10/15/10 Post

BUZZ: Early Third Quarter GDP Forecast

Today's News
Obama Administration Set to Announce Second Year of $1.3 Trillion Deficit
The Obama administration will announce it has exceeded the $1 trillion mark in the federal deficit -- predicted by Congress' research arm last week as $1.29 trillion -- for the second straight year as it projects an even larger gap between revenues and spending for fiscal year 2011.
Judge disses Dems' 'Alice in Wonderland' health defense
U.S. District Judge Roger Vinson allowed two major counts to proceed: the states’ challenge to the controversial requirement that nearly all Americans buy insurance and a required expansion of the Medicaid program.
Bernanke: Fed prepared to act to boost economy
The Federal Reserve is prepared to take new action to boost the economy, its chairman, Ben S. Bernanke, said Friday morning, because inflation has been too low of late and unemployment is poised to come down too slowly.
Bernanke Gives Strong Indication Fed Will Act
Just how much money the Fed will inject into the economy remains uncertain, and Bernanke gave no indication of a figure in his address. He did note some risks to embarking on another round of quantitative easing, including worries that the Fed would have a difficult time extricating itself when it wanted to tighten monetary policy again.
Social Security benefits will remain flat for 2nd straight year, government says
For the second year in a row, the nearly 54 million retirees and other Americans who receive Social Security benefits will not get any cost-of-living increase in 2011 in their monthly checks, government officials announced Friday morning.
TARP Contracting Has 'Significant' Transparency Issues
Treasury's use of private contractors as part of the much-criticized Troubled Asset Relief Program raises "significant" transparency and conflict concerns, the Congressional Oversight Panel said in a report this morning.
Who can magically fix the economy? No one
Let us tell you an ugly truth about the economy, a truth that no one in power or who aspires to power wants to share with you, at least until after the midterm elections are over. It's this: There is nothing that the U.S. government or the Federal Reserve or tax cutters can do to make our economic pain vanish overnight. There are no all-powerful, all-knowing superheroes or supervillains who can rescue or tank the economy all by themselves.
September Retail Sales Up for Third Straight Month
Americans spent more money on cars, furniture and at hardware stores to boost retail sales to a third monthly increase in September.
CPI: Inflation rate stays uncomfortably low
Consumer prices are up slightly over last year driven by climbing food and energy costs, but still lower than policymakers would like.
House to vote on bonus Social Security payment
Pelosi says $250 lump sum needed since no cost-of-living increase this year.
Lessons About Market Crises from Greece's Quiet Recovery
It may seem tough to fathom now, but few things struck terror in the hearts of investors like the tiny Greek economy did at the beginning of this year. However, the country's dire financial conditions have healed better than most would have imagined.
Sovereign Debt Default Risk
...default risk has fallen the most for Japan, China, Australia, Chile, and South Korea since July 2nd. It has risen for just four countries -- Egypt, Portugal, Ireland, and the US. Yep, the US has seen default risk rise 15.7% since the start of July, even as the equity market has performed well. Germany has the lowest default risk of all the countries shown.
Has Obama Raised Taxes? That Depends on Whom You Ask
Americans for Tax Reform (ATR) point to the cost of Obama's health care legislation as proof that the president has violated his pledge not to raise taxes on families earning less than $250,000 and on individuals earning less than $200,000.

Blogs
Atlanta’s Lockhart: Fed Should Provide ‘Certainty’
The whole theme of uncertainty is really very prominent in the minds” of Fed officials and quantitative easing could help alleviate the problem.
The Economist on the U.S. Pension Crisis
San Jose offers workers its own muncipal plan and according to Robert Novy Marx and Joshua Rauh, their unfunded liability is about $4 billion, or 321% of the city’s 2006 revenues
Parsing Bernanke: Takeaways From Boston Speech.
The takeaways:Unemployment is way too high, inflation is too low, the first round of bond buying — aka Quantitative Easing — worked and the Fed is thinking about publicly pledging to keep short term rates near zero for a REALLY long time.
Big Ben: What He Said and What it Means for the Markets
The S&P emerges as a government sponsored entity.
Time to go to work.
With a new round of monetary easing probably,every little utterance out of the leaders of the Fed's Open Market Committee is heavily scrutinised. Today it was the Chairman, Ben Bernanke's turn to set tongues wagging.
Obamacare Suffers Another Legal Blow
The deliberate consideration that these district courts are giving to these serious constitutional arguments indicates that the probability that the Supreme Court will ultimately strike down the individual mandate continues to increase.
How Government Micromanagement Could Discourage Access to Some Preventive Services
The new health care law requires insurers to cover all preventive measures rated “A” or “B” by the United States Preventive Services Task Force (USPSTF) with zero cost-sharing. Otherwise, “a plan or issuer has the discretion to either cover or not cover additional preventive services not recommended by the USPSTF.”
What’s the Biggest Tax Mistake That Might Be Made This Year? A Freakonomics Quorum
Consider the ingredients: a frail economy, a toxic political environment, looming hard deadlines and massive uncertainty in the business community — the perfect circumstances under which to write some great federal tax policy!
New, Useful Tool to Keep Up with the Health Care Lawsuits
Obamacare is now being challenged by 20 different lawsuits with 21 different states as plaintiffs, but it is difficult to find all the different court documents and key arguments for the ongoing cases.
Nearly three decades after the 1980s recession, those areas most damaged are still lagging behind.
Andrew Biggs
How Many Times Should We Rebate Payroll Taxes for Low Earners?
Over at e21, Chuck Blahous—the Bush White House’s point man on Social Security and now a public Trustee for Social Security and Medicare—discusses a Social Security reform proposal from the Committee for a Responsible Federal Budget, which is designed as a middle-ground plan that could achieve some level of consensus on reform
A Legal Victory on the Road to Repeal
Yesterday, Roger Vinson, senior federal judge of the United States District Court for the Northern District of Florida, characterized the Obama Justice Department’s motion to dismiss the constitutional challenge to Obamacare brought by 16 state attorneys general, four governors, two private citizens and the National Federation of Independent Business (NFIB) as “not even a close call.”
The wrong sort of inflation
Terrified by memories of the 1930s and Japan’s more recent experience in 1990s and 2000s, the academics who now dominate the Federal Open Market Committee display a hyperactive compulsion to tinker with monetary policy in a bid to solve all the problems besetting the U.S. economy.
Pelosi’s PAYGO Ploy: Budgetary Gimmick Provides Cover for Liberals
Four years after Democrats campaigned on the promise of using pay-as-you-go budgeting, their record is dismal. Since gaining control of Congress in 2007, they’ve gamed, ignored or employed PAYGO on 32 occasions to justify new spending or tax increases.
Secondary Sources: Value Added Tax, Rich Spending, Trade Risks
A roundup of economic news from around the Web.
Thoughts on Unemployment
The overall puzzle is why the unemployment rate is highest for low-skilled workers.
With Moratorium Lifted, Time to Start Issuing Permits
From the perspective of those in the Gulf who suffered from the moratorium, lifting it may seem more like an obviously smart move than a reason for self-congratulation. It has never been widely popular to celebrate putting out a fire one started in the first place. In fact, it is more like damage control.
Good Time to End Farm Subsidies
The Wall Street Journal reports that the agricultural sector is recovering nicely from the recent recession while the rest of the private sector continues to struggle. The counter-cyclical nature of some farm subsidy programs means that the taxpayer bill for the year could be cut in half to only about $12 billion.
U.S. Manufacturing Growth Likely to Slow
Production by U.S. manufacturers is likely to keep growing but at a slower pace, according to a new survey by the Manufacturers Alliance/MAPI, a public policy and economic research group in Arlington, Va.
“… this only applies to big business …”
The union- and trial-lawyer-backed Paycheck Fairness Act, which would greatly expand the scope of lawsuits against private employers alleging gender pay inequality, has run into considerable resistance in Congress.
Free Money! It’s a Nifty Gift from the Federal Government!
As state and local governments are under crushing budget constraints, mega-sized infrastructure boondoggles are cropping up all over the country. With the promise of “free money” from the federal government, these projects are proving too tempting for state governments to turn down.
Fannie and Freddie in a Mess
The foreclosure mess is now spreading to Fannie and Freddie, as our government-owned mortgage machines starts looking into what, exactly, its servicers have been doing with their loans.
“Dropout Factories” and “The Lemon Dance” in Waiting for Superman
Not only must students be free to learn, but good teachers must also be free to teach. The status quo punishes innovation and tolerates a baffling degree of teacher incompetence.
It’s Time to Foreclose on Big Government
The biggest foreclosure yet may begin on November 2nd, as voters start foreclosure proceedings against big government. It’s run up more debt than we can afford to pay.
No Fizz in Upcoming COLA
Tomorrow, new figures from the Labor Department are expected to confirm that for the second year in a row, Social Security recipients will receive no cost-of-living adjustment (COLA) in January. Nevertheless, people who have been receiving Social Security for a few years are still ahead of the inflation game.

Economists’ Comments & Opinions
QE2 and Rising Markets: Where Can Investors Find Real Value?
Don't be seduced by rising securities and commodities prices into thinking that all's well.
A Significant Victory In the Fight Against Obamacare
Americans who own and run their own small businesses understand better than anyone the importance of limited government for prosperity and liberty. So, when Congressional Democrats and the Obama administration decided that they had the power to force every American citizen to buy health insurance the National Federation of Independent Business moved quickly to oppose this unprecedented and profoundly unconstitutional claim of power.
Shamed By What America Owes
Barack Obama apparently never figured out that he had been elected in part because that massive Republican borrowing had sickened the American people. So in near-suicidal fashion, he took Bush's last scheduled budget deficit of more than $500 billion — in a Keynesian attempt to get the country out of the 2008 recession and financial panic — and nearly tripled it by 2010.
Stop Bashing Business, Mr. President
If we tried to start The Home Depot today, it's a stone cold certainty that it would never have gotten off the ground.
Put our money where our mouth is: Build better
This week, the Treasury Department and Council of Economic Advisers released an important new analysis on the economic benefits of transportation infrastructure investment. The findings prove what we have long been advocating: Our nation’s infrastructure has been neglected for far too long.
Liberalism and Public Works
Entitlement politics leaves little money for roads and tunnels.
Nightmare on Every Street
Fannie Mae and Freddie Mac are broke and the largest owner of their obligations is now the United States Federal Reserve.
Macroeconomic Predictions and Realities
Six months of spot-on predictions and educational misses regarding the US recovery, the European crisis, emerging markets, the dollar, and more.
Obama shafts the economy
Job growth trapped under bureaucracy and taxes.
Republican Congress means more jobs
What voters have been saying — to incumbents and challengers alike since early 2009 — is that the top job for the president and Congress is jobs. Voters want elected officials to focus, above all, on jobs and the economy.
Recession is tragedy for young, almost-old
Persistently high unemployment for teenagers is a tragedy that could haunt a whole generation for years. And the Great Recession has also been a disaster for older Americans that could ruin their finances for the rest of their lives.
Tax, Spend, and Shovel
Maybe it's unfair for people to think Obama is just another tax-and-spend Democrat. After all, some tax-and-spend Democrats are actually competent at it.

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.
Defending Defense: Setting the Record Straight on U.S. Military Spending Requirements
Now, just as this strain on the military—engaged in today’s persistent irregular wars, yet unable to prepare fully for the wars of the future—reaches a point of crisis, come new calls to cut the Defense Department’s budget, amplified by the fears of a faltering economy, the federal government’s desire to boost spending elsewhere, and its inability to rein in other spending. Yet the arguments frequently made for Pentagon spending cuts are concocted from a mix of faulty analysis and out-of-context “facts.”

Book Excerpts
"The more the state "plans" the more difficult planning becomes for the individual." –F.A. Hayek, The Road to Serfdom, (1944)

"Did You Know"
Freddie Mac: 30 year Mortgage Rates fall to 4.19 percent... "The last time 30-year FRM rates were this low was April 1951 (based on a data series of FHA rates going back to 1948)."