Friday, October 1, 2010

10/1/10 Post

The legacy of the 111th Congress
Like a tale of two cities, the 111th Congress roared out of the starting gate in January 2009 only to gasp to a pre-election halt this week after punting major spending and tax decisions to an uncertain lame-duck finale.
Pew Report Finds 'No Silver Bullet' For Deficits
Both tax hikes and spending cuts will be needed to reduce crippling national debt, new study shows.
Foreclosures Slow as Document Flaws Emerge
Evictions are expected to slow sharply, housing analysts said, as state and national law enforcement officials shine a light on questionable foreclosure methods revealed by two of the country’s biggest home lenders in the last two weeks.
Bloomberg Would Extend Tax Cuts For Two Years
"I'd be worried a little about the economics of stopping any growth," he told the audience gathered at the Newseum for the Washington Ideas Forum. "The economy is so fragile you don't want to do that."
Many wheat growers won't benefit from price jump
Although the poor harvest in Russia helps U.S. wheat growers, no one expects wheat prices to reach the record levels they did two years ago when the world was down to almost a 60-day supply of wheat.
Dollar Reverses Course on Upbeat U.S. Data
Second-quarter gross domestic product data, weekly jobless claims and a closely watched survey of Chicago-area purchasing managers all gave investors heart that the economy may be regaining some steam.
Americans tread water in gulf between rich, poor
The recession technically ended in the middle of last year, but the numbers can't tell the whole story. The census report translates to stories of impatience, resignation and hopelessness for those who are living it across the country.
Austerity Plan Spurs Bond Rush
A measure on the Colorado ballot for November would ban all borrowing by the state and severely restrict it at the municipal level, making Colorado the only state whose agencies would be unable to issue debt, municipal experts say.
Holiday hiring picture gets a bit merrier
The jobs probably won't be enough to be a dent in the nation's nearly 10 percent unemployment rate, but for Americans desperate for some work, they're far more than an early Christmas present.
Bernanke: Teach us out of the next crisis
Fed Chairman Ben Bernanke told a crowd of schoolteachers in Washington Thursday they can help prevent the next big financial crisis by teaching students personal finance basics of saving and budgeting.
Veteran Staffer To Replace Emanuel
White House Chief of Staff Rahm Emanuel, one of the most visible faces of the Obama presidency, will step down Friday to run for mayor of Chicago, leaving the high-profile post at least temporarily to a longtime Obama aide who has guarded his privacy fiercely.
Postal Service denied rate hike
Christmas is not coming early this year for the U.S. Postal Service, after regulators denied a request Thursday that would have raised the price of a first-class stamp by 2 cents, to 46 cents.
Irish Crisis Shakes Europe
Dublin to Spend Billions More to Shore Up Lenders; Jitters Over Euro's Future.
Personal income is up, and so is spending
Personal income increased $59.3 billion, or 0.5% last month, while spending by individuals remained steady.
Regulators: Much to do on Wall Street reform
The Federal Reserve has 50 new rules to write, the Federal Deposit Insurance Corp. has 44 new rules to write. The Securities and Exchange Commission has 100 rules and 20 studies on its plate. And Treasury has two new agencies and an oversight council to set up.
U.N. Says Global Employment Needs 5 Years to Rebound
To get back to the level of employment in 2007, the global economy needs to create nearly 23 million jobs, including more than 14 million in developed countries, the report said.
China manufacturing sector grows
China's manufacturing sector picked up pace in September, easing some fears that the world's third largest economy might be in for a rapid slowdown.
China warns U.S. currency bill might hurt ties
Beijing warned Washington Thursday that economic ties might be damaged after American lawmakers escalated the conflict over China's currency controls, inching the two economic giants closer to a trade war.
Health reform to worsen doctor shortage: group
The U.S. healthcare reform law will worsen a shortage of physicians as millions of newly insured patients seek care, the Association of American Medical Colleges said on Thursday.
Ireland Prices Bank Rescue; Deficit at 32% of GDP
Ireland's central bank has put a 34 billion euro price on bailing out stricken Anglo Irish Bank under a worst case scenario and said Allied Irish Banks needs to raise an additional 3 billion euros by the end of the year.
Global employment crisis will stir social unrest, warns UN agency
Global employment will not recover to pre-crisis levels until 2015 if current policies are pursued, creating social tension, the International Labor Organization has warned.
Thousands show up in LA for free mortgage help
Armed with folding chairs, coolers and jugs of water, thousands of people who want to avoid losing their homes lined up around the Los Angeles Convention Center on Thursday seeking help with mortgages they can no longer afford.
Latest unemployed: Stimulus-subsidized workers
Tens of thousands of low-income workers lost their jobs Thursday as a stimulus-subsidized employment program came to an end.
Consumer spending, incomes both rose in August
Consumer spending rose by a moderate amount in August while incomes increased by the largest amount in eight months, a gain that was propelled by the resumption of extended unemployment benefits.
Child nutrition bill stalls in House
First lady Michelle Obama's campaign for healthier school lunches has stalled in Congress after anti-hunger groups and more than 100 Democrats protested the use of food stamp dollars to pay for it.
Second-Quarter Growth Is Revised Higher, to 1.7%
Still, that is a sharp slowdown from a 3.7 percent rate in the first quarter and does not change the big picture: the economy has been losing momentum since the end of last year.

ObamaCare Prods Yet Another Insurer to Flee the Market
By forcing the exit of Principal Financial Group — which ran a profitable, $1.6 billion health insurance business — ObamaCare has now left 840,000 Americans to find another source of coverage.
Hotel Occupancy Rate: Slightly below 2008 Levels
"Overall, the U.S. hotel industry rose 7.5% in occupancy to 64.2%, average daily rate was up 2.6% to US$103.09, and RevPAR ended the week up 10.3% to US$66.15."
Postal Service’s Financial Woes
The U.S. Postal Service is in a lurch after Congress wrapped up business until November without giving the USPS a break on a $5.5 billion retiree health benefits payment that’s due tomorrow. Combined with an expected loss in the billions of dollars, the USPS could run out of money in October.
Which Cities Face Biggest Housing Risks?
Within more than 500 metro areas, the top 20 most stressed include nine in California and six in Florida, where the housing bust has been particularly acute. Among the most populous cities, Miami tops the list, followed by California’s Inland Empire, Los Angeles and San Diego.
McDonald’s Case Highlights ObamaCare’s Threat to Low-Income Workers’ Health Insurance, Political Freedom
Many employers, such as McDonald’s, provide health benefits that are less comprehensive than most. They may have an annual claims limit of $10,000 or less. These are the health plans (and the workers), however, that are seeing the highest premium increases under ObamaCare.
What Makes the US Health Care System So Expensive?
In particular, Aaron Carroll's series on What Makes the US Health Care System so Expensive does a very good job of locating the sectors where the US health care system is more expensive than we would expect compared to other countries (it's less good at identifying why these sectors are expensive but we have to start somewhere.)
Overhauling CBO and JCT Is a Real Test of GOP Resolve, not the ‘Pledge to America’
Redemption is a good thing, however, so maybe the GOP actually intends to do the right thing this time around. One key test is whether Republicans do a top-to-bottom housecleaning at both the Congressional Budget Office and the Joint Committee on Taxation.
Secondary Sources: Small Business Job Creation, Fiscal State of the Union, Economics of Lobbying
A roundup of economic news from around the Web.
One reason why fiscal reform is difficult
The dilemma is simple: variations in Medicaid coverage account for a lot of the variation in the health of state government finances. Yet if states cut back on Medicaid in some manner, there will be more people on the more expensive subsidized exchanges, come the full onset of the Obama health plan.
Geithner on the Economy, Politics and More
Treasury Secretary Timothy Geithner spoke for roughly a half hour at The Washington Ideas Forum hosted by The Atlantic and the Aspen Institute on Thursday. Here are some points he made during his appearance...
Balancing the Fed’s Hawks, Doves
The Senate’s confirmation of Janet Yellen and Sarah Bloom Raskin to the Federal Reserve’s Board of Governors, continues to shift the balance of those who want more action to spur growth with those who are more concerned about inflation.
The Keynesian Attraction
Introspection, though fallible, is genuinely informative. We use it all the time to our great profit. And Keynesians should celebrate this truth, because some of their key premises pass the test of introspection with flying colors. Much unemployment is involuntary - there's no denying it. And workers genuinely resent - and employers therefore genuinely fear - nominal wage cuts. ...Of course, once Keynesians admit their real reasons, they do have a little problem: Some of their positions fail the introspective test!
Goolsbee Takes a Turn at the White Board to Explain Tax Cuts
Austan Goolsbee, the newly minted chairman of President Barack Obama’s Council of Economic Advisers, takes a turn at the White Board to explain the tax fight in Congress – and why Obama does not want to extend the expiring tax cuts of George W. Bush for households earning more than $250,000.
Is a Municipal Debt Crisis Imminent?
The basic problem: state and local governments are facing a new budgetary reality.
China's Embarrassing Foreign Aid Scam
While China spent tens of billions on hosting the Olympics, it still has its other hand out asking for donations.
Let the Market Control Pharmaceutical Costs
US consumers are being burdened with unnecessary costs that could be alleviated if worldwide prices were factored into the equation.
Is the Obama DOJ Committed to Race Neutral Law Enforcement?
On May 14, 2010, Department of Justice Civil Rights Division Assistant Attorney General Thomas E. Perez testified before the U.S. Commission on Civil Rights about the DOJ’s decision to completely drop charges against the New Black Panther Party and two of its members for alleged voter intimidation in violation of the 1964 Voting Rights Act.
Duck Season Opens
As Congress vacates Washington to campaign, they promise to return after Election Day to clean up the mess they leave behind.
Side Effects: Massachusetts Seniors Will Lose Medicare Advantage Plans in 2011
President Barack Obama’s promise that “if you like it you can keep it” may be this generation’s “read my lips—no new taxes,” claim.
The “Myth” of the American Founding
You should think twice the next time you invoke the Constitution or argue that the federal government is overreaching its power. According to The Economist, you may well have succumbed to “The Perils of Constitution Worship.”

Research, Reports & Studies
Canada’s Budget Triumph
...just 16 years later, Canada’s federal debt had fallen from 67 percent to only 29 percent of GDP. Moreover, in every year between 1997 and 2008, Canada’s federal government had a budget surplus.
Fiscal Policy Report Card on America's Governors: 2010
America needs a lot more "A" governors to face the fiscal challenges and make the needed tax and spending reforms.

Economists’ Comments & Opinions
Echoes of the Great Depression
As in the 1930s, policy uncertainty and hostility to business have retarded recovery. At least this time around the political price for economic failure promises to be swift.
Workers, Not Employers, Bear the (Full) Cost of Health Benefits
The Kaiser Family Foundation recently issued its annual survey of employer-sponsored health benefits, declaring: "Family Health Premiums Rise 3 Percent to $13,770 in 2010, But Workers' Share Jumps 14 Percent as Firms Shift Cost Burden." That's half-right — but the other half perpetuates a myth about employee health benefits that stands in the way of real health care reform.
CBO: Obama's Tax Plan Could Be Worst of All
...Obama's plan to extend only 80 percent of the Bush tax cuts could be worse for the economy in 2020 than the Republican plan to extend 100 percent, even though the GOP's plan would saddle us with more debt.
Curb Medicare Spending the Ryan Way
Nothing presents as great a threat to the federal budget — and therefore to economic growth — as the persistent and rapid growth of Medicare spending.
The Newspeak of Paul Krugman
To believe that spending — any kind of spending — is the cure for what ails us is to ignore the subjective nature of wealth and the microeconomic basis of economic growth in favor of an absolute reification of economic aggregates such as GDP and unemployment.
WARREN: It's Time to Simplify Financial Regulation
Perhaps most remarkably, the agency will not simply create new regulations: It has the power to get rid of old ones that are outdated, expensive or don't work.
They’re Coming to Get You
A fiscal horror story so terrifying, it can only be told in 3D!
Consumers Still Unaware of Impending Doom, Part 1
Credit cards and the government have encouraged spending, leaving many completely unprepared for retirement. This financial crisis will take decades to repair.
Why America Won't Have Hyperinflation
Many of the most respected names in economics predict hyperinflation, yet none of the actual economic or political factors required are present.
Consumers Still Unaware of Impending Doom, Part 2
Nobody believes today that major mega retailers like Target might not exist in 10 years, but it's an entirely plausible scenario.
David Rubenstein: U.S. is losing its competitive edge
The Carlyle Group co-founder says the U.S. threatens to fall behind China, thanks to our growing deficit and government debt. Meanwhile, Treasury Secretary Tim Geithner downplays the threat of a looming trade war.

"We get rich by finding ways to do more with less. As productivity increases in manufacturing and agriculture, employment falls." -Russ Roberts, Twitter

Graph of the Day
Mercatus Center: Tax Cuts, or Hikes, Are a Sideshow
Bush Tax Cuts: The Cheat Sheet
See: The Luck of the Irish
See: Where your taxes all go
VIDEO: The Latest from the Standup Economist

Book Excerpts
"The consumer-voter may be viewed as picking that community which best satisfies his preference pattern for public goods. This is a major difference between central and local provision of public goods. At the central level the preferences of the consumer-voter are given, and the government tries to adjust to the pattern of these preferences, whereas at the local level various governments have their revenue and expenditure patterns more or less set. Given these revenue and expenditure patterns, the consumer-voter moves to that community whose local government best satisfies his set of preferences. The greater the number of communities and the greater the variance among them, the closer the consumer will come to fully realizing his preference position." –Charles M. Tiebout, "A Pure Theory of Local Expenditures," (1956)

Did You Know
In Washington D.C. and the surrounding suburbs, 47.3% of people 25 years or older have bachelor's, master's, professional school or doctorate degrees, according to new Census Bureau data released Tuesday. The national average barely tips 25%. That metro area has the nation's highest percentage of residents with college degrees so you can call it America's brainiest place to live.