Tuesday, September 21, 2010

9/21/10 Post

Risk of double-dip recession: Unlikely, but rising
While the risk of the U.S. economy falling into a double-dip recession is rising, there is only about a one-in-four chance of that happening, according to a survey of top economists.
Fed Purchases Lift Treasurys
In recent trading, the benchmark 10-year Treasury note was up 6/32 in price, and its yield fell to 2.719%. The 30-year bond was 16/32 higher to yield 3.875%. Bond prices move inversely to their yields.
Obama defends economic record
Obama said he has limited discretion over the biggest aspects of the budget, including Social Security and Medicare. But he said his administration has identified billions of dollars in spending and tax loopholes that can be eliminated in the 2011 budget.
The real fix for the economy: Savings
We've said it before, and we'll say it again: Savings are a better stimulus for the economy than consumer spending. For the skeptics, here's what you need to know.
Economy improving, but still hurting
Even if the economy avoids falling into a double-dip recession, the next year will probably feel like one anyway. Unemployment is expected to remain high, economic growth is expected to be anemic at best.
As Tax Cut Expirations Near, Democrats Tackle the Issue on GOP’s Terms
Despite solid majorities in both chambers and ample time to develop their own ideas, Democrats head into this fall’s fiscal debate trapped inside a tax agenda constructed by Republicans.
Looming Tax Hike Stays Under the Radar
While Democrats and Republicans debate extending Bush-era tax cuts for the wealthy, a middle class tax cut Congress passed as part of last year’s stimulus package is set to expire. Neither party’s leaders have put forward a play to extend it.
Capitol Police shortfall may hit $21M
The department already has a history of budgetary miscalculations and cost overruns.
Home construction jumps 10.5 pct in August
Home construction increased last month and applications for building permits also grew. The gains were driven mainly by apartment and condominium construction, not the much larger single-family homes sector.
U.S. Loses No. 1 to Brazil-China-India Market in Investor Poll
The U.S. has fallen behind emerging markets in Brazil, China and India as the preferred place to invest, a Bloomberg survey shows, though the world’s largest economy still ranks highest of all major developed countries.
U.S. household net worth drops
U.S. household wealth fell by $1.5 trillion in the second quarter, according to Federal Reserve data on Friday that showed the strain a slow-paced recovery and high unemployment are putting on Americans.
UN: Rich must not cut aid to poor to balance budget
U.N. Secretary-General Ban Ki-moon pressed debt-ridden donor countries on Monday not to cut aid to the poor despite their budgetary woes.
Fed Mulls Trillion-Dollar Policy Question
The Federal Reserve is scheduled to meet Tuesday to debate what would warrant pumping more money into the financial system.
Jobs picture gets worse in 27 states
The national unemployment rate may have only ticked up slightly in August, but on a state-by-state basis, the jobs picture continues to look a lot more grim in places like Nevada, Michigan and California.
Dollar Falls on Euro; Aussie at 2-Year High
Late Monday, the euro was at $1.3064 from $1.3039 from late Friday. The dollar was at 85.70 yen from yen 85.82, while the euro was at yen 111.96 from 112.89 yen. The U.K. pound was at $1.5547 from $1.5626.

Recession is Officially Over--Now What?
One way to look at this is that we are one year into a "lost decade" of economic stagnation. While the Obama Administration can slough off blame for the Great Recession, it's going to have to take responsibility for America's Lost Decade
Lame Policy for Lame Duck
It seems that many in Washington had their books upside down when they studied economics.
Secondary Sources: Recession End, Hard Times, Individualism
A roundup of economic news from around the Web.
A Leftist Wish List vs. National Security
This week the U.S. Senate is scheduled to take up the FY 2011 National Defense Authorization Act. This legislation is necessary to fund the defense of the United States and its interests abroad. The House already passed their bill in May. But Majority Leader Harry Reid (D-NV) would rather talk about amnesty.
New data on income inequality and finance
"...for 2004, nonfinancial executives of publicly traded companies account for less than six percent of the top 0.01% income bracket. In that same year, the top twenty-five hedge fund managers combined appear to have earned more than all of the CEOs from the entire S&P 500. The number of Wall Street investors earning over $100 million a year was nine times higher than the public company executives earning that amount."
Progressivism: Still Dangerous After All These Years
Progressivism rejects America’s foundational principles. For the past one hundred years, progressive intellectuals and politicians have been desperately trying to sever Americans’ attachment to the principles of the Declaration of Independence and instead embrace a more European model of governance.
Did the Recession End 15 Months Ago?
I have gotten so used to not thinking of economic activity as spending that I am totally blowing off the fact that GDP has been increasing for the past year. Instead, I focus on patterns of sustainable specialization and trade, which I think are better indicated by employment.
Big Spending, Not Tax Cuts, Drive U.S. Budget Deficits
The left wants you to believe that we must pass the Obama tax hike because low taxes on wealthy Americans are the cause of our nation’s budget deficits.
Obama’s Wants a 23.9% Capital Gains Tax, but the Rate Actually Will Be Much Higher Because of Inflation
The capital gains tax rate will jump to 20 percent next year if the President gets his way. This sounds bad (and it is), but the news is even worse than you think.
Not From the Onion
"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."
ObamaCare’s Premium Refunds: Bad News for the Sick
USA Today and Politico Pulse report that ObamaCare has prompted BlueCross BlueShield of North Carolina to rebate $156 million to its customers in the individual market. This may seem like good news. It’s actually bad news, particularly for BCBS’s sickest customers.
Why Can't We Have Higher Inflation?
At Brookings' semi-annual presentation of economics papers, which I attended on Friday, one of the participants made an interesting point: the fear of nominal losses made the crisis much worse than it had to be.
How should economic instruction change?
...along with responses by Alberto Alesina, Laurence Kotlikoff, Michael Pettis, Gilles Saint-Paul, Paul Seabright, Richard Baldwin, Michael Bordo, Guillermo Calvo, Tyler Cowen, Harold James, David Laibson, and Eswar Prasad [All Responses].

Research, Reports & Studies
Obama Tax Hikes: Economic Harm to All Americans
The economic effects of not extending the 2001 and 2003 tax laws would impact all Americans, especially those who will just start their economic lives and the millions more trying to find work...
The Obama Administration’s Ambitious Export Control Reform Plan
On August 31, the White House announced its plan to reform both the policy and process for controlling the export of militarily sensitive commodities and technologies. It is clear that the United States’s export control system is in need of reform.
Budgetary Savings from Military Restraint
Concern about deficits has prompted greater scrutiny of all federal spending...
The Value Added Tax: Too Costly for the United States
This study projects that if the United States introduced a VAT in 2010, its net effect on tax revenue would be minimal by 2030 because VAT revenue would mostly be offset by declines in revenue from other tax bases.

Economists’ Comments & Opinions
Why It Feels Like We're Still in Recession
The NBER has declared that the recession ended in June 2009, but money credit and other indicators show that we're still a long way off from recovery.
A Very Grim Reaper
While Washington debates whether to raise taxes on incomes and dividends next year, another huge tax increase looms as an even grimmer reaper: The death tax, which is currently zero, but will return to a rate of 55% next year if Congress fails to act.
Why Pensions Are in So Much Trouble
It was only a matter of time before pensions were subject to the same transparency as banks, however it's happening sooner than expected.
Foolhardy Tax Hikes
"Raising taxes on the top 2% of households, as Mr. Obama proposes, would bring in $34 billion next year: enough to cover nine days' worth of the deficit," notes The Economist. So that is what all the political fuss about extending the Bush tax cuts for another year is all about. Does this make any sense?
Cap Gains Taxation: Less Means More
A new study suggests a zero cap gains rate could create millions of jobs at a fraction of the cost of the spending stimulus.

Graph of the Day
WSJ: Charkbook: The Depth of the Downturn
See: The Housing Recession Isn't Over
See also: The Biggest Issue of 2010, In One Chart

Book Excerpts
"'Taxes upon the transference of property from the dead to the living,' said Adam Smith, 'fall finally, as well as immediately, upon the persons to whom the property is transferred.' But this view altogether neglects the ulterior effects on the distribution of wealth that the duties may bring about. If, as Ricardo argued, they fall mainly on capital, it is evident that the whole society suffers by less efficient production, and it is also probable that the higher value of the remaining capital will lead to a rise in interest and a consequent fall in wages." –Charles Bastable, Public Finance (1892)

Did You Know
"Secretary of State Hillary Clinton will announce on Tuesday a U.S. contribution of more than $50 million toward providing clean cooking stoves in developing countries to reduce deaths from smoke inhalation and fight climate change. The U.S. funding, which will be spread over five years, is part of a Global Alliance for Clean Cookstoves being started to combat a problem officials equate with malaria and unclean water in terms of their health impact worldwide. More efficient stoves can be purchased for $10 to $100, according to one senior U.S. administration official, who spoke on condition of anonymity ahead of Clinton's funding announcement."