Monday, September 20, 2010

9/20/10 Post

News
Nevada unemployment rises to 14.4 percent
Even as thousands of Nevadans abandoned the state's workforce, unemployment in the Silver State has risen to a record yet again, new numbers reveal.
For the Unemployed Over 50, Fears of Never Working Again
Of the 14.9 million unemployed, more than 2.2 million are 55 or older. Nearly half of them have been unemployed six months or longer, according to the Labor Department. The unemployment rate in the group — 7.3 percent — is at a record, more than double what it was at the beginning of the latest recession.
Americans' Net Worth Falls Along With Stocks
The Federal Reserve reported Friday that household net worth—stocks, bonds, homes and other assets, minus mortgages and other debts—fell 2.8% to $53.5 trillion in the second quarter, driven by a sharp decline in the value of stock investments.
Fed Expected to Weigh More Stimulus
With tax rates at the center of the debate over how to revive the stalled recovery, the Federal Reserve is likely to spend its policy meeting on Tuesday weighing the merits of additional steps to stimulate the economy, while deferring some major decisions until later this year.
Global ‘internet treaty’ proposed
Deal would enshrine in law the founding principles of open standards and net neutrality, and protect the web from political interference.
Government could seek foreign investors for GM
Investment bankers handling the upcoming General Motors Co. stock sale are expected to court foreign investors as well as those in North America, according to a U.S. Treasury Department statement.
Inflation remains flat in August as consumer prices rise 0.3 percent
Consumer prices posted a small rise in August, but outside of a big jump in volatile gasoline prices, inflation was essentially flat.
UK Proposes All Paychecks Go to the State First
The UK's tax collection agency is putting forth a proposal that all employers send employee paychecks to the government, after which the government would deduct what it deems as the appropriate tax and pay the employees by bank transfer.
Economists: Extend Bush tax cuts for everyone
With income tax rates set to go up on Dec. 31, Congress is hotly debating what to do next. But most economists agree: Keep them where they are.
GOP Aims to Erode White House Agenda
Eyeing a potential Congressional win in November, House Republicans are planning to chip away at the White House's legislative agenda—in particular the health-care law—by depriving the programs of cash.
Tax cuts: Small biz fact check
Republicans say raising taxes on the wealthy would cause small businesses to pull back on hiring. Many leading Democrats say that's nonsense. Who's right? The answer isn't black and white, despite politicians' confident assertions to the contrary. It's more like multiple shades of gray.
Pension Gaps Loom Larger
Funds Stick to 'Unrealistic' Return Assumptions, Threatening Bigger Shortfalls.
States playing fast and loose with teachers' jobs money
Congress gave states $10 billion to save 145,000 teachers' jobs. But it won't help all school districts rehire educators since some governors are planning to take away state aid.
Treasurys Can Be Painful, as History Shows
Investors in 10-year Treasurys would lose around 20% if yields rise to, say, 7% over the next two years. Thirty-year Treasurys would lose about 34% if the yield rises to 7.5%.
Retailers to boost holiday jobs
Stores could add up to 600,000 jobs during the holidays -- up from last year but still not in line with pre-recession levels, report says.
Wall Street Reform Spurs Hiring Spree on K Street
The nation’s banks seem to have received one powerful message from this year’s finicial services reform measure: Get more help on K Street.
DeMint to GOP: We must produce
Sen. Jim DeMint (R-S.C.) says the Republican Party - even if it regains control only of the House - is "dead" unless it follows Americans' demands to rein in government spending.

Blogs
NAHB Builder Confidence stuck at low level in September
The National Association of Home Builders (NAHB) reports the housing market index (HMI) was at 13 in September. This is the same low level as in August and below expectations.
Defaults Account for Most of Pared Down Debt
0.08% — The annual rate at which U.S. consumers have pared down their debts since mid-2008, not counting defaults.
Greenspan Paradox on Recovery

Alan Greenspan exemplifies an inconsistency that appears to be widespread. He reportedly said that the stimulus has fallen far short of expectations and the government should get out of the way and allow businesses to power the recovery. At the same time, he’s so worried about budget deficits that he supports higher taxes.
We Have Obama's Number!
...under the president’s proposal, virtually all of top earners’ ordinary income will be taxed at 44.6 percent, starting in 2013.
The Anti-Government Straw Man
Nearly all economists agree that these kinds of failures can justify some degree of state intervention. Furthermore, it is legitimate (in our view) for society to provide some minimum basic standard of living for all, and government has a role to play in that process.
Weekly Schedule for September 19th
Four key housing reports will be released this week: the September homebuilder confidence survey (Monday), August housing starts (Tuesday), August existing home sales (Thursday), and August new home sales (Friday). Also the FOMC meets on Tuesday.
Dirtier Dishes, Cleaner Lakes
...the environmental benefits of reformulated products can depend on how consumers respond. Low-flow toilets don’t save as much water if they prompt some users to flush multiple times. Might there be a similar rebound effect with low-phosphate detergents? Perhaps.
The Second Austrian Moment
...the consequences both for policy and the future of economics depend on the interpretation of the financial crisis and the Great Recession.
Q2 Flow of Funds: Household Net Worth off $12.3 Trillion from Peak
According to the Fed, household net worth is now off $12.3 Trillion from the peak in 2007, but up $4.7 trillion from the trough in Q1 2009.
My Hammer and Some Nails
I would like to be able to subscribe to the school system of my choice, the financial regulatory system of my choice, the food inspection system of my choice, and so forth. Monopoly based on geography is not necessary for most government services.
Unofficial Problem Bank List increases to 854 institutions
"...the Unofficial Problem Bank List stands at 854 institutions with assets of $416 billion, up from 849 institutions with assets of $415.3 billion last week."
Krugman and Taxes
Well, yes: save for corporate-welfare kings and queens, rich people earn their riches. They are, in fact, entitled to their money, and entitled to be angry when government tries to take more of it.
No increase to Social Security Benefits for 2011 (unofficial)
It won't be official until the BLS releases the September CPI-W report, but we can already say there will be no increase in Social Security benefits or the Maximum Contribution Base in 2011 (assuming no new legislation).
Underestimating the Pension Bomb’s Impact
...over a 25 year period pension plans had an annualized median return of 9.3%. Over a 10 year period that fell to 3.9%. However in choosing a discount rate it’s not simply the number or time-period they’re selecting that matters. It’s the rationale.
Mad Ireland Hurt Them Into Austerity
Alex Massie offers a powerful rebuttal to those who would use Ireland's woes to argue that this somehow "proves" that austerity is bad: they didn't really have much choice.
Companies Still Holding Lots of Cash
Nonfinancial firms held $1.845 trillion in cash and other liquid assets last quarter, down from $1.847 in the first quarter, the Federal Reserve’s flow of funds report shows. Meantime, the value of companies total assets rose to $14.366 trillion. Cash as a share of total assets edged down from 7.1% to 7%.
For Needy Families, a Needy Program
Temporary Assistance for Needy Families, our nation’s primary cash-welfare program for families with children, would more accurately be named Inadequate Assistance for Needy Families.
This Week in Government Failure
These wasteful government issues have been exposed...
China Currency Hearings a Distraction
The chief obstacle to America’s recovery is not China’s currency regime, but a housing market that remains depressed, soaring government spending and debt, looming tax increases, and grandstanding politicians who refuse to remove those very large boots from the neck of the American economy.
Is the U.S. Still the Land of Opportunity?
The Global Entrepreneurship and Development Index (GEDI) report by researchers at the Small Business Administration shows that the U.S. may be slipping in its ability to sustain productive entrepreneurship relative to other countries.
The Economic Toll of the Obama Tax Hikes
Before the recession, federal spending totaled $24,000 per U.S. household. President Obama’s FY 2011 budget would hike it to $36,000 per household by 2020. But spending is just one-half of this White House’s economic plan. Massive wealth-distributing tax hikes are the other half of President Obama’s wish list, and they are just as big a threat to our nation’s economy.
Increasing Numbers of the Poor: Why Government Anti-Poverty Programs Have Failed
Since 2008, food stamp rolls have risen by nearly 50 percent to more than 40 million, and the number of welfare recipients rose to 4.4 million, an 18 percent increase. In fact, government expenditure for anti-poverty programs is now at an all-time high.
Why Preserve the Constitution?
For over a hundred years, Progressives have been trying to persuade Americans that times have changed, and therefore our founding documents must evolve to meet the needs of a developing society.
The Cause and Effect of Financial Recklessness
We can blame consumers, policymakers, and risk for the current financial situation, but isn't it time to stop the finger pointing?
In Reality, Housing Is Not Even Close to Stabilizing
Shadow inventory -- distressed residential properties that will almost certainly come onto the market in the not-too-distant future -- paints a more accurate and more dismal outlook than many claim.
Misguided Stimulus: Businesses Won't Hire Until Demand Exceeds Supply
The Obama administration's stimulus package doesn't guarantee businesses will immediately grow employment and work toward expanding the economy.

Research, Reports & Studies
Hudson Institute Economic Report
This week saw better than expected economic news. Retail sales rose 0.5% in August from July, and were up 3.7% from last year...
RCM: Wells Fargo Economics Group: U.S. Review
Mostly Better News But Sluggishness Still Reigns.
Closing the Racial Achievement Gap: Learning from Florida’s Reforms
An education gap between white students and their black and Hispanic peers is something to which most Americans have become accustomed. But this racial division of education—and hence of prospects for the future— is nothing less than tragic. The good news is that the racial divide in learning is a problem that can be fixed.
Obama Tax Hikes: The Economic and Fiscal Effects
Since 1996, Congress after Congress has voted to lighten the tax burden on Americans. The current Congress will decide this fall whether to continue this policy or to significantly raise personal income taxes.

Economists’ Comments & Opinions
Can the Fed Offer a Reason to Cheer?
As high unemployment continues, more and more people, including top economists, are asking the Fed to promise a credible commitment to a more expansionary monetary policy. This approach will work only if the Fed finds a way to be bold — and if we find a way to believe in it.
Many Are the Errors
Perhaps Paul Krugman believes that by labeling other economists as politically extreme, he can undercut their credibility. But his is badly weakened by the myriad errors he makes.
Solving the Unemployment Crisis
If we truly want to create jobs, it is not enough to simply berate business to create them. We must address the dynamics that keep businesses from offering jobs and that keep people from accepting jobs.
The Christie Example
Far from being onerous, these changes are consistent with current standards across private industry. The Christie plan would eliminate a major chunk of the state's unfunded liabilities, and for that he deserves kudos.
Stimulus for Clunkers
The [Cash for Clunkers] program "had no long run effect on auto purchases." It did juice sales during its two-month run last summer, by about 360,000 cars, but then it quickly hurt sales by about the same amount, in effect stealing purchases from the future.
The Estate Tax Is A Tax On Those Without Estates
All entrepreneurial concepts morph into innovative realities thanks to the savings of others. When estates are left alone, the money doesn't disappear; rather it's lent to or invested in the ideas of those not yet wealthy.
Why It's Time for the Tea Party
One difference so far between the tea party and the great wave of conservatives that elected Ronald Reagan in 1980 is the latter was a true coalition—not only North and South, East and West but right-wingers, intellectuals who were former leftists, and former Democrats. When they won presidential landslides in 1980, '84 and '88, they brought the center with them.
Pelosi's False Tax Choice
Stop the presses: House Speaker Nancy Pelosi has discovered fiscal discipline.
More Proof We Cant Stop Poverty By Making It More Comfortable
One definition of insanity is doing the same thing over and over and expecting different results. Perhaps that's something to keep in mind the next time we hear a call for more welfare spending.
How Underwater Mortgages Can Float the Economy
Recent calls for another federal stimulus package raise an important question: Before considering costly short-term measures to raise overall consumer demand, have we done enough to ensure that financial markets will work properly and lead us to recovery?
A Poverty of Statistics
Unfortunately, official U.S. poverty statistics do not satisfy this assigned function.
A Conservative Plan to Transform America
"Solutions for America," a comprehensive 54-page guide from The Heritage Foundation that presents more than 120 conservative policy prescriptions to get our nation back on the right track. Some of the recommendations are groundbreaking. Others are familiar. All have one thing in common: They would return power to the people. And, collectively, they will transform America.
The Economics of Mass Destruction, Part 2
Governments around the world are focused on spending money, but these policies are ultimately destroying capital.
What America Needs Is Complete Economic Overhaul
Nouriel Roubini argues that our country needs a payroll tax cut, but that will do little to nothing to actually stimulate the economy.


"Insight from the Median Voter Theorem: Zero-based budgeting can lead to bigger government. Why? b/c MV thinks 1.2X>0X." -Garett Jones, Twitter

Graph of the Day
Recession officially ended in June 2009
Medicaid: Are Costs Up or Are We Buying More?

Book Excerpts
"[Economists] ask first: what are the effects of confiscatory taxation on capital accumulation? The greater part of that portion of the higher incomes which is taxed away would have been used for the accumulation of additional capital. If the treasury employs the proceeds for current expenditure, the result is a drop in the amount of capital accumulation. The same is valid, even to a greater extent, for death taxes. They force the heirs to sell a considerable part of the testator's estate. This capital is, of course, not destroyed; it merely changes ownership. But the savings of the purchasers, which are spent for the acquisition of the capital sold by the heirs, would have constituted a net increment in capital available. Thus the accumulation of new capital is slowed down. The realization of technological improvement is impaired; the quota of capital invested per worker employed is reduced; a check is placed upon the rise in the marginal productivity of labor and upon the concomitant rise in real wage rates. It is obvious that the popular belief that this mode of confiscatory taxation harms only the immediate victims, the rich, is false." –Ludwig von Mises, Human Action: A Treatise on Economics (1949)

Did You Know
"The House last week advanced a bill that would for the first time require federal health officials to ask patients about their sexual orientation and gender identity. The proposal was introduced by Rep. Tammy Baldwin, D-Wis. Under the proposal, programs and surveys administered through the Department of Health and Human Services would be required to ask people about their sexual orientation and gender identity, though the response would be voluntary. "