies that employ more than 500 workers represent only .3 percent of all employer firms in the U.S., and yet they account for about half of the country’s total employment.
Why Does Government Grow and Grow and Grow?
Brooks and Ryan are right to argue for big choices, since it is only by confronting these choices that we can arrest creeping statism. But having looked at how we got here, those who value individual and economic freedom have a difficult task at hand in resolving this issue.
It's the Spending, Stupid
A chronic voter 'concern' has now exploded into a broad public movement.
How Pensions Can Get Out of the Red
The pension-fund crisis is rooted in the intersection of excessive optimism by fund managers and the funds’ influence on the political process.
New Bank Regulations Would Bless Lehman's Risk-Taking
Basel III improves on the old regime by strengthening the definition of "capital" and raising the bar for the ratios themselves. It does not do much about the definition of an "asset," however, which leaves the new standards open to abuse.
Let’s Cut Spending! (Just Not Any of the Spending That Benefits Me.)
Voters tend to voice general support for cutting spending, but don’t respond well to the idea of cutting benefits that affect them...
Deflation -- Delusion or Danger?
Even if political battles did not influence policy, it is not completely clear that the standard actions like reducing interest rates will always perk up the economy and prevent deflation, Allen warns.
The Case for a 'Repeal Amendment'
Virginia will consider proposing a constitutional amendment that would allow two thirds of the states to repeal a federal law.
The Economics of Mass Destruction, Part 1
The serious economic problems in America are the direct outcome of mainstream economic thought, and these ideas now operate worldwide.
Basel III Misses the Point; Bankers Will Still Cheat the Rules
The Basel III Accord won't have enough of an impact on Wall Street to dissuade another financial crisis.

"Consilience: Both subprime and 100% loan-to-value can be explained by lenders' belief that bubble is unlikely." -Garett Jones, Twitter

Graph of the Day
WSJ: Principles for Economic Revival
See: Welcome to the tea party
See also: August PPI report

Book Excerpts
"We are led to propose an avowed reversal of the Keynesian destruction of budget balance, an outcome that would be accomplished through an explicit reestablishment of balance between the two sides of the fiscal account as the overriding constraint on public outlays. The principle of budget balance has the great advantage of simplicity. It was, is, and can be understood by everyone, and the translation of the principles for private financial responsibility to those for governments tends to facilitate such an understanding. Furthermore, and perhaps most importantly, despite the Keynesian conversion of our politicians, there remain significant residues of this norm in prevailing public attitudes, residues that can be brought to bear productively in any genuine restoration." –James M. Buchanan, Democracy in Deficit: The Political Legacy of Lord Keynes (1977)

"Did You Know"
After banning cars from Times Square last year to turn the street over to pedestrians, the city now plans to outlaw smoking in the new plazas. Mayor Michael Bloomberg announced plans Wednesday to forbid smoking in all city parks, beaches and pedestrian plazas. The list of 1,700 parks and 14 miles of beach includes Central Park, the Coney Island beach and boardwalk, and the new pedestrian plazas in Times Square.