9/28/10 Post

BUZZ: Consumer confidence slumps in September

News
Democrats to stuff 20 bills into post-election lame-duck session
Democrats are considering cramming as many as 20 pieces of legislation into the lame-duck session they plan to hold after the Nov. 2 election.
House prices continue to deflate
Home prices decelerated further in July as the housing market lost ground after the expiration of a federal tax incentive for homebuyers. Prices overall are at the levels last seen in late 2003
IRS: No more tax forms in the mailbox
Electronic filing of tax returns has become so popular that the Internal Revenue Service will no longer automatically mail a traditional paper form.
State and Local Tax Revenue Inches Up
Gain of Just 1.7% in Second Quarter Suggests Budgets Will Remain Tight This Year and Beyond; Corporate Payments Fall.
Bill on outsourced jobs fails Senate test
As expected, a Senate bill designed to end tax breaks for U.S. companies that move jobs and manufacturing plants overseas failed a key test vote Tuesday.
Study: One-Third of Americans Have Low Credit Scores
A controversial new study suggests that one-third of all Americans hoping to buy a home will not qualify for a mortgage because of poor credit scores.
D.C. workers have America's highest salaries
Washington, D.C.'s workers enjoy the highest salaries of any major U.S. city., with a median household income of $85,198. The nation's capital fared better than most of the rest of the country in 2009, according to the Census Bureau's annual survey of income and poverty in the United States, which was released on Tuesday.
California eyes $5 billion bank loan
California is in talks with Wall Street banks to secure up to $5 billion in short-term loans following an exceptionally long budget impasse.
Busily going nowhere
Low interest rates have been a mixed blessing for equities.
Jobless told they owe money to the ESC
Thousands of long-term unemployed North Carolinians could soon owe the state money because the Employment Security Commission improperly made about $28 million in payments over the last two years.
U.S. Economy "Close to a Destructive Tipping Point," Glenn Hubbard Says
"America is very close to a destructive tipping point," co-authors Glenn Hubbard and Peter Navarro warn in their new book Seeds of Destruction. "We must change how we conduct our politics and economics...or we will inevitably go the way of all once-great nations and suffer an irreversible decline."
Dollar Trades Near Five-Month Low After U.S. Home Price Rise Slows in July
The dollar traded at almost a five- month low against the euro after U.S. home prices rose at a slower pace in July, fueling speculation the Federal Reserve will ease monetary policy.
Toys R Us to hire 45,000 workers for holidays
Toys R Us will hire about 45,000 employees to help with the holiday season, doubling its U.S. work force.
Census data: Marriages in 2009 at record low level
The recession took a dramatic toll on the institution of marriage in America last year, new figures show, with weddings for people 18 and older at the lowest ebb in over a hundred years.
'I'll work till I die': Older workers say no to retirement
Gone are the days of golf and gardening into the golden years. Many older workers are working well into retirement and it's not just because they have to, it's because they want to.
Crisis panel head: How did Wall Street miss it?
Phil Angelides says he just doesn't get how Wall Street executives say they never saw the financial crisis coming. The head of a federal panel charged with determining what caused the meltdown says the proof was sitting in plain view.
Recession's impact: Census shows growing income gap as young adults, children take big hits
The income gap between the richest and poorest Americans grew last year to its widest amount on record as young adults and children in particular struggled to stay afloat in the recession. The top-earning 20% of Americans received 49.4% of all income generated in the U.S., compared with the 3.4% earned by those below the poverty line. This ratio of 14.5-to-1 is an increase from 13.6 in 2008 and nearly double a low of 7.69 in 1968.
To avoid government shutdown by end of week, Senate to move on stopgap spending bill
Lawmakers are largely ignoring an Obama administration shopping list as they fashion a stopgap spending bill that's needed to avoid a government shutdown Friday.
Small-Business Bill Signed By Obama
President Obama on Monday celebrated a rare victory over determined Republican opposition in the Senate and signed into law a bill designed to make more loans available to entrepreneurs, calling the law "the most significant step on behalf of our small businesses in more than a decade."
D.C. disconnect: 400 fundraisers in 14 days
Inside the Capitol, lawmakers are largely marking time by naming post offices and passing a resolution to keep the government running through the elections. But outside the Capitol, in the private rooms of Washington’s top steakhouses, political clubs and Capitol Hill townhouse salons, there is an epic money grab under way, with more than 400 fundraisers for House candidates in the two weeks leading up to Friday’s congressional adjournment.

Blogs
Health alert: Paying for Health Reform
The people getting hit with these very expensive [health reform] tabs live in predominately low-income households. They are disproportionately minorities. They have trouble paying their own medical bills.
Those unintended consequences
Laws against texting while driving may lead to more accidents.
CBO’s Elmendorf Measures Impact of Tax Options
Congressional Budget Office Director Douglas W. Elmendorf on Tuesday broke down four different tax policy options and projected what their impact would be on the deficit.
Headline: “Poll: Nevadans favor balanced federal budget, let states repeal federal laws”
49 percent of Nevadans supported the concept; 27 percent were opposed; with 24 percent undecided. Of course, like any proposal limiting state or federal power, a Repeal Amendment can be demagogued, and it surely will be if it gains any political traction.
A Look at Case-Shiller, by Metro Area (September Update)
The S&P/Case-Shiller Composite 20 home price index, a broad gauge of U.S. home prices, posted a 3.2% increase from 2009, but the gains decelerated in the waning days of government tax credits.
Forecasting the Cost of College
...unless and until the current pattern breaks, you can reasonably expect that the average cost of college forecast by our tool will generally follow the pace set by the federal government's projected levels of future spending.
Secondary Sources: State Surpluses, Income Inequality, Mergers and Markets
A roundup of economic news from around the Web.
Minimum Wage Hurts The Poor
Fortunately, the US minimum wage is still low enough that it only affects about 5% of the workforce. But South Africa is an example of what would happen if it were increased...
More Americans Expect Recovery Will Take Years
Some 46% said it will be 2013 or later before that happens. A smaller 36% predicted a recovery sometime before 2013.
Unemployment May Be Headed Up Despite Growth
The strong likelihood of tepid economic growth through next year suggests unemployment may rise, rather than fall, as many forecasters currently predict.
More Unintended Consequences
Companies fed up with America’s exorbitant corporate taxes can move their headquarters and operations overseas entirely. At some point, it simply prudent to do that. High taxes in the USA could even make that the CEO’s fiduciary responsibility.
Strike Action in the 21st Century
With the various reforms, especially the Employment Contracts Act of 1991, the NZ labor market became more fluid, unemployment went down, and the cost of striking increased. When living in NZ, one forgets that pre-1990s, the country was constantly threatened by strikes, the way France (and others) are now (and have been for a long time).
Public Sector Silver Parachutes
Under a 1979 law to promote work attendance, state employees can turn in one-quarter of their unsued sick days for a retirment bonus. Facing a $4.5 billion budget gap, some are questioning whether the benefit should be kept.
Meme of the Week: Reductio Ad Somalia
...subtle conflation of "society" and "the government" makes this sort of absurd reductio possible. Because of course, while it is true that living in America makes one vastly better able to create wealth than living almost anywhere else, much of that wealthy creation comes not from anything the government provides, but from the infrastructure of people, skills, and norms that surround one.
Inequality and Moral Hazard Rents in the Financial Sector
The increased completeness of markets means that banks and hedge funds can implement almost any payoff they desire. Attempts to make markets less complete are futile and any attempts to do so can and will be subverted by economic agents.
GOP’s Pledge to America
The House Republicans’ release of its “Pledge to America” has been met with criticism from across the ideological spectrum. While excoriation from the left was inevitable, those who were hoping that the GOP would set out a detailed agenda for limiting government were also not satisfied.
The Lower Spending Solution to Deficits
With the expiration of the 2001 and 2003 tax cuts fast approaching, the debate over whether to extend the cuts, and for whom, has taken on a new face.
Education Reform’s Kryptonite
A quality education in America shouldn’t come down to a lottery ball. But that’s exactly how life plays out for many low-income families seeking an alternative to failing public schools.
Keeping the Pledge on Marriage-Friendly Federal Policy
The Heritage Foundation’s “Solutions for America” series is designed to provide concise policy proposals that focus on a wide array of concerns, including ideas for “Making Federal Policy Marriage Friendly.” Specifically, a Congress concerned about the erosion of traditional marriage, especially in lower-income communities, could:
How Much More Can They Get Wrong? The New Obamacare Impact Calculator Answers
So how much more could the new health law impact Americans and the health sector if other forecasts, such as those from the Congressional Budget Office, turn out to be false? Heritage’s brand-new Obamacare Impact Calculator shows the real-time results of what these changes could mean to you, the federal budget and the US economy if the CBO is wrong.
In the Green Room: Scott Rasmussen on Tea Parties, Obamacare’s Unpopularity
We discussed the values of the tea party movement, the early and persistent underestimating of the movement by many who didn’t recognize its broad appeal, and Obamacare’s consistent unpopularity among the American people.

Research, Reports & Studies
Fiscal Adjustments: What Do We Know and What Are We Doing?
Governments that have initiated thorough and successful fiscal adjustment policies have not systematically suffered at the polls.
Guaranteed 22 Percent Benefit Cuts If Social Security Is Taken off the Table
A number of unions and other organizations have banded together under the banner “Strengthen Social Security” to oppose any change to Social Security benefits, including raising the retirement age or including any form of means testing.
"Consumer Safety" Bill Could Boomerang against U.S. Manufacturers
Barriers to trade can be straightforward and transparent, even if wrongheaded, such as a 27.5 percent tariff that certain members of Congress threatened to impose on imports from China.
The Child Care Tax Credit: Not Just Another Middle-Income Tax Break
The section 21 child and dependent care tax credit has received little attention in recent tax policy debates. When the credit is discussed, its supporters and opponents often treat it as simply another middle-income tax break. The child care tax credit, however, is not just another middle-income tax break. By providing tax relief for work-related costs, it helps offset the work penalty imposed by the income tax and promotes economic efficiency.

Economists’ Comments & Opinions
Paycheck Fairness Act: A flawed approach to job bias
Take an employer who gives a hefty raise to a valued male employee who has gotten a job offer from a competitor. Would a court agree that the raise advanced a legitimate business purpose or could the employer be slammed unless he also bumps up the salary of a similarly situated female employee?
Austerity Agonistes
Why left-wing economists’ warnings against austerity programs are wrong.
ObamaCare's Hotel California
The state moves to impose price controls you can never leave.
They're Playing Chicken with Tax Cuts
Apparently, the voters know something that congressional Democrats don't. An urgent letter to President Obama from 313 leading economists warns that letting the Bush cuts expire - even just on the rich - willl lead to serious economic consequences for the U.S.
Let's reform state government
Here are some major reforms these state policymakers could pass immediately:
Repeal Obamacare and Go Home
If Congress wants to do something useful before the fall elections, they should merely repeal Obamacare then go home. Every second Congress is in session, they do more damage to America.
Why America Needs China to Invest in GM
If SAIC Motor picks up a stake in General Motors, everyone stands to profit.
Tax Cuts and Revenue: What We Learned in the 1980s
There will be no gain in long-term tax revenue from increasing tax rates on those making more than $200,000 per year, despite claims by President Obama's Office of Management and Budget, and the Congressional Joint Committee on Taxation, which studied the administration's tax proposals. The current debate over the expiring Bush tax cuts is a replay of the debate about the Reagan tax-rate reductions of three decades ago.
Regulators Have Learned Nothing from the Financial Crisis
The Basel III process so far has indicated that bank regulators have learned almost nothing from the crisis. Many of the contributors to the crisis, including Basel II, are being expanded instead of being scrapped. At least this time around we'll know that the stool we're being asked to sit on doesn't have any legs.

Graph of the Day
Mercatus Center: This Decade: Government Pay Growth Outpaces Private Pay Growth
ObamaCare: Never Supported by a Majority, Now 10-Points behind with Likely Voters
Congress down to wire with no budget

Gender Pay Gap JEC Hearing
Rep. Brady Opening Statement JEC Hearing on Gender Pay Gap



Representative Kevin Brady, the Senior House Republican on the Joint Economic Committee gives his opening statement at a hearing on the Gender Pay Gap for Women and Mothers in Management.


Book Excerpts
"This distinguishing feature of all indirect taxes may be illustrated by an elementary comparison between the corporate and the personal income tax. Under the latter, the individual varies his own tax liability, in tax-price terms, by varying the amount of taxable income that he earns. His own ability to do so implies also that the tax-price he faces is indirectly dependent on the behavior of others who can react similarly. In acting to reduce the tax base, each taxpayer imposes an external diseconomy on all fellow taxpayers. To an extent, this sort of personal interdependence remains under the corporate tax. Individuals may, within limits, reduce the tax-price per unit of public goods through withdrawing resources from corporate investment. And any one person's final tax obligation becomes reciprocally dependent on the activity of all other persons in making such allocative adjustments. In this respect, the two taxes differ only in the degrees of response. The additional factor that the corporate tax necessarily introduces is the "bridge" between the individual and the corporate entity. To become liable for tax, it is the corporation that must earn taxable income, not the individual. And to reduce its liability for the tax directly, the corporation must reduce taxable income. In order to estimate his own share, therefore, even apart from his own influence over aggregate investment in the corporate sector, the individual must predict how the corporation itself will behave in response to the tax. In other words, an additional decision-making entity is introduced between the individual and the fisc. A whole set of new predictions must be made concerning the decision-making processes of this in-between institution, the corporation, processes themselves involving most of the problems of group rather than individual decision-making." –James M. Buchanan, Public Finance in Democratic Process: Fiscal Institutions and Individual Choice (1967)

Did You Know
CEOs across America say they plan to increase capital spending, but have lowered their expectations on employment and sales for the short-term future, according to a survey released Tuesday by Business Roundtable. A majority of the CEOs surveyed, about 66%, said they expect sales to increase over the next six months. But that number is down from 79% of those surveyed in the group's last poll, which was conducted in the second quarter. But only 31% of those surveyed said they expected to increase their number of U.S. employees, a figure that was down from 39% in the second quarter.