Thursday, October 14, 2010

10/14/10 Post

Obama admission inspires GOP
Senate Republicans on Wednesday seized on President Barack Obama’s admission to The New York Times that “there’s no such thing as shovel-ready projects,” an acknowledgement they say suggests the administration’s $814 billion economic stimulus plan is a failure.
Government Approval at Lowest Point since Watergate
Public approval of the federal government at lowest level since the Watergate scandal, while Americans are evenly split over what the government’s role should be.
Ethanol decision seen as Corn Belt pandering
The Obama administration’s decision Wednesday to allow more ethanol in gasoline was met with fury from environmentalists and Big Oil, but it could help Democrats in the nation’s Corn Belt.
Lawmakers Urge Deficit Panel To Back Defense Cuts
House Financial Services Chairman Barney Frank, D-Mass., and more than 50 other lawmakers sent a letter to the Commission on Fiscal Responsibility and Reform describing the "urgent need" to cut excess defense spending.
Trade deficit widens sharply to $46.3 billion
The U.S. trade deficit widened sharply in August, reflecting a surge in imports of consumer products as businesses restocked their shelves in hopes of a pickup in consumer demand.
State and City Pensions Could Destroy U.S. Economy
Six major cities have current pension assets that can only pay for promised benefits through 2020: Philadelphia, Boston, Chicago, Cincinnati, Jacksonville and St. Paul. An additional 18 cities and counties, including New York City, Detroit, Cook County in Illinois and Orange County in California would be solvent through 2020 but not past 2025.
Foreclosure Mess Deepens, as Experts Fear that U.S. Has Yet to See the Bottom
Instead of selling foreclosed homes, banks have been hanging onto them, waiting for the economy to improve. "These banks that have all this pent-up inventory will unleash it on the market, as soon as they see a minor uptick in real estate prices."
China still stockpiling foreign currency
In the latest sign that the Chinese could be keeping the yuan artificially undervalued, China's currency reserves jumped in the third quarter, to one of the highest levels on record.
Fast-growing states suffer worst in recession
Call it the migration bust: Many of the fastest-growing areas of the country during the housing boom are now yielding some of the biggest drops in income as a result of the economic downturn.
Drilling ban's job impact less than feared
With the end of the deepwater drilling moratorium, it seems that fears of massive job losses among drill workers may have been overblown.
Food, drink makers push back at soda taxes, junk-food curbs
Last May, D.C. lawmakers approved a measure that would add sports drinks, soda and other sweetened beverages to the list of food items subject to the city's 6 percent sales tax.
U.S. producer prices up twice as fast as expected
Rising food and energy prices pushed inflation at the wholesale level up twice as fast as expected last month, and prices excluding those staples rose at the fastest annual pace in a year, data released by the Labor Department showed on Thursday.
Dollar hits fresh 15-year-low against yen
The dollar fell to a fresh 15-year-low against the yen in Tokyo on Thursday amid growing speculation that the U.S. Federal Reserve will ease monetary policy next month.
U.S. to Let Insurers Raise Fees for Sick Children
The Obama administration, aiming to encourage health insurance companies to offer child-only policies, said Wednesday that they could charge higher premiums for coverage of children with serious medical problems, if state law allowed it.
Regence Blue Shield customers notified of skyrocketing rates
Rates are going up, and many blame it on the new health care law.
Obama calls on Congress to extend tax break for college students
President Barack Obama called Wednesday for Congress to extend the tax credit that helped soften the blow of college tuition for more than 12 million students last year.
Don’t let them eat cake: Queen cancels holiday party for staff
Queen Elizabeth has canceled a planned Christmas party for her staffers after deciding it would be inappropriate to celebrate as ordinary Britons feel the pinch from tough economic times.
Thousands of Nonprofit Groups Face New Tax Burden Starting Friday
Thousands of nonprofit businesses across the U.S. -- from homeowners associations to Masonic lodges to collectors' clubs -- could be stripped of their tax-exempt status on Friday because of filing rules that changed three years ago but are still catching filers unaware.

Secondary Sources: Retirement Planning, Why QE2?, Fed and the World
A roundup of economic news from around the Web.
Hoping it will Go Away? Employee Benefits Breaking Budgets
So far attempts to rein in costs by billing retirees for part of their premiums have met with lawsuits. And governments are only recently coming to terms with the size of these promises.
Did Fed Cause 2000s Bubble by Holding Rates Too Long Too Low?
Greenspan and Bernanke said: No, and they’ve got numbers to make their case. Now comes a pair of economists from the European Central Bank to make the opposite case.
Two unemployment puzzles
The first puzzle about unemployment when thought about from within the search-matching framework is that unemployment rates are highest among the least skilled and most homogeneous skills, i.e. among those worker/jobs with the easiest matches. ...the second puzzle is that uncertainty should matter most when hiring and firing costs are high and once again these costs are lowest for those workers with the greatest unemployment rates.
New Normal: 7%-8% Unemployment?
Those dire thoughts come from Joseph Stiglitz, Nobel laureate and economics professor at Columbia University. His book “Freefall,” now out in paperback, chronicles the events that led up to the financial collapse and global recession of the past few years and what lies ahead.
The Myth of Shovel Ready
The way to avoid this problem is a rigorous cost-benefit analysis of each government project. Such analysis is hard to do quickly, however, especially when vast sums are at stake.
Hard-Hit Areas Could Lag for Decades
Nearly three decades after the 1980s recession, those areas most damaged are still lagging behind.
RealtyTrac: Record Repossessions reported in September
"A record total of 102,134 bank repossessions were reported in September, the first time bank repossessions have surpassed the 100,000 mark in a single month."
Messynomics and the Troubles with Money
You don't need to call this "Austrian" economics, though Mises and Hayek did more than any other economists to get us to think about the messy implications of the world and how the market system and relative price adjustments guides us in copying with the imperfections of man and the world.
A Few More Thoughts on the Foreclosure Scandal
The "foreclosure scandal," as I understand it, is that with securitization, the actual noteholder has changed in ways that may not have been recorded properly at the county records office. However, the identity of the noteholder is well defined in the trading systems used by mortgage securities traders.
Just How Bad Will Foreclosure-Gate Get?
Ally Bank, JPMorgan Chase, and Bank of America have all begun investigating problems with foreclosure paperwork. But could it all be a blessing in disguise?
The Great QE2 Experiment: Success Now, Failure Later
Quantitative easing is supportive of the stock market, commodity prices for the time being, but will add to issues in the real economy and the Fed's exit problems down the road.
The Coming Energy Crunch: There's No "Plan B"
The impact of peak oil on markets, lifestyles, and national solvency deserves the highest attention -- but some important players seem to be paying no attention at all.
The Tea Party Is Here to Stay
There is still hope for our country: the Tea Party. Decentralized and skeptical of central authority, the Tea Party offers baffled politicians and lobbyists no one to co-opt.
The 2010 Index of Dependence on Government
The problem caused by unsustainable promises of entitlement benefits to millions of Americans will not go away of its own accord. In fact, the IMF predicts that U.S. public-sector debt (federal plus state) will equal 100 percent of the U.S. gross domestic product by 2015 unless the annual deficits are immediately cut by an amount equal to 12 percent of GDP.
The EPA Ozone Regs: Another Obama Jobs Killer
The EPA normally waits at least five years before revising their ozone standard, but there is nothing normal about the Obama EPA. In January 2010.
Spending Has Steeply Increased
Overall, Washington is spending 23 percent more today than it did two years ago. Quite a stunning increase given the concern about deficits and fiscal austerity other nations are embarking on.
After Waiting for Superman: Be a Part of the Solution
Waiting for Superman has left moviegoers rightfully outraged at the state of America’s education system. It’s an accurate portrayal. In many of the nation’s largest cities, fewer than half of all children graduate high school.

Research, Reports & Studies
The Regional Economist: Disagreement at the FOMC: The Dissenting Votes Are Just Part of the Story
It's safe to say that the past few years have been interesting for the Federal Reserve System, particularly for the members of the Federal Open Market Committee (FOMC). Difficult decisions have been made: The federal funds rate has been lowered to basically zero, and money has been distributed to various financial institutions in order to keep them solvent.
The 2010 Index of Dependence on Government
This year’s publication of the Index of Dependence on Government marks the eighth consecutive year that The Heritage Foundation has flashed warning lights about Americans’ growing dependence on government payments and programs. For eight years, the Index has signaled troubling and rapid increases in the growth of dependence-creating federal programs, and for each of these years Heritage has raised concerns about the challenges that rapidly growing dependence poses to this country’s republican form of government and for the broader civil society.

Economists’ Comments & Opinions
Your sovereignty & trade
The only fair policy -- and the only one that ensures long-run prosperity for all -- is a policy in which no one's consumer sovereignty is ever sacrificed.
Capitalism Saved the Miners
If those miners had been trapped a half-mile down like this 25 years ago anywhere on earth, they would be dead. What happened over the past 25 years that meant the difference between life and death for those men? ...Short answer: the Center Rock drill bit.
QE2: Why is the Fed doing this?
Most observers now seem convinced that the Federal Reserve will shortly implement QE2, a second round of quantitative easing. It's worth taking a look at what QE2 is and is not expected to accomplish.
The other demographic dividend
The next Facebook is increasingly likely to be founded in India or Indonesia rather than middle-aged America or doddery old Europe.
Tea partiers won't go when fun ends
The tea party isn’t about to go away after the November elections. Its powerful message of limited government is likely to remain a sharp thorn in the side of those in both parties who want to continue politics as usual.
Currency Devaluation War: When Will the Next Crisis Start?
Don't get caught up in the hype as this entire rise in the markets isn't sustainable.
A Runaway Market?
Even if you didn't anticipate this rally, there will always be new opportunities to make money in financial markets.
Hiding the Cost of Government Leads to Bigger Government
Politicians love to rail against car dealers and mortgage lenders who surprise consumers with hidden costs. Yet Congress hides from voters a huge part of the cost of government: the hidden costs of taxes, which include lost income and jobs. Failing to account for these costs creates a bias in favor of bigger government and a less efficient tax code.

Graph of the Day
A Hidden Cost of ObamaCare
See: Reagan Recovery vs. Obama Recovery

Book Excerpts
"The consumers suffer when the laws of the country prevent the most efficient entrepreneurs from expanding the sphere of their activities. What made some enterprises develop into big business was precisely their success in filling best the demand of the masses." –Ludwig von Mises, Planned Chaos, (1947)

Did You Know
Hispanics live longer than whites or blacks, according to the first-ever life expectancy data for the U.S. Hispanic population, which were released Wednesday. On average, Hispanics outlive whites by 2.5 years and blacks by 7.7 years, according to the report. Their life expectancy at birth in 2006 was 80.6 years, compared with 78.1 for whites, 72.9 for blacks and 77.7 years for the total population.