General Economic News Jan. 24 - 28

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News
FRIDAY
Bumps remain on economy's road to recovery
Headwinds include fading stimulus, budget cuts, ongoing housing recession
Causes of the financial crisis? Commission ends in hung jury.
In its final report, the Financial Crisis Inquiry Commission offers three views of the crisis -– essentially one from Democrats and two dissenting views by Republicans on the panel.
Don't panic—yet
The government should stick to its course despite worrying economic figures
Senate Approves Changes Intended to Ease Gridlock
In an effort to ease persistent Senate gridlock, the leadership on Thursday promised to temper the procedural warfare that has consumed the chamber in recent years and increased partisan tension.
The union's troubled state
A strikingly unaudacious speech from Barack Obama failed to address America’s problems
Data Reflect Economy's Strain
New claims for jobless benefits rose last week and orders for durable goods fell in December, according to reports Thursday indicating the struggle of an economy trying to gather steam.
Consumer Mood Improves in Late January
U.S. consumer sentiment improved in late January, as hopes of a stronger economy and more jobs overcame worries about rising costs for food and gasoline, a survey released on Friday showed.

THURSDAY
Las Vegas lef nations in foreclosures
Las Vegas is once again the foreclosure king.
Mortgage rate rise for second week in a row
30-year benchmarks edges up to 4.80% from 4.74%.
What Businesses liked in the State of the Union- and what they didn't
The tone with businesses has changed, but they are waiting to see what happens with the State of the Union promises.

WEDNESDAY
Cool maps: Measuring growth from outer space
For many of the world’s poorest countries, figures measuring economic growth are unreliable, and in some cases they don’t exist at all.  In an NBER working paper, Brown University professors J. Vernon Henderson, Adam Storeygard, and David N. Weil came up with an interesting proxy for GDP growth: the amount of light that can be seen from outer space.
Obama and his imbalanced ledger
The ledger did not appear to be adding up Tuesday night when President Barack Obama urged more spending on one hand and a spending freeze on the other.
Consumer rebound: No 'sugar rush' - it's 'protein'
American consumers are finally opening their wallets again, according to an exclusive CNNMoney survey, raising hopes that the long-suffering economy could get a boost.
UK Economy May Be Heading for a Double-Dip
Britain's "awful" gross domestic product figure for the fourth quarter is pushing the country closer to a double-dip and limits the central bank's ability to fight rising inflation, analysts and business leaders said Tuesday.
TARP watchdog blasts Obama's foreclosure program
The Obama Administration's main foreclosure-prevention program continues to fall short, and last year's Wall Street reform act does not adequately address the threat that big financial firms pose to the broader economy, the top federal bailout watchdog said Tuesday.
State of the Union 2011: Sidestepped Issues
Social Security, Foreclosures, Price Tags Among the Taboo Topics
Business Sees the Devil in the Policy Details
Business responses to President Obama’s State of the Union address reflected praise for his rhetorical commitment to “winning the future” and his support for innovation, education and infrastructure, while raising concerns about the details of his policy proposals.
Financial Crisis Was Avoidable, Inquiry Finds
The 2008 financial crisis was an “avoidable” disaster caused by widespread failures in government regulation, corporate mismanagement and heedless risk-taking by Wall Street, according to the conclusions of a federal inquiry.

TUESDAY
Home price slump deepens
November home prices continued their latest slump, falling 1% compared with October, according to the latest S&P/Case-Shiller Home Price Index of 20 metro markets.
UK economy shrinks 0.5%
Economic activity in Britain contracted unexpectedly in the fourth quarter of 2010, with bad weather likely to have been a significant factor, preliminary figures show.
Consumer Confidence Hits Highest Level Since May
U.S. consumer confidence rose more than expected in January to its highest level in eight months, helped by growing optimism about the economy and the jobs market, according to a private sector report released Tuesday.
IMF: Instability Threatens Recovery
The uneven global recovery continues apace but sovereign debt and financial sector risks, particularly in Europe, could threaten global stability, the International Monetary Fund said Tuesday.
Cashing in on a China bet
President Hu Jintao's visit may be over, but the hype around China is not going away. As the country's economic boom continues, investors want to know how they can cash-in on this rapid growth.

MONDAY
GM's China sales pass US for first time in history
General Motors Co. sold more cars and trucks in China last year than it did in the U.S., for the first time in the company's 102-year history.
Reforming Fannie and Freddie: A $6 Trillion Problem
As the Obama administration struggles to draft a report to Congress on how best to overhaul Fannie Mae and Freddie Mac, industry and  public interest groups are promoting plans of their own for the two mortgage giants.
Postal Service Eyes Closing Thousands of Post Offices
The U.S. Postal Service plays two roles in America: an agency that keeps rural areas linked to the rest of the nation, and one that loses a lot of money.
Economic Reports for the Week
Scheduled for this week include the S.& P./Case-Shiller home price index for November and consumer confidence for January (Tuesday); new home sales for December (Wednesday); durable goods orders for December and pending home sales for December (Thursday); and gross domestic product for the fourth quarter and the Thomson Reuters/University of Michigan consumer sentiment index for January (Friday).
Gas tax holds the line as roads crumble
Area roads and bridges are crumbling, commuters are wasting hours sitting in traffic on congested highways, and legislators are at the end of their ropes in finding ways to generate new revenue. Despite gas prices topping $3 a gallon, some are still pondering whether now is finally the time for a gas tax increase.
Greek Finance Minister Reiterates No Need to Restructure Country's Debts
Greek Finance Minister George Papaconstantinou reiterated that his nation doesn’t need to restructure about 300 billion euros ($409 billion) of debt.
The end of credit cards is coming
Credit cards may soon be as outdated as vinyl records. (Remember those?) And this is the year that the slow, steady march to oblivion begins.
Treasury's Toxic Asset Funds Up 27%
The eight toxic asset funds have seen gains since they were created to help revive the mortgage-backed securities market.

Economist Comments
Obama’s regulatory deja vu
Dude, it’s been done, and it flopped.
A Two-Track Plan to Restore Growth
Our economic wounds are self-inflicted. Changing fiscal and monetary policies could make a difference fast.
Facing Up to $4 Gasoline
As pump prices climb, President Obama is likely to loosen drilling restrictions.
YOUNG: Gridlock: Better for budgets
Divided government helps keep spending in check

THURSDAY
Land of Milk and Regulation
Preventing the next dairy farm oil slick.
What caused the financial crisis?
Congresses's inquiry commission is offering a simplistic narrative that could lead to the wrong policy reforms.

WEDNESDAY
The poor are not getting poorer
In the latest version of its annual report "The State of Working America," the Economic Policy Institute once again argues that the gap between America's rich and poor is widening. Using a variety of data, the institute argues that a few are profiting at the expense of many.
The Great Misallocators
What Barack Obama and General Electric have in common.
The Economic Stimulus That Wasn't
Did the hundreds of billions spent to stimulate the economy do the job? And where did all that money go, anyway? A new report crunches the data and finds answers that are devastating for stimulus backers.
SOTU Sells Big Government with American Exceptionalism
But what made his speech truly exceptional was his attempt to harness the language of American exceptionalism in defense of big government.
Restoring Economic Freedom
Suppose a quiz show host were to ask: “What country enjoys the most economic freedom?” Most Americans probably wouldn’t even hesitate before answering, “The United States.” They’d be wrong. In fact, according to the 2011 “Index of Economic Freedom,” the U.S. isn’t even in the top five. We come in at number nine -- right below Denmark, Ireland and Canada.

TUESDAY
Obama puts political correctness ahead of economics
President Obama reportedly will call on Congress tonight in his State of the Union address to make "investments" in America's future by appropriating large new sums of money for education, alternative energy and infrastructure to create what he often calls the jobs of the 21st century.
The SOTUation on Trade and the Deficit
The State of the Union address offers any president the temptation to revel in the pageantry and splendor of the office. He can sound resonant themes and expound on U.S. values. He can embellish these motifs with the recognition of carefully-placed guests in the balcony.
Obama’s regulatory reform test
President Obama jumped on the regulatory-reform bandwagon last week after two years of greatly expanding costly regulations and reducing personal liberty, particularly on health care and financial services. I confidently predict his new initiative will be a failure. History has shown that the vested interest of the regulators in job preservation and expansion almost always swamps efforts at regulatory reform.
Why Do Regulators Hate the Markets?
So don't blame capitalism or greedy businesses for the sluggish state of the U.S. capital markets. The blame rests squarely at the feet of the SEC.
Regulations and rhetoric
President promises to lighten the burden while bureaucrats load up

MONDAY
Obama's Rule-Making Loophole
The President's new executive order says agencies must consider "equity, human dignity, fairness, and distributive impacts" as benefits of regulation.
Regulatory state needs more than a trim
First, a red-tape timeout before adding new restraints
The UAW's Next Act
Saved by Washington, the union wants to write its own labor laws.
The eurozone’s best solution is the least likely
Last week we got a glimpse of what a “permanent” crisis resolution strategy for the eurozone might look like: a bond repurchase programme for Greek debt. The reaction to reports that European Union officials were considering this option reminded me of the heydays of using structured finance to spread risk. The markets were euphoric.
Obama must woo business to win
Asked last week what was needed to revive the US economy, Jeff Immelt, chief executive of General Electric, told the Financial Times: “It’s a little bit on policy, a lot on tone.” Barack Obama, wondering what he must do to revive his presidency, may have come to the same conclusion.
Corporate excess bad, union robbery of kids just dandy
Under the administration of President Obama and the former Democratic majority in both houses of Congress, it was fashionable to engage in class warfare and attack anything viewed as corporate excess.

Blogs
FRIDAY
The Real Scandal of Farm Subsidies
When the Washington Post published a story in 2007 about how dead farmers had received farm subsidies to the tune of over $1bn, most people were horrified (even “farm subsidy moderate” Rand Paul thought they should go!). Although the article made clear that “most estates are allowed to collect farm payments for up to two years after an owner’s death,” and that the payments weren’t necessarily fraudulent, outrage ensued.
Does the Federal Government Want to Fix Fannie and Freddie?
It would work, but here's the problem: does the government actually want to do it?
Nothing Has Changed
It is apparent to me that the factors that underlie the causes of our boom-bust cycle still exist. Nothing has changed.
Environmental National Income Accounting
While I think it is certainly a useful thought exercise, the creation of Green GDP accounting metrics is fraught with inconsistencies and measurement difficulties, and is typically used as yet another “scientific tool” to prove that market-based economic systems are “unsustainable.” But despite this, a proper Green GDP accounting would probably have to recognize that the measured and reported “normal” GDP dramatically understates the present condition of the world.
Overcooked, undercooked
What do burger prices tell us about the reliability of official inflation figures?
Speeding up
The big continued question marks concern the problems in government budgets—how much a drag on growth they will ultimately represent—and the labour market. If growth begins translating into an acceleration in hiring, that could change the psychology around the economy, fueling spending and investment. And then recovery might finally resemble the V-shape one would expect after such a long, deep, and painful downturn.
Mr. President, Being Innovative Requires Greater Economic Freedom
The tool of choice for advancing innovation and American economy into the future—economic freedom—requires only an understanding that the people, expressing their wishes freely in the marketplaces of America, know better than any central planner or government bureaucrat what they need to get moving again.

THURSDAY
The American Nomenklatura
The Republicans are almost as bad. And thats not good enough.
Gauging the President and the State of the Union Speech
I may be underestimating the man, but the speech says otherwise.
Update on Government and Science
The flawed market failure arguments pertaining to "basic research" have morphed to apply to the commercial end of R&D to further "competiveness in the global knowledge economy." In reality, however, this unwarrented extension of government insinuation into the private sector is just a more modern version of 1970s "industrial policy" and should be rejected for the same reasons
The Moral Heart of Economics
Economists are often wary of moral exhortation, as many see the harm so wrought by arguments that are long on passion and short on sense. But don't think that our discipline doesn't have a moral spine beneath all the algebra. That spine is a fundamental belief in freedom.

WEDNESDAY
Free Market Vs. Government Rail
President Obama proposed a five year budget freeze. Yippee.  Except that it won’t affect Medicare. Or Social Security. Or the military. And current levels of spending are the highest ever.
RSC Silent on Farm Subsidies
The federal government, in my opinion, has a role to play in limited and defined areas of public life.  I strongly disagree with the NAWG’s implication that farm subsidies are just as important/necessary as, say, public funding for national defense or for the control of infectious disease.
USPS Takes Another Shot at Closing Outlets
The USPS needs to adjust to the times, but congressional meddling makes the task nearly impossible. The solution is to separate the government from the postal business altogether and allow the private sector to provide mail services, just as it provides package delivery and countless other services.
NAEP: If the Scores Don’t Rise, You Must Revise!
Maybe there’s an excellent reason why the federal government no longer wants to measure trends in science  achievement, but if there is, I suspect it’s political rather than educational.
Public Education Needs Transparency & Competition, Not More Money
Unfortunately, at the state, local, and school-district level, it takes a forensic accountant to discover how much we’re really spending.
Heritage Responds To The State Of The Union
And here are just some of our experts’ immediate reactions to parts of the speech:

TUESDAY
Debating the Great Depression: Steve Horwitz’s Latest Contribution
Misunderstanding the Great Depression has caused much mischief in modern macroeconomics and, more important, in government fiscal and monetary policies based on or influenced by this faulty understanding. If we are ever to arrive at a sound understanding of the Depression, we will have to persuade the economics profession to take Austrian economics seriously, as most economists did before the publication of Keynes’s magnum opus in 1936. Keynesianism in particular has proven itself to be a fundamentally flawed mode of analysis, yet one that has survived, evolved, and—like the zombies in the film “Night of the Living Dead”—keeps coming back, no matter how many times anti-Keynesians credit themselves with having dealt it a fatal blow. Monetarist, New Classical, and other recent critiques have themselves been inadequate or indefensible in various ways, as well.
An economic snowdown
BRITISH output seems to move in only one direction these days, and that direction is whatever the forecasters aren't predicting. After surprising to the upside in the second and third quarters of 2010, British GDP notched a shock decline in the fourth quarter. Output dropped 0.5% for the quarter (2% annualised), leaving observers wondering where the economy will go once austerity begins in earnest.
Our Crony Capitalist in Chief
Regardless of what the president says in the State of the Union address, his actions suggest that his administration is focused on crony capitalism, and not the real thing.
Case-Shiller: U.S. Home Prices Keep Weakening as Eight Cities Reach New Lows in November
S&P/Case-Shiller released the monthly Home Price Indices for November (actually a 3 month average of September, October and November).
What to Expect from Obama’s State of the Union
With confidence, I can tell you what President Obama will not say in his State of the Union address tonight: “The era of big government is over.”

MONDAY
Ryan to Give State of Union Response
Wisconsin Rep. Paul Ryan, who will spearhead GOP efforts to slash federal spending, will deliver the Republicans’ response to President Barack Obama’s State of the Union next week.
Regulations from the Executive In Need of Scrutiny
Tomorrow afternoon (back willing) I will be in Washington, D.C. to testify before the House Judiciary Committee’s Subcommittee on Courts, Commercial and Administrative Law on the Regulations from the Executive In Need of Scrutiny (REINS) Act.  This bill would require congressional approval before  new “major” regulations – those regulations expected to cost in excess of $100 million per year — could take effect.  It also creates an expedited process for consideration of new regulations, much like that which has been used in conjunction with “fast track” trade negotiation authority, to ensure that both Houses of Congress take up-or-down votes within a short time frame.
Schedule for Week of January 23rd
The key economic report for the coming week is the Q4 advance GDP report to be released on Friday. There are also two important housing reports to be released early in the week: Case-Shiller house prices on Tuesday, and New Home sales on Wednesday. There is also a two day FOMC meeting ending on Wednesday.
Keynes Versus Hayek: An Empirical Matter
Is our aim, as economic theorists, to defend our initial position come what may, or to advance our understanding of economic reality? If the latter, shouldn’t we be open to empirical evidence as to what model (or combination of models) most closely captures the current historical reality? Because I can’t help but believe that the key points of divergence between Keynes and Hayek are empirical matters, and can’t be answered on the plane of pure theory.
House Price Behavior
With secularly rising incomes, a little bit of house price appreciation is enough to get a good trade-up market going. But an equivalent decline in house prices would not create as much trade-down activity.
U.S. Lawmaker Renews Push for Credit Card Rate Cap
Concerned that credit cards are trapping consumers “in a spiral of debt,” a Democratic U.S. lawmaker from New York Thursday introduced a bill that would cap credit card interest rates and all other loans at 15%.
Unofficial Problem Bank list increases to 937 Institutions
Here is the unofficial problem bank list for Jan 21, 2011.
Another recession? Here's what indicators really say.
Two leading indicators point to continued growth, not recession.
English Anti-Tax Haven Ideologues Are Just as Foolish and Ignorant as their American Cousins
There’s a supposed expose’ in the U.K.-based Daily Mail about how major British companies have subsidiaries in low-tax jurisdictions. It even includes this table with the ostensibly shocking numbers.
State Corporate Welfare Programs Under Fire
One positive outcome of the recession, as the states struggle to find revenue to spend, is that state subsidies to businesses are facing increased scrutiny.
Sugar Policy: Sweet Deal for Producers, Sour for Consumers
In a recent Wall Street Journal letter titled “The Sugar Program Makes Sense,” the American Sugar Alliance’s chief economist claimed that “sugar policy operates at no cost to the government and is projected to do so for the next decade.” While it’s true that U.S. sugar producers haven’t tapped American taxpayers directly since the beet sugar farmers raked in more than $240 million in farm subsidy payments from 2000 to 2005, U.S. sugar policy does force American consumers to pay out billions of dollars every year in higher sugar prices to support the “Big Sugar” cartel.

Reports
FRIDAY
Competitive Exclusion with Heterogenous Sellers
The Case of State Wine Shipping Laws.
Durable Goods Orders Fail To Bounce Back in December
Durable goods orders were weaker than expected for December, slipping 2.5 percent. Nondefense aircraft orders were virtually nonexistent in the month, on a seasonally adjusted basis.
The Case for Gridlock
By fostering gridlock, the U.S. Constitution increases the likelihood that policies will reflect broad, unorganized interests instead of the interests of narrow, organized groups.

THURSDAY
New Home Sales Jumped in December, but Recovery Still Slow
New home sales rose 17.5% in December to a 329,000-unit annual pace, the largest month-over-month gain since 1992. The inventory of unsold homes, however, continued to slide and remains at a 42 year low.

WEDNESDAY
Dissent from the Majority Report of the Financial Crisis Inquiry Commission
To avoid the next financial crisis, we must understand what caused the one from which we are now slowly emerging, and take action to avoid the same mistakes in the future.

TUESDAY
Economic Realities of the Electric Car
Congress should not provide any additional taxpayer-funded incentives for electric vehicles and should repeal the ones already in place. Private industry should be allowed to improve these products to meet the demands of the market.
How Western Environmental Policies Are Stunting Economic Growth in Developing Countries
Governments and large agribusinesses are increasingly using the environmentalist movement and its policy arm of green nongovernmental organizations to justify imposing protectionist non-tariff barriers on developing countries. Wrong-headed environmental policies and “green” protectionism are contributing to a resurgence of malaria in some countries and endangering millions of jobs in developing countries. Even the World Bank’s mandate to foster economic development is being subverted to serve environmentalist and protectionist objectives. The EU and the U.S. need to eliminate protectionist policies and regulations that are masquerading as environmental safeguards and refocus the World Bank on promoting economic development to alleviate poverty.

MONDAY
Economics Group
Weekly Economic & Financial Commentary
Obama’s State of the Union Address: Top Five Commitments for a Free, Secure, and Prosperous America
The President’s approach has proven to be far short of what is needed to keep the nation safe, free, and prosperous. It is time for a new doctrine—and new priorities. Here are the top five that should be in the President’s speech.