Friday, November 26, 2010

Budget News Nov.22-24

Portugal New Focus of Europe Debt Fears .
Hopes that the rescue plan being worked out for Ireland would stop pressure building on other European governments were set back Monday as retreating financial markets turned the spotlight to Portugal as the next potential domino to fall.
Pork Really Stinks: $1.8 Million to Study Pig Odor
Rep. Jeff Flake of Arizona waged a lonely battle against congressional spending earmarks for years, but now he’s got plenty of company as President Obama and House and Senate Republican leaders all support a moratorium.
Euro-Zone Private Sector Grows Despite Debt Woes
Growth in the euro-zone's private sector expanded sharply in November, boosted by a strong expansion in France and Germany, despite heightened concern about the rising debts of some euro-zone member states, particularly Ireland.
In European Debt Crisis, Some Call Default Better Option
Ireland has finally taken its medicine, accepting the financial rescue package European officials have been pushing for several weeks.
IMF: Greece Needs More Reforms
A delegation of European and International Monetary Fund officials said Tuesday that Greece was "broadly on track" with its efforts to cut its budget deficit, but warned the country would need to take tough structural reforms in the months ahead.
Irish Debt Crisis Forces Collapse of Government
Confronted with high-level defections from his governing coalition, Prime Minister Brian Cowen said he would dissolve the government after passage of the country’s crucial 2011 budget early in December.

Some States Weigh Unthinkable Option: Ending Medicaid
Elected and appointed officials in nearly a half-dozen states, including Washington, Texas and South Carolina, have publicly thrown out the idea.
GOP Ranks Fray on Vote to Raise Debt Limit
The government is authorized to borrow $14.3 trillion and is expected to hit that amount within a few months. If the limit is not raised, it could signal to the markets that the U.S. isn't prepared to meet its obligations and send tremors through the financial system.
State Tests Limits of Spending Cuts
Many within the state are now worrying about 2012, which is expected to be the toughest budget year yet as federal stimulus dollars dry up.

Economist Comments
Why We Should Be Thankful for the Fiscal Commission
In my own opinion, the probability that 14 commission members would sign onto a consensus report was zero all along; so was the probability that we would get a comprehensive deficit reduction deal out of the 112th Congress, absent a sovereign debt crisis or other economic crisis that forces the hands of elected officials.

Deficit reduction pleas fall on deaf ears
Their leadership has learned well the lesson of that earlier episode: deficit reduction requires painful tradeoffs and bipartisan compromise, and while the long-term economic benefit may be significant, the short-term political dividend is negligible at best.
US Budget Cutting Options Are Plentiful:Concrete Action Needed
Bowles and Simpson released a discussion draft about two weeks ago that they are now reworking in an attempt to come to an agreement next week.

CORRAO: It's the spending, stupid
Raising taxes just enables spendthrift government.
The 'Build America' Debt Bomb
The state and city fiscal mess is getting worse, yet the Obama administration wants Congress to make new taxpayer-subsidized bonds permanent.

Five Ways to Cut Military Spending Today
The U.S. military has an important purpose, protecting Americans, but that purpose has been distorted over the years. Here are five military spending cuts Congress and the President can make today while they undertake the harder task of rethinking the true purpose of the military and then restraining its use.
Defending Defense: A Response to Recent Deficit Reduction Proposals
The Center for Defense Studies issued a statement in response to the deficit commission co-chair's recent proposals.
Desperately Seeking Revenues in Michigan
Michigan’s municipal governments are on the hunt for revenues. Mayor Demsey sent out a letter asking tax-exempt organizations to make a voluntary contribution to the general fund.

Which States are Earmark Magnets?
Cato’s Tad DeHaven has a great piece in The New York Post on what the earmark ban means for New York. Not much, it turns out. New York taxpayers contribute 8.2% on average to the overall federal tax burden and receive only 2.1% of all earmarked funds, making them the last state in the earmarks line.
Bad Arguments for Earmarks, Good Arguments against Them
One of the things I find most disturbing about earmarks is how they contribute to vote-trading between members, which probably increases spending significantly, too. My guess is that fewer bills would go through if lawmakers had to get their colleagues to vote yes based purely on bills’ merits.
Will Republicans Get Serious on Spending?
It is tempting to think the Tea Partiers will force the party to finally live up to their promises of frugality. But the evidence suggests they are engaged in a task akin to plowing the sea.

Political Morality and the SS Trust Fund
The U.S. budget is not "tight." It is unsustainable. It is a lie. Politicians have made a set of future promises that under the most commonly-believed economic scenarios cannot be kept.
The knowledge that they were going to have a chance to start shoveling pork a little bit later in the process affected how much they appropriated at the beginning.
What is wrong in this picture?
"State governments are borrowing heavily from the federal government to keep paying unemployment-insurance benefits and, even with the weak job market, most states are raising payroll taxes to pay off the loans."
When Do City Pension Plans Run Dry?
Actuary John Bury has an analysis of when city pension plans are scheduled to run out of assets. Philadelphia, Chicago, and Detroit have about seven or eight years left.
Earmarks Are the Gateway Drug to Big Government Addiction
Members who otherwise might want to defend taxpayers are lured into becoming part of the problem.

Fiscal Commission Factsheet
...even if 14 of the 18 commissioners agree on policy recommendations, Congress is not required to act.

Employment News Nov. 22-24

Initial unemployment claims: Lowest since July 2008
The government's weekly jobs report brought a bit of good news Wednesday, as the number of Americans filing for their first week of unemployment benefits sunk to its lowest level in more than two years.
Consumers spend and earn more, layoffs slow
Americans earned more and spent more last month, and the number of people applying for unemployment benefits dropped last week to the lowest level in more than two years. At the same time, demand for long-lasting manufactured goods fell off.

State unemployment rates hold steady
The state unemployment picture was little changed in October, with rates holding relatively steady across the country, the government said Tuesday.

Another hit to states: Interest payments to Uncle Sam
The Great Recession has forced states to borrow $41 billion from a federal fund to cover unemployment checks for their jobless residents. Now their bill is coming due.

Economists Comments
FOMC members sour on growth, unemployment
The Federal Reserve’s governors and regional presidents have grown more sour on growth and unemployment, with some saying it could take more than six years for the jobless rate to return to normal levels, according to a summary of projections released Tuesday.
Bernanke Goal of Optimal Employment Elusive With Profits Bringing No Jobs
Not far from where Federal Reserve Chairman Ben S. Bernanke grew up, a revolution inside a Campbell Soup Co. plant explains why U.S. corporations are piling up profits -- with little need to hire more people.
Obama’s War on Gulf Drilling Sends American Jobs Overseas
You’d think that an unemployment rate hovering near 10% would focus the White House’s mind on job creation, not destruction, but the Obama administration stayed true to form yesterday when Interior Secretary Ken Salazar visited the Gulf and told offshore drillers that the permits they need to put Americans back to work are not coming anytime soon.

State Unemployment Rates in October: "Little changed" from September
Eight states now have double digit unemployment rates. A number of other states are close.

Unemployment Benefits Lead to Higher Taxes, Loans
A National Employment Law Project analysis found 41 states increased unemployment-insurance payroll taxes this year by an average of nearly 33.9%. The largest was a 168.5% boost from 2009 in Hawaii. As a weekend Journal article noted, states also are borrowing more from the federal government to help pay the high costs of unemployment insurance.


Monetary News Nov. 22-24

Fed Trims Outlook on Growth and Jobs
Federal Reserve officials downgraded their outlook for the U.S. economy at their early November meeting, projecting that the jobless rate could exceed 8% for two more years and that it won't return to its former vitality for five years or more.
Fed Considered long-term target in secret
The US Federal Reserve considered a radical change to its monetary policy at an unannounced metting in mid October which could have committed it to buying an unlimited amount of securities.
Federal Reserve minutes show split on QE2
When Federal Reserve policymakers met behind closed doors earlier this month to discuss the controversial policy of quantitative easing, the debate was a contentious one.
Corporate Issuers Freeze Up
Worries about Europe's debt troubles and growing tensions in Korea froze corporate credit markets.

Geithner Says Obama Opposes Depriving Fed of Employment Mandate
U.S. Treasury Secretary Timothy F. Geithner said the Obama administration would oppose any effort to strip the Federal Reserve of its mandate to pursue full employment and warned Republicans against politicizing the central bank.
Backlash could tie Fed's hands, Goldman says
Are hopes for a QE2-driven recovery already drifting off course?

Economists Comments
Ben Bernanke: The Central Banker, the Diplomat?
The chairman's vision, where the emerging world should just do what the developed world wants it to do, isn't going to happen. And lecturing people on a specific world view isn't going to make you any friends.
Here's Why the Fed Plan is Failing: We're All Austrians Now
It's no accident that Austrian economic is newly popular. It provides the best explanation for the business cycles we just lived through.

BACON: Bernanke's raid on the middle class
Fed action will reward the profligate and punish the prudent.
Fed Can’t Serve Two Masters
Last week Congressman Pence and Senator Corker announced a bill to end the Federal Reserve’s dual mandate of price stability and maximum employment.

Seventies Revival
How close are we to a 1970s scenario? There are similarities as well as differences.
I'd Sign Any Letter to Avert Inflation Crisis: Kevin Hassett
The biggest potential benefit of QE2 is that it will reduce the risk of deflation. If prices start dropping, the economy could conceivably enter a death spiral, especially if wages don’t adjust downward as prices fall. In that case, employers might cut even more workers.
O Deflation, Where Is Thy Sting?
Whether or not we are in danger of deflation all depends on what your definition of deflation is.
A Critical Analysis of Current Federal Reserve Actions and Their Consequences
An exploration of recent QE actions by the Fed, the repercussions, and what implications similar policies may have on financial markets, the global economy going forward.
Bernanke Under Fire: Why an Early Tuesday Turkey Could Shake Up Markets
On November 23, the Fed will release the minutes of the FOMC meeting held earlier this month as Bernanke steps up defense of QE2 in the face of growing criticism.

Thoughts on QE2
A LOT has been written recently, pro and con, about the Fed’s new round of quantitative easing, dubbed QE2. But, frankly, much of the discussion on both sides lacks a coherent analytical framework for thinking about the key issues. I try here to provide such a framework.
Secondary Sources: QE2 Exit, Fed and Inflation, Bank Scrutiny
A roundup of economic news from around the Web.
Economists React: Fed Failing on Both Sides of Mandate
The bottom line from the forecasts is that the FOMC thinks that it will be failing on both sides of its dual mandate three years from now. It is easy to understand their dovishness given that outlook.
The case for doing less or nothing
John Taylor lays out the case for rules vs. discretion and in the process, does a superb job of summarizing his case for why doing less or even nothing would have been better than the activist government response over the last two and a half years.
The Fed’s Clouded Vision Of The Future
If you are looking for guidance and clarity from the Federal Reserve, your trust will be misplaced. The recently released minutes of the Federal Reserve Open Market Committee’s (FOMC) November meeting reveal a deeply divided Fed with no clear consensus on the effectiveness of their policies.

Weaker Dollar Not Likely to Spur Job Creation
The effects of monetary easing are starting to hit the market, including an increase in US exports.

Geithner Politicizes the Fed, Warns Congress Not to Do the Same
To top it off, the Fed itself is politicizing the Fed by interfering and commenting on fiscal policy while whining about Congress commenting on monetary policy.
Bernanke Translated
Here are excerpts from Mr. Bernanke’s remarks, with translation by David Wessel, economics editor of The Wall Street Journal and author of “In Fed We Trust: Ben Bernanke’s War on the Great Panic.”
Bank Failures Reach 149 in 2010, Totaling 314 Since End of 2007
The FDIC closed three more community banks last Friday. There are now 22 failures so far in the fourth quarter.


Tax News Nov. 22-24

More Than 80 Percent of Americans Say Keeping Bush Tax Cuts a Priority
More than 80 percent of Americans say it is at least "somewhat important" that Congress extend the Bush tax cuts before they expire at the end of this year.
Liberal Millionaires Urge Democrats to Compromise on Bush Tax Cuts
Group would keep Bush tax cuts for families earning up to, oh say, $1 million.
Your paycheck is about to shrink
Are you ready to give up $30 a month? That's what may come out of your paycheck if -- as expected -- the Making Work Pay tax credit expires at the end of the year.

Tax cuts, federal budget await Congress' return from holiday
Coming off an election in which voters unleashed their fury over Washington's perceived inability to grapple with tough issues, lawmakers spent much of the first week of the lame-duck session going after low-hanging fruit while leaving a number of big-ticket items on the table.
If tax breaks for the wealthy expire, would small business suffer?
Republicans say an extension would encourage spending and job creation. Most Democrats say the majority of small firms wouldn't be affected anyway.
Bush tax cuts: What happens if Congress punts
Congress' dithering over the Bush tax cuts could mean smaller paychecks for everyone come Jan. 1 -- no matter what lawmakers decide to do.

States Raise Payroll Taxes to Repay Loans
Demands on Depleted Unemployment-Insurance Funds Led to Borrowing of Nearly $41 Billion From Federal Government.

Economist Comments
Year-end tax strategies for small-business owners
Tax tips to keep more of your profit in your pocket.
Tax hikes aimed at the rich hit everyone
It is time to set the record straight. Small-business employers and their employees face a looming crisis come Jan. 1. That is when hefty tax increases will take effect if Congress does not act to reinstate the 2001 and 2003 tax rates. Worse, there is a misperception among policymakers and the general public that increases to the top-tier rates will only be a tax on the rich.

FEULNER: The trouble with tax hikes
When we raise taxes on the rich, they react as any of us would: by doing what they can to shrink their taxable income. That means not investing as much in the kinds of projects that create jobs. This sets up a chain reaction: Lower-income workers wind up with fewer opportunities and smaller salaries - those fortunate enough to remain employed, that is.
Estate Tax
The estate tax has gotten a lot of press this year because, well, it doesn’t exist this year and Congress is set to discuss what they want to do with it, along with tax rates, in subsequent years.
RAHN: Thoughtless taxation
We're past the point of diminishing returns.
Buffett's Wealth of Dollars, Lack of Insight
Billionaire investor Warren Buffett says the rich should have a higher tax bill. He's free to hold this opinion. But he's not free to turn his ideas into law. For this, the nation should be grateful.

The Blur Between Spending and Taxes
The Bowles-Simpson proposal is not perfect, but it is far better than the status quo. The question ahead is whether we can get Senator Porkbelly and Congressman Blowhard to agree.
Higher Taxes Won't Reduce the Deficit
History shows that when Congress gets more revenue, the pols spend it.

Deficit Hawks, Tax Chickens
In other words, both plans to cut the deficit are hawkish, and the response to them largely represents hawks revealing their inner chickens.
Tax Loopholes Are Corrupt and Inefficient, but They Should only Be Eliminated if Every Penny of New Revenue Is Used to Lower Tax Rates
The problem is on the spending side of the fiscal ledger. The Simpson-Bowles Commission and the Domenici-Rivlin Task Force were charged with figuring out how to reduce red ink. We already know from Congressional Budget Office data, however, that we can balance the budget fairly quickly by limiting the growth of government spending.


Health Care News Nov. 22-24

High Deductibles Prompt Many Families to Forgo Treatment
Lower-income families with high-deductible insurance plans are opting to forgo treatment more often than other groups, a new study finds.
HHS Sells Overhaul Law With Data
HHS found that average deductibles in employer-sponsored insurance had nearly doubled, increasing from $446 to $917 for single coverage from 2002 to 2009, and $958 to $1,761 in family coverage during the same time period.
Poll: Voters want foes to reject health care
Most voters say members of Congress who campaigned against the health care reform bill should turn down the medical insurance offered them as federal employees.

Rules Eased for Some Health Plans
Amid pressure from employers, the Obama administration on Monday loosened rules for bare-bones health-insurance policies. It marks one of the administration's biggest steps to peel back regulations that big business found onerous under the health- care overhaul.
Insurance Regulations Follow State Recommendations
The HHS rules lay out a process for states to request an adjustment over the next three years if they believe that the rules' medical-loss ratio will destabilize their insurance market.
Johanns Hopes to Repeal Health Care Provision in Lame Duck
The Senate is scheduled to vote after Thanksgiving on legislation to repeal a small but increasingly maligned provision of President Barack Obama’s health care overhaul, and the Republican author of the repeal is optimistic that it will pass this time.

Health insurers: Pay more for medical care or give refunds
Beginning in 2011, insurance companies have to spend 80% to 85% of premiums on medical care instead of toward their own profits and overhead costs, according to the Department of Health and Human Services.
States Battle with Federal Government on Health Care
Medicaid Becomes First Victim of Blame Game in Some States
Rivlin Throws Grenade Into Medicare Debate
Former Clinton budget director teams up with GOP budget cutter.

Economist Comments
Health Reform's Competition Crushers
Liberal consumer groups are aghast to learn that the Obama health team are really monopolists at heart, bent on handing hospitals a cartel in their local markets.
More Good News for Thanksgiving
In the Wall Street Journal just before Thanksgiving last year, Melinda Beck detailed some of the health care advances that we should continue to give thanks for this Thanksgiving Day:

Business on Obamacare: Resist, Don't Repeal
Congressional Republicans are touting plans to repeal the Obama Administration's health care reform law, but they face wariness for a full rollback from a key constituency: the business lobby.

Does the UK have the best health care institutions in the world?
Not in the present day time slice sense, but think of it over time.  There is a big lock-in effect.  The United States, for instance, cannot easily switch into another way of organizing its health care system.  Obamacare is built upon current institutions and, for better or worse, does more to lock them in than to modify them.

Will Health Reform Save Lives?
Ideal health insurance actually would not include Medicaid at all. It would involve people enrolling in private plans that are portable, and travel with them from job to job. And this result is consistent with other research. For although there is some argument about how much difference health insurance makes, almost every study finds that private insurance is better than Medicaid.
One More Step toward the Right Medicare and Medicaid Reforms
The President’s National Commission on Fiscal Responsibility and Reform is not set to release its final recommendations on how best to tackle deficit spending and entitlement reform until December 1. However, several of its members have already gone public with proposals to reduce runaway spending and put Medicare and Medicaid, two of the fastest-growing entitlement programs, on the road to solvency.

Welfare Reform: British Style
According to British Chancellor of the Exchequer George Osborne, the United Kingdom will put into place “a radical new welfare state where it always pays to work.”


General Economic News Nov. 22-24

How to Improve the Financial-Reform Law
A brief proposal to protect the system—without stifling innovation.
Battered Ireland Clings to Its Low Taxes
Though the country needs $115 billion, it says its 12.5 percent corporate tax rate is "non-negotiable"
Home Sales Fell 2.2% in October
Sales of previously owned homes fell in October amid weak demand and concerns about the foreclosure process, putting sales for 2010 on pace to close at their lowest level in 13 years.
Remake of Obama Economic Team Broadens Scope
The departure of a number of administration officials is giving President Obama broader scope to remake his economic team even as the White House prepares to carry out a long-planned shuffle involving two of his closest political advisers.
Orders for U.S. Durable Goods Unexpectedly Dropped in October
Demand for so-called durable goods dropped 3.3 percent, the biggest plunge since January 2009, after a revised 5 percent jump in September that was larger than previously estimated.
New home sales: Down 80% from the boom
New home sales dropped to an annual pace of just 283,000, according to the Commerce Department. That was down 8.1% from a slow September and 28.5% from 12 months ago when the annualized sales rate was at 430,000.

Study: Emissions Still Near Record Levels
Despite the global financial crisis, which was expected to significantly bring down carbon emissions last year, emissions were only 1.3 percent below the record levels of 2008, according to the annual carbon budget update by the Global Carbon Project.
Existing Home Sales Fall More Than Expected
Sales of previously owned homes fell by more than expected in October, possibly due to delayed foreclosures and as banks imposed "overly strict" lending standards, the National Association of Realtors said on Tuesday.
Whitney sees 5,000 bank branches closing
The bank shakeout is about to pick up steam.

Ireland Is Second Euro Nation to Seek Aid as Banks Wobble
Ireland became the second euro country to seek a rescue as the cost of saving its banks threatened a rerun of the Greek debt crisis that destabilized the currency.
What does the Irish bailout mean?
Europe and the International Monetary Fund are discussing the final details of a rescue package worth up to 100 billion euros to bail out Ireland's banking sector. What are the implications of the bailout for Irish people and the rest of the world?
French Fear ‘Brain Drain’ to the U.S.
Academics are increasingly leaving France for the United States, which carries the risk of a “brain drain” in France, according to a report this month by an independent study group.
Add 2.1 million houses to the glut
There's a large number of homes, either already repossessed by lenders or very seriously delinquent, that are poised to be added to the already glutted regular supply of homes on the market.
Weak world economy cuts carbon pollution last year
Weak world economy cuts carbon pollution last year
Holiday Drivers Face Highest Gas Prices in More Than 6 Months
Americans preparing for Thanksgiving travel face the highest gasoline prices in more than six months, with prices at the pump topping $3 per gallon in New York and on the West Coast.

Economist Comments
The Laws of Economics Do Not Stop at Borders and Do Not Face an Expiration Date
Time and place matter in questions of the manifestation of the laws of economics, and the magnitude of the effect.  But the pure logic of human action is neither time specific nor country specific.

There’s Nothing ‘Rapacious’ About America’s Income Differences
Here is a summary of some of the key differences between low-income and high-income households in America:
Would Higher 30 Year Fixed-Rate Mortgages Hurt Homeownership
At the center of the debate over Fannie Mae and Freddie Mac reform is the question of 30-year fixed-rate mortgages. The industry and progressive left argue that without some kind of government guarantee for housing finance, rates on 30-year mortgages will sky rocket to unaffordable levels and hurt homeownership.

Banks Face Another Mortgage Crisis
The government may have bailed out the nation's biggest banks, but now the courts will sort out who gets stuck with mortgage losses. Banks could lose more than $100 billion.
Taking von Mises to pieces
Why is the Austrian explanation for the crisis so little discussed?
Seeing the U.S. through Asia's eyes
Many leaders from Asia's growing economies believe the U.S. is in a state of denial. It's time to stop bickering and put our house in order.
Irish Bailout May Highlight New Problems in Portugal and Spain
While it appears that Ireland may be able to move forward from its financial crisis soon, the other two countries -- attempting to expand their economies while dealing with heavy debt burdens -- may not be so fortunate.

Fair Trade Is Less Fair (and Less Free) than Free Trade
Is there any doubt that replacing “free” with “fair” in this context would remove all teeth from the First Amendment?  In the same way, a policy of fair trade rather than free trade would, in practice, be a policy of unfree – and, by the way, unfair – monopoly privileges for politically influential domestic producers.
More on the Trade Deficit
Here’s a letter to Chris Isidore, Senior Writer at, on the trade deficit.
Production vs. Predation
One thing’s for certain: the proportion of personal wealth that is today the result of unjustified government-granted privileges is a great deal higher than it was before the 1930s – and even before 2008.

General Motors. Never Again?
“Government bought 914 million shares at 43.71. Sold half at 33, own 500 million or so at 35. Taxpayers down about 9 billion. Why is there such celebration today about this 'great government success?'”
Confidence Affects the Business Cycle, Study Finds
Economists have long recognized that feelings influence economic decisions. When optimism rules, businesses hire in anticipation of better sales ahead, and consumers take on debt in expectation of bigger paychecks. John Maynard Keynes called it “animal spirits.”
Second thoughts on Ireland
Irish political economy seems to be falling apart in front of our eyes and the bond market isn't so happy, even after Ireland accepted the EU/IMF bailout.  That would appear to be political risk.  Maybe there won't be a happy ending even in the short run.
7 Thoughts About Ireland
Tyler Cowen ponders what went wrong.  As someone who wrote a bit about the Euro, and the Celtic Tiger, before this mess started, my thoughts:
Secondary Sources: The Euro, Students, Wall Street
A roundup of economic news from around the Web.

Forecasters See U.S. Economy Still Sluggish in 2011
Economic forecasters expect the U.S. economy to remain sluggish next year, weighed down by high public debt, unemployment and business regulation.
Schedule for Week of November 21st
This is a holiday week (Happy Thanksgiving!), but there will be plenty of data released early in the week. The key releases are existing home sales (on Tuesday) and New home sales (on Wednesday).
CoreLogic: Shadow Housing Inventory pushes total unsold inventory to 6.3 million units
Shadow Inventory Jumps More Than 10 Percent in One Year, Pushing Total Unsold Inventory to 6.3 Million Units
Microfinance as Subprime
Having done a fair amount of work in microfinance and closely related areas (development finance involving business clients with larger-than-microfinance loans) in the developing world, I am overall a big fan.  As many people are.  The question that has long loomed, however, is whether it can or should scale upwards to become a full-fledged part of the global capital markets, or whether it should remain a highly subsidized development activity for very poor people or, most plausibly, some of both.
New Fannie Mae Lending Guidelines
Good news. These are not seller-funded Down payment Assistance Programs (DAPs).
The Politics of the Mortgage Interest Deduction
For the real estate industry, the problem with giving in to Wyden-Gregg is that it would show weakness. Once we have been defeated once, the thinking goes, we can be defeated again. If our goal is to maintain the mortgage interest deduction, we must show that any attempt to trim the deduction, no matter how sensible and narrow, will result in devastating electoral punishment from the housing lobby.
Climate Talks or Wealth Redistribution Talks?
Typically the largest wealth distribution program that occurs in Cancun, Mexico, is college students spending their parents’ money. That could change at the upcoming United Nations climate summit if developing countries clamoring for money to cope with global warming get their wish. With each passing year, it’s clear that international climate change talks are less about climate and more about wealth redistribution.

An International Comparison of Capital Structure and Debt Maturity Choices
This study examines the influence of institutional environment on capital structure and debt maturity choices by examining a cross-section of firms in 39 developed and developing countries. We find that a country’s legal and tax system, the level of corruption and the preferences of capital suppliers explain a significant portion of the variation in leverage and debt maturity ratios.

Time to Raise Social Security’s Retirement Age
Americans are living longer, which means they are spending a higher proportion of their lives in retirement, receiving Social Security payments. Yet the government program is a mere five years away from being unable to pay out all of the claims it has promised. Because today’s retirees enjoy longer lives and better health, both Social Security retirement ages (“normal” and “early eligibility”) must be increased.

Economics Group
Weekly Economic & Financial Commentary