Thursday, September 23, 2010

9/23/10 Post


News
Republican 'Pledge to America': spending caps, tax cuts
House Republicans are set to release on Thursday a "Pledge to America," an ambitious and sweeping set of proposed changes to domestic and security policy, including promises to freeze most federal government hiring, cut Congress' budget, place hard caps on domestic spending accounts, prevent the phase-out of tax cuts that are set to expire in 2011 and "repeal and replace" the new health care law.
Democrats guess wrong on health care
Rarely have so many political strategists been so wrong about something so big. But when it comes to the health care bill, everyone from former President Bill Clinton on down whiffed on some of the more significant predictions.
Both Sides Tiptoe Around Tax Cuts
Neither Republicans nor Democrats in the Senate appear to have the appetite for a floor fight before the midterm elections over extending Bush-era tax cuts, making it more likely than ever that the chamber will punt the issue to a lame-duck session.
White House says no quick decision expected on a replacement for departing economic adviser
The White House says that naming a successor to President Barack Obama's top economic adviser, Lawrence Summers, is not imminent. Summers plans to leave his post as director of the National Economic Council at the end of the year to return to Harvard University. He is the third high-ranking member of Obama's economic team to leave this year.
The Fed worries about something unusual: Inflation may actually be too low
The Fed says a little more inflation might be just the thing to start a chain reaction that would ultimately create jobs — and avoid a spiral of falling prices that could damage the economy
Unemployment filings jump back up
Initial filings for unemployment insurance ticked up in the latest week, but continued to hover in the same range they have been since November. The number of first-time filers for unemployment benefits rose to 465,000 in the week ended Sept. 18.
What deflation? Prices are rising!
Deflation might be the economic buzzword right now, yet prices seem to be going up on everything from a cup of coffee to Dallas Cowboys tickets.
The real wallop of raising taxes on the rich
If President Obama's plan for the Bush tax cuts is enacted, the wealthiest residents of New York City would feel real tax rates of 50.7%, highest of any place in the country. Right behind is Hawaii, where residents would pay 49.7%.
Existing home sales bounce back in August
Existing home sales bounced back in August after plunging in the previous month.
Wage scandal tarnishes India's crisis-hit Games
As India struggled to prevent the Commonwealth Games from being cancelled on Thursday, rights groups said that construction workers were paid half the country's minimum wage to toil on sites where accidents have killed dozens.
California Budget Impasse Set to Break 85-Day Record as No Vote Scheduled
California is poised this week to break its record of going 85 days without a budget as Governor Arnold Schwarzenegger and lawmakers remain at odds over closing a $19 billion deficit in the most populous U.S. state.
France slammed by new strikes over retirement age
French commuters squeezed onto limited trains or fought for rare parking spots Thursday as a second round of strikes against President Nicolas Sarkozy's plan to raise the retirement age to 62 hobbled trains, planes and schools across the country.
The secret deal that changed the monarchy
The Queen has been forced to give up the ultimate right to manage the Palace's financial affairs in a secret deal signed by Palace aides and the Government.

Blogs
The Right Way to Limit Pre-Existing Condition Exclusions
The inability of some Americans to obtain health insurance for pre-existing medical conditions continues to be used by Obamacare supporters as justification for the mammoth legislation. The truth, however, is that the problem was nowhere near as big as portrayed, and the solution doesn’t require 2700 pages of legislation or $1 trillion in new government spending.
Blast From the Past - Just How Well We Have It
As a society, and as individual households, we simply have so much more wealth than 80 years ago that even in the worst of circumstances, we are unlikely to suffer as we did back then. So even as the recession continues, it's worth remembering just how good we have it, and just how far we would really have to fall to find ourselves back in the misery of the Great Depression.
Red Tape Rises Again: Cost of Regulation Reaches $1.75 Trillion
While the revenues and expenditures of the government are budgeted and accounted for each year, the costs of regulation are largely hidden from view, paid for indirectly via higher prices, fewer choices, and less innovation.
Unfunded Obligations of State and Local Governments
"When adjusted using a more appropriate discount rate, however, states' unfunded obligations were 22 percent of U.S. GDP. All but 10 states and the District of Columbia have total adjusted unfunded liabilities above 15 percent of their state GDP, and four states -- Alaska, Hawaii, New Jersey and Ohio -- have adjusted unfunded liabilities above 35 percent of their state GDP."
Why Are the Rich So Rich?
It's hard to explain how the wealthy are manipulating the regulatory apparatus to make Apple vastly more profitable than it would have been forty years ago.
Max Baucus Clears One Hurdle on Dividends Tax Rate—Where’s Harry?
For the second time in a week, Senate Finance Committee Chairman Max Baucus (D–MT) has called for the suspension of PAYGO budget rules to pass necessary and vital tax policies. First, Baucus suggested waiving PAYGO as it pertains to the death tax. Now he’s calling for the Senate to rightly ignore PAYGO so it can keep the tax rate on dividends from skyrocketing to almost 40 percent from its current 15 percent level.
Digging Deeper into Bell, California’s Corruption
...Foster raises a troubling paradox: the role crisis plays in bringing to light the causes of the crisis.
Coverdell Education Accounts Are in Danger of Becoming Less Useful
Coverdell Education Savings Accounts were created in 2001 to provide parents with more options to pay for their children’s elementary, secondary, and college education. Unless Congress quickly takes action, those accounts will no longer be allowed to fund secondary and elementary school expenses.
Correlating Federal Spending and College Tuition
These high and increasing levels of correlation between total federal spending and the average cost of college tuition strongly indicates that the federal government is directly responsible for the escalating cost of attending college for the vast majority of students.
The U.N. Wants to Tax the World Out of Poverty
At the United Nation’s Millennium Development Goals (MDGs) Summit in New York this week, French President Nicolas Sarkozy and Spain’s Prime Minister José Luis Zapatero both called for a global financial transaction tax to fund foreign aid projects to lift the world’s poor out of poverty.
Weekly Initial Unemployment Claims increase
"In the week ending Sept. 18, the advance figure for seasonally adjusted initial claims was 465,000, an increase of 12,000 from the previous week's revised figure of 453,000."
Tax Hikes Are Not the Right Path to Reducing the Deficit
Congress must soon reach a consensus on whether, and on whom, they will raise taxes in 2011. With the economy at the forefront of Americans’ concerns, the effects of raising taxes for any income bracket are a serious matter.
The Good Old Days Are Now: Trickle-Down Automotive Safety
Partly as a result of the “trickle down of advances” that are now becoming standard on even low-priced, compact cars like the Chevy Cruze, traffic fatalities fell to a 60-year low in 2009 of 33,808 deaths, the lowest level since 1950 (see top chart).
Six Months Closer to Repeal
…the evidence that the American people have completely rejected Obamacare is overwhelming. Rasmussen Reports, Gallup and CNN all put opposition to Obamacare somewhere between 56% and 61%.
Secondary Sources: Unemployment, Succeeding Summers, ECB and Fed
A roundup of economic news from around the Web.
Existing Home Sales at 4.1 million SAAR, 11.6 months of supply
Sales in August 2010 (4.13 million SAAR) were 7.6% higher than last month, and were 19.0% lower than August 2009 (5.1 million SAAR).
Fed May Get Some Help From Weakening Dollar
That’s because a weak dollar, if sustained, will offer some aid to the central bank in achieving its two main goals outlined in Tuesday’s statement: supporting the recovery and lifting inflation.
The Irish haven't in fact tried "austerity"
"The escalating cost of bailing out Anglo Irish Bank is set to balloon the deficit to at least 25 per cent of GDP this year, cancelling out the benefits of previous austerity budgets."
U.S. Innovation Clustered on Coasts
U.S. innovation is most concentrated on the coasts, with the highest density on the West Coast, according to urban theorist Richard Florida.

Research, Reports & Studies
Obamacare: Impact on the Economy
Contrary to a key intention of the legislation, the combination of mandates and taxes will not help to reduce the deficit. In fact, the PPACA will likely increase the deficit by an average $75 billion per year, and as a result, the nation’s publicly held debt will be $753 billion higher at the end of 2020.
The United Nations and Development: Grand Aims, Modest Results
In reality, little evidence indicates that U.N. development assistance has contributed to economic growth in the recipient countries. In general, countries that receive significant U.N. assistance show no better development results than those that receive little aid.
Meeting the Long-term Challenge of Old Age Entitlement Spending
...deficits have soared in response to the financial crisis and the recession.Second, spending on Medicare, Medicaid, and, to a lesser extent, social security is projected to increase drastically over the next 60 years, engendering extraordinary fiscal pressure.

Economists’ Comments & Opinions
Your Stimulus Tax Dollars at Work
According to the International Business Times, with the $111 million in stimulus money that the city of Los Angeles received, it created 55 jobs. The city controller is understandably disappointed.
Obama's Problem Is Ideology
In his speeches, Mr. Obama has repeatedly called for raising taxes on joint filers with $250,000 or more of gross income and singles making more than $200,000 -although in the fine print of his budget his tax hikes would affect joint filers with more than $209,000 of taxable income and singles with more than $172,000, potentially ensnaring households at lower levels of gross income than he advertises.
Too Little Inflation?
Central bankers who say they want higher prices usually get them.
Summers’ departure opens door for new ideas
America is not producing new jobs in anything like the quality or the quantity it needs to replace the high-end jobs it is losing. Mr Summers’ exit therefore offers Mr Obama an unusually important chance to think radically about the kind of economic legacy he wishes to leave.
How Seniors Will Pay for ObamaCare
In many areas, Medicare Advantage enrollees will lose about one-third of their health insurance benefits. The cuts will finance new subsidies for younger people.
Is the Fed Really Gearing Up for Monetary Stimulus?
Expansion of the Fed's balance sheet in the current context is a reactive accommodation of expansionary fiscal policy.
Obama Must Look to Private Sector to Replace Summers
JPMorgan's Jamie Dimon, Jack Welch of GE, and Michael Bloomberg are just a few of the leaders who have proved they can build a major organization from the ground up.
Three Reasons China Is Right (and the US Is Wrong) About the Yuan
While China has bowed to US pressure and allowed the yuan to appreciate, the move could end up backfiring on both parties.
How to Get Housing Off Government's Juice
In a year when angry voters are demanding a reduced government role in the economy, it is remarkable that most of the ideas for supplanting Fannie Mae and Freddie Mac are just imaginative ways of keeping government in the business of housing finance.
Still No Good News for ObamaCare
ObamaCare addresses every healthcare problem, with every solution further centralizing power and decision making in Washington. The promises do not come cheap.
Obamacare is even worse than critics thought
Six months ago, President Obama, Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi rammed Obamacare down the throats of an unwilling American public. Half a year removed we now know much more about the bill than we did then.
The Pain Begins
Today, six months since Congress passed the Patient Protection and Affordable Care Act, President Obama will be celebrating the signature achievement of his administration. It's apt to be a lonely celebration: Few Democratic candidates are willing to talk about the health-care bill — except the ones running ads to remind the electorate that they voted against it.
Tax Hikes Not Needed to Balance the Budget
Washington insiders say that tax increases are unavoidable because deficits are too large. Since these often are the same people who supported "Obamacare" and the so-called stimulus, their crocodile tears about red ink probably are not very sincere.
Six Months Later...
Six months ago today, President Obama signed the Patient Protection and Affordable Care Act, commonly known as Obamacare. The intervening six months have shown that this health care law offers neither patient protection nor affordable health care — in fact, quite the opposite.

"Debt is a disciplining device for firms and nations: In both cases, you're Briar Patching a LR commitment." -Garett Jones, Twitter

Graph of the Day
WSJ: Local Debts Defy Easy Solution
Rising Welfare Costs
The Millennium Development Goals: Meeting Targets
Poverty and Unemployment could remain high after recession

Book Excerpts
"Above all, what cannot be calculated are the wealth and number of jobs that would have been created had this regulatory assault not taken place and had these immense fortunes in capital been invested in production. What we know with certainty is that the regulatory process—acutely stepped up since the sixties—has had a devastating impact on investment, price stability, innovation, productivity, and economic development... The incredible irony is that all this, allegedly executed in the interest of the consumer, has ultimately come out of the consumer’s pocket." –Former Treasury Secretary William E. Simon, A Time for Truth (1978)

Did You Know
Video-rental chain Blockbuster filed for Chapter 11 bankruptcy protection today but plans to keep stores and kiosks open and operating. The filing comes about a month before the 25th anniversary of the opening of Blockbuster's first store in Dallas. The video chain owned 3,023 stores in the U.S. and had 402 franchises as of July. A bankruptcy "will enable (Blockbuster) to break the leases," says Kenneth Latz, director of the New York office of financial restructuring firm Conway MacKenzie.